Positive investments

The Trustee continues to own and operate several investments which it views as ESG positive, specifically its portfolio of renewable energy assets and its forestry holdings. RIEL continues to look at opportunities to improve these assets through capital expenditure and although the new Fund strategy may result in fewer such assets being held, the Trustee anticipates that real assets will form a part of the Fund’s portfolio for the foreseeable future.

The Trustee’s new materials recovery facility, Nine Mile Point near Newport, Wales was fully operational in the reporting period. It can receive up to 100,000 tonnes of in-feed material per year and produce up to 85,000 tonnes of solid recovered fuel (SRF). SRF production helps suppliers and customers reduce their environmental impact by decarbonising their waste and reducing landfill, diverting a carbon rich waste to SRF as a coal replacement fuel.

Due to its strategy change, the Trustee will no longer be making new investments specifically to meet ESG or climate goals. However, the Trustee will be selling assets and will keep ESG issues in mind when those sales take place. The expectation is that climate positive real assets should continue in operation and possibly be further developed after sale. The Trustee is hopeful that the efforts it has made to improve the climate credentials of real assets and the data supporting these improvements will help in asset marketability. The Fund had exposure to a large forestry asset in Tasmania through New Forest Fund 2 and a directly held co-investment. This asset has now been sold. This is an example of an asset which contributed to the Trustee’s positive climate impact being removed from the portfolio, in this case as a result of an associated closed end fund investment reaching maturity.

Sales of real assets will reduce the Fund’s exposure to physical climate risks and, in the case of real estate in particular, will reduce the Fund’s exposure to transition risks as policy pressure to increase environmental performance of buildings requires greater capital expenditure. Proceeds of sale of real assets will be reinvested in corporate credit and the Trustee’s credit managers apply the ROP.