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BLOG: Investing in London’s (and the world’s) cleaner air

Paloma Kubiak
Written By:
Paloma Kubiak

Air pollution is one of the world’s largest health and environmental problems, but global investment in clean energy is growing. Here are five examples of funds investing for cleaner air and cleaner energy.

Later this month, London’s Ultra Low Emission Zone (ULEZ) will expand to cover the whole of Greater London. Having been in place in the congestion charge zone since April 2019, the area was expanded in October 2021, and will now “see five million more Londoners being able to breathe cleaner air,” according to mayor of London, Sadiq Khan.

But London is not the only city in the UK to introduce such measures. There are currently 15 active Clean Air Zones according to Motorway.co.uk – geographical areas where certain types of vehicles are required to comply with emissions standards or pay a fine – in the UK, including Aberdeen, Glasgow, Bradford, Bath, and Portsmouth.

Why? Because air pollution is one of the world’s largest health and environmental problems. It increases the risk of life-changing illnesses such as cancer, asthma, lung disease and dementia in older people, and contributes to 11.65% of deaths globally. In fact, according to the World Health Organization, almost the entire global population (99%) breathes air that exceeds WHO air quality limits and threatens their health.

As one of those five million people set to benefit from the ULEZ expansion and a mother with three small children, I’m therefore a supporter of the move.

Taking more steps towards cleaner air

The findings mentioned above have prompted the WHO to highlight the importance of curbing fossil fuel use and taking other tangible steps to reduce air pollution levels.

It acknowledges that a number of Governments are taking steps to improve air quality but is calling for a rapid intensification of actions. These include adopting national air quality standards, identifying sources of air pollution, supporting the transition to exclusive use of clean household energy for cooking, heating and lighting, building safe and affordable public transport systems and pedestrian- and cycle-friendly networks, and reducing agricultural waste incineration, forest fires and certain agro-forestry activities.

Investing in cleaner energy

The recovery from the Covid-19 pandemic and the response to the global energy crisis have provided a major boost to global clean energy investment, which will support some of these moves.

The IEA World Energy Investment 2023 report suggests that global investment in clean energy is on course to rise to USD 1.7 trillion this year (24% more than two years ago). This investment is going into renewable power, EVs, nuclear, grids, storage, low-emission fuels, efficiency improvements and end-use renewables and electrification.

“Investment in clean energy technologies is significantly outpacing spending on fossil fuels as affordability and security concerns triggered by the global energy crisis strengthen the momentum behind more sustainable options,” it stated.

The report also says that “solar is the star performer and more than USD 1 billion per day is expected to go into solar investments in 2023, edging this spending above that in upstream oil for the first time.” Demand for electric cars is also booming, with sales expected to leap by more than one-third this year after a record-breaking 2022.

Funds investing in clean energy

For investors, there are a number of ways to take part in this global transition. Here are five examples of funds investing for cleaner air and cleaner energy.

1) Artemis Positive Future

This is a global equity fund, and its four-strong management team is looking for those firms making a material positive impact on the world through either environmental or social improvements. These companies will sit at the axis of technological and sustainable change, looking to disrupt old economies to capture market share. The fund is aligned with the UN’s Sustainable Development goals and currently has 39.1% allocated to SDG3: Good Health and Well-being and 11.4% to SDG7: Affordable and Clean Energy.

2) Guinness Global Innovators

As the name suggests this fund is all about finding, and investing in, innovative and disruptive businesses which are changing the world in which we live. The team creates its investment universe by identifying nine innovation themes. The managers then pick the highest quality, fastest growing and best value stocks from within these themes. One of these themes is clean energy and sustainability.

3) Liontrust Sustainable Future Managed

This fund invests in a combination of global equities, bonds and cash and the managers use a thematic approach to identify the key structural growth trends that will shape the global economy of the future, across a 40-60 stock portfolio. Three mega trends have been identified, with strong and dependable growth prospects. These are: better resource efficiency (cleaner), improved health (healthier), and greater safety and resilience (safer).

4) Ninety One Global Environment

This global equity fund has a unique approach of only investing in companies that are contributing to the decarbonisation of the world economy. The proprietary screen that is used to build the investable universe is impressively comprehensive and dynamic to ensure the futureproofing of the strategy in the event of considerable technological enhancement. It means that the fund is set to benefit from the massive tailwind of the some $2.4 trillion of annual spend required to meet global temperature goals.

5) VT Gravis Clean Energy Income

This fund taps into the expertise of the Gravis group to create a portfolio of renewable energy and energy-efficiency related projects that are benefiting from the secular move to more sustainable energy demands. It looks to generate an attractive income, alongside modest capital growth, from a spread of different projects that should deliver defensive, uncorrelated performance. Areas of investment include solar, wind and hydro-electric power, as well as energy storage, energy efficiency, bioenergy, geothermal, heat pumps and the smart grid.

Juliet Schooling Latter is research director at FundCalibre