Monday, 10 February 2020

Passive Investing and Climate Change - A Few Thoughts

Over the past year or so, the global climate emergency has risen to the top of the political agenda. Every day we are reminded of the effects of a gradually warming world - wildfires in California and Australia, hurricanes and typhoons, closer to home the widespread flooding in South Yorkshire and Derbyshire at the end of last year. Currently, disruption from storm Ciara with winds gusting up to 95 mph and widespread flooding and 200 flood warning issued by the environment agency.

More and more school children are taking to the streets every Friday and Extinction Rebellion captured the headlines for many weeks as they organised mass protests in London and elsewhere to highlight the climate issues. Surely this sort of direct action will increase this year.

Naturally, a growing number of people are starting to question where their savings, investments and pensions are invested and finding they may be contributing to the climate problem - invested in fossil fuel companies or companies involved in the destruction of the Amazon rainforest. They are increasingly demanding their money is moved to investing for good and sustainable solutions rather than continuing to support the big business which are part of the problem which has got us to this point.

Snowdrops at their very best in early Feb  (thanks Jan!)

The Case Against Index Funds

Globally diverse, low cost index funds and ETFs from the likes of Vanguard and BlackRock have become increasingly popular over the past decade. Indeed the Vanguard Lifestrategy and HSBC Global Strategy funds formed the core of my investing portfolio for several years.

However, in 2019 I took the decision to dispose of my index funds. This was due to the fact that these funds hold a significant proportion of fossil fuel companies involved in the extraction of oil, gas and coal as well as all the major banks which fund their operations and also the insurance companies which underwrite them. If I was to take stock of all the large companies in any global index, I would suggest well over one third are continuing to make global warming worse and despite assurances to the contrary. They are failing to align their business models in line with the Paris Agreement to reduce CO2 levels well below 2.0C by the end of the century.

Obviously I get it that the whole point about passive investing and index funds is to stay above the fray, avoid trying to beat the market etc. but what's a person supposed to do when a large part of that market is hell-bent on destroying the planet and refusing to make any changes? The sort of capitalism championed by the likes of President Trump and Scott Morrison!

What To Do

Obviously, the starting point for any responsible investor is to avoid the sectors which are the most polluting - coal, oil and gas. However, this is currently almost impossible to achieve by adopting the passive approach, even using the so called ESG funds, they all seem to hold the big oil companies and the big banks which fund their continuing operations for exploration and drilling.

The big pension funds and institutions are ahead of the curve and are starting to divest out of these fossil fuels. The more this gathers momentum, the more risk builds for those who remain invested.


Fossil fuels is not the only sector to be affected - there is a strong possibility the transition will impact airlines, cruise industry, motor manufacturers, space exploration as well as the big insurers and banks which are closely connected to these sectors.

Having decided in 2018 to transition to a more climate-friendly portfolio, I naturally put my index funds - Vanguard Lifestrategy and HSBC Global Strategy which together had previously formed the core of my investments - under the spotlight in early 2019. I came to the conclusion that holding a little bit less of an oil company drilling for ever more oil in the Arctic was not the answer - this seems to be the basic proposition offered by the majority (all?) of the ESG funds.

Therefore to avoid these sorts of dubious companies, it was necessary to move back to those actively managed funds which avoid these sectors such as the likes Mid Wynd and also individual company shares - Orsted, Vestas, ITM Power etc. where it was fairly clear what activities the company are engaged in together with a range of renewable infrastructure trusts.

The Future

I am hoping that the index fund providers will come up with some climate-friendly index alternatives. I was encouraged to hear last month that Blackrock has joined Climate Action 100+, the world's largest group of investors pressuring the big companies to act on climate change. 

Global assets under management...$7 trillion

CEO Larry Fink has said : "Climate change has become a defining factor in companies' long-term prospects … But awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance. In the near future — and sooner than most anticipate — there will be a significant reallocation of capital".

In the light of this acknowledgement, I think it is now far more likely Blackrock will soon be offering investors the option of fossil-free alternatives to their main index funds and ETFs.

For the fossil fuel companies, the passive investing revolution of the past decade has provided support for their shares as a steady stream of investors money has headed their way. Furthermore, the big index fund providers such as Blackrock and Vanguard have shielded their executives from climate scrutiny...until now.

I sense the tectonic plates of the global financial system are beginning to move more quickly. Pension funds, local authorities and institutional investors are increasingly coming to realise they can no longer afford to be passive when it comes to addressing our climate crisis. I am sure that when investors have the opportunity to invest in a more climate-friendly way they will switch their money into investments which do not compromise the planet and life as we know it.

It just has to made simpler for everyone to make such a choice. 

If you have any thoughts or opinions on the climate issue and passive funds, feel free to share them in the comments below.

Thursday, 6 February 2020

Vestas Wind - Full Year Results


Vestas is one of the world's leading players in wind turbines - it designs, makes, installs and services both onshore and offshore turbines and holds the record of providing more turbines throughout 80 countries than any other company. The core of the business is providing sustainable, clean and affordable energy to people all around the world.

They are the global leader in onshore wind - over 100 GW installed and also onshore servicing. They are #2 in offshore wind (behind Orsted) with 5 GW installed and plans to double this by 2022. It's market cap. is currently 143bn DKK (approx £16bn).

The shares were added to my ISA portfolio last October at the price of 535 DKK.

Results

The company have this week released results for the full year to end December 2019 (link via Company website).

Orders have increased by 25% to a record 17.9MW. Revenues increased to 12.15bn EUR (10.13bn in 2018) with the bulk of this provided by their Power Solutions sector - 10.3bn and a further 1.9bn from servicing.

They propose a 6.6% hike in the dividend to 7.93 DKK which equates to just over 1.1% at current share price.

Commenting on the results, group CEO, Henrik Andersen said :
“Wind energy manifested its position as a leading global energy source in 2019, driving Vestas’ order intake to a record 17.9 GW, 20 percent growth in revenue and expected high activity levels in the coming years. In an extraordinarily busy year, Vestas extended its industry leadership, met its guidance on all parameters and scaled the company to deliver on our highest-ever order backlog of EUR 34bn.

Once again, our Service business delivered year-on-year growth and improved profitability, underlining its strategic importance in a tough market. In 2019, the industry thus faced challenges from trade wars and tariffs, causing execution costs to increase, which we expect to continue in an even busier 2020.

Together with our customers and partners, everyone at Vestas worked vigorously to create the momentum to finish 2019 strongly, and we must continue this momentum to achieve our goals for 2020. As we continue to lead the transition towards a world powered by sustainable energy, we remain focused on executing our strategy and pushing the industry to higher levels on technology, profitability and sustainability,” 

The results have been well received with the share price rising 5% to 721 DKK on Wednesday.

12m share price chart  (click to enlarge)


Outlook

The company expects strong growth in the renewables sector over the coming decade. They forecast that global renewable capacity for electricity will increase from 10% to 35% by 2035 with annual investment in wind power to double to $200bn during this time frame.

Vestas has launched a seriously ambitious sustainablity drive throughout their own business and entire value chain. The company aims to become carbon neutral by 2030 and produce zero-waste turbines by 2040.

As with Orsted, I am more than happy with my acquisition and may look for an opportunity to top up my holding over the coming few months.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation. Holding individual shares always carries more risk than collective investments - always DYOR!

Monday, 3 February 2020

Orsted - Full Year Results


This energy company based in Denmark is a global leader in offshore wind with around 30% of global capacity and operations in Denmark, UK, Germany, Holland the US and also Taiwan. Total offshore capacity is around 7.5GW and the recently completed Hornsea 1 is the largest in the world accounting for 1.2GW.

The US arm has recently started work on their first utility scale solar+storage project. A 460 MW facility in Texas which is due to become operational in mid 2021.

The shares were added to my portfolio in April at the 495 DKK and have advanced nicely over the past few months to currently 740 DKK - an increase of 50%. The shares represent around 9% of my 'green' portfolio.

Renewable energy is very much in the ascendancy due to concerns about our climate emergency. It is estimated the global wind energy sector will attract investment of $1 trillion over the next 10 years as the world makes the transition from fossil fuels to low-carbon clean energy.

Results

The company has recently announced full year results to end 2019 (link via company website).

Operating profits were ahead of expectations and increased by 17% to DKK 17.5bn (2017 13.3bn). The dividend will increase by 7.7% to DKK 10.5 - a yield of 1.4% based on the current share price.

Henrik Poulsen, CEO and President of ├śrsted, says:  “2019 was a great year for ├śrsted with continued strategic progress and global expansion. We achieved a very satisfactory operating profit (EBITDA), and the green share of our heat and power generation increased to a new high of 86%.
We reached significant milestones by winning two large-scale offshore projects in the US. We were awarded 1,100MW with our Ocean Wind project in New Jersey and 880MW with our Sunrise Wind project in New York. With these awards, we have secured a US offshore wind portfolio with a total capacity of 2.9GW to be completed towards 2024. In addition, we have up to 4.5GW of lease rights which can be developed for future offshore wind projects in the US. The Sunrise Wind project will be constructed together with our partner Eversource. For Ocean Wind, we are in exclusive negotiations with the Public Service Enterprise Group (PSEG) regarding a joint venture agreement to acquire 25% of the project.
In the UK, we commissioned Hornsea 1, the world’s largest offshore wind farm with a capacity of 1,218MW. We passed further milestones when we inaugurated phase two of Taiwan’s first-ever offshore wind farm Formosa 1, and when we commissioned the onshore wind farm Lockett in Texas in the US".
Investment for the coming year will be around DKK 30bn reflecting high levels of construction activity for both offshore and onshore wind as well as solar PV.


A decade ago, this company was heavily involved in oil & gas but has transformed itself to become the most sustainable company in the world according to Corporate Knights Global 100 Index. The management realised that fossil fuels were neither environmentally or financially sustainable - something the other large oil companies have yet to grasp.

The company has the ambitious target of becoming carbon neutral by 2025. Their vision is to see a world run entirely on renewable energy.

Orsted is one of six stand-alone company shares I have added to my 'green' portfolio over the past year and as it currently represents around 9% of the whole portfolio, I don't want to go too much overboard with any one holding. But obviously very happy with progress so far and hoping for more progress over the coming year or two.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

Tuesday, 28 January 2020

ITM Power - Half-Year Results


Earlier this month I posted an article suggesting hydrogen could transform the global economy. It's the most commonly occurring element in nature and is set to play a defining role in the 'green' industrial revolution as it replaces fossil fuels. It can be stored and used to power long-distant transport such as cars, lorries, trains and ships. It can be used to generate electricity. It is a clean source of energy and when used the only emissions are water and heat.

So, last year I decided to add a few companies to my green portfolio which I hoped would be able to take advantage of this revolution. One of these additions was ITM Power - a small AIM-listed clean energy company added to my portfolio in August 2019.

It has recently announced results for the half year to end October 2019 (link via Investegate).

Whilst revenues doubled to £2.4m (2018 £1.2m), grant income reduced to just £1.4m (2018 £3.8m). Total income for the period therefore fell by £1.2m or 24%.
The company has seen an increase in qualified tender opportunities to £248m - 37 projects and a corresponding backlog of £42.4m - £16.3m under contract and £26.1m in the final stages of negotiation.

The company made a loss of £9.8m and has been adversely affected by legacy issues connected to the Shell Refhyne project. The joint venture with Linde is likely to reduce exposure to future development risks.

Despite the setbacks, the company maintains a positive outlook. Global energy markets are increasingly recognising the need for the use of green hydrogen for energy storage, transport and heating. The UK Committee on Climate suggest we will need between 6 and 17GW of electrolosys to reach net zero emissions by 2050. ITM with its partner Linde are well positioned to benefit from these opportunities.

Linde Joint Venture

Global industrial engineering group Linde has now acquired a 20% stake in ITM for the £38m. The 50:50 joint venture will target an increasing number of companies and governments that are looking to green hydrogen as a solution to tackling climate change. These include the storage of renewable energy and grid balancing as well as the essential task of reducing CO2 emissions from sectors such as transport and heavy industry. ITM will focus on hydrogen production from its electrolysers whilst Linde will look after the engineering and construction side of the projects.
 
6m comparison v AFC Energy and Proton Power
(click image to enlarge)

The results are disappointing but the markets seem fairly relaxed and the share price closed at 105p today - quite a jump from my purchase price of 37p last August. Hopefully the company can make some progress to profitability over the coming year or two with their new partners.

For the time being, this can return to the bottom drawer.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation... investing in smaller companies can be rewarding but is higher risk - always DYOR!

Tuesday, 14 January 2020

Green Hydrogen Could Transform the World


The more I read about the potential for hydrogen as a fuel of the future, the more convinced I become about this gas transforming the global economy.

As everyone must surely be aware by now, we urgently need to move away from fossil fuels such as coal and oil due to the effects of global warming and climate change. The scenes from Australia over the past month or so have been truly horrific and a real wake-up call to the rest of the developed world.

There are many positive signs of progress such as an upsurge in the use of renewable energy such as wind and solar over the past few years but now there is an increasing focus on green hydrogen (made from renewable energy) as the most promising environmentally-friendly fuel - the only emissions being water.

Last years G20 summit in Japan had a strong emphasis on hydrogen. It was there that the IEA's report was launched "The Future of Hydrogen" concluding that the time was right to tap into the potential of hydrogen saying:

"The report finds that clean hydrogen is currently enjoying unprecedented political and business momentum, with the number of policies and projects around the world expanding rapidly. It concludes that now is the time to scale up technologies and bring down costs to allow hydrogen to become widely used".


Many Applications

1 Heating Our Homes. In most of the developed world including most European countries, the vast majority of energy is used for heating and hot water. For example, here in the UK around 90% of homes use gas central heating. Hydrogen offers an very attractive alternative to natural gas (methane) which is carbon free as well as more efficient than using electric. The added advantage is that the existing gas infrastructure could be used to supply all the homes with clean hydrogen gas subject to the appliances in our homes being adapted.


A year long ground-breaking trial has just started at Keele University where 20% green hydrogen is blended with natural gas. If such a blend were rolled out across the country it would reduce CO2 emissions by around six million tonnes - equivalent of taking 2.5 million cars off the roads. ITM Power supply the on-site integrated hydrogen energy system.

Worcester Bosch have designed a hydrogen-ready boiler which can currently run on gas but then easily converted to run on 100% hydrogen.

2 Balancing the National Grid. As we build out more and more wind and solar, we may get to the point where we are generating more energy than the grid can handle. Already we are seeing offshore wind farms having to be temporarily shut down during windy spells. Instead of wasting this excess energy, we can use it to power the electrolysis of water to create green hydrogen. This can then be stored for future use.

3 Industry. A global supply chain for hydrogen could be used to de-carbonise heavy industry such as steel making and cement which together currently account for around 15% of global GHG emissions.

4 Transport. Hydrogen is ideally suited as a replacement for fossil fuels in the transport sector. London is set to deploy hydrogen powered buses this year. The USA, Japan, S Korea and China have all announced ambitious plans for the mass roll-out of fuel cell EVs over the coming decade. Hyundai have contracted to build 1,600 HGVs in partnership with Swiss company H2Energy.


Germany already has hydrogen-fueled trains and plans to have 40 running by 2022. The UK is not far behind with plans to retrofit existing trains with hydrogen tanks with added fuel-cell and battery. In collaboration with Air Liquide, Paris plans 600 hydrogen taxis by the end of 2020.

Recently, Orsted have joined forces with other companies to develop a 2MW hydrogen electrolysis plant in Denmark which will produce green hydrogen to power 20 to 30 buses. Orsted's head of green hydrogen Anders Nordstrom said "Renewable hydrogen could potentially form a cornerstone of Denmark's ambition to reduce GHG emissions by 70% in 2030 and of the transition to a world that runs entirely on green energy".

Several car companies have started to invest heavily into hydrogen car production including Hyundai (Nexo), Toyota (Mirai) and Honda (Clarity). The hydrogen fuel-cell vehicles offer the advantage of greater range and faster refueling compared to electric vehicles.

Conclusion

So, I am thinking that green hydrogen could be a massive game changer with potential to transform the global economy and play a part in the transition from fossil fuels to clean energy to halt global warming. Some companies will be in a position to benefit from this transition but it's early days and therefore not so clear which sectors will take the lead. This is why I have added several potential beneficiaries - the likes of Air Liquide, Orsted, AFC Energy and ITM Power to my green portfolio over the past year.

Investing in equities involves ownership of the organisations you hold in your portfolio. I really don't want to be a part owner of the fossil fuel companies that are making the planet uninhabitable for future generations. The climate scientists are saying we are currently on track for another 2C of warming by the end of this century and suggest the rest of the planet will become like Australia these past few weeks - phew! There's not much time left to turn things around so instead I choose to buy into those companies that are doing their bit to make the world cleaner and more sustainable.

As ever, this article is merely reflects my current thinking on climate-related issues and the companies mentioned are a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

Tuesday, 7 January 2020

My New Book on Climate Change


It's the start of a new year and a new decade - the 20s which will likely be dominated by the global climate crisis which seems to get worse with each passing day. So, an opportune time to launch my new book "Climate Emergency!"

It's over four years since I published my last book "DIY Simple Investing". At the time I thought that would be my last book however, over the past couple of years I have become increasingly concerned about our climate so in August 2019 I started to put down a few thoughts. What are the drivers? What impact will the changing climate deliver if we continue with business as usual? What are the alternatives to using fossil fuels and what can individuals do in their everyday lives?


Over the past year or so it seems hardly a day has passed without some climate-related disaster in the news - hurricanes and cyclones, wildfires...and more recently the flooding in Jakata with reported 60 dead and many thousands evacuated and at the same time the bushfires having a devastating impact in Australia and again loss of life, thousands displaced and an estimated 500 million animals dead (not a typo... a half billion) however WWF Australia suggest the figure could be one billion+ - iconic species such as the koala now close to extinction. 

Average temperatures in Australia have risen dramatically in just the past decade and the current average is more than 3.0C above pre-industrial levels compared to 1.0C for the global average. This should give some better indication of what is in store for the rest of the world if we fail to tackle climate change.
Posted by Ed Hawkins on Twitter (click to enlarge)

The only word that comes to mind is apocalypse. These events were actually predicted as long back as 2008 and will only become more widespread and intense as the new decade unfolds.

I am no expert on climate science - or anything else for that matter - but maybe there's a place for a simple introduction to this important issue directed at everyday ordinary people who just want to understand what is happening to our climate and what can be done.

"Climate Emergency" and has just been self-published via Amazon as Kindle ebook as well as paperback formats. Here's a link to the preview page.

I am very grateful to author and long-term climate campaigner Bill McKibben for reviewing a draft of my book and a writing a short foreword. Also many thanks to Ed Hawkins for permission to use the iconic climate stripes for the book cover.

I hope readers will help to spread the word about my book and if you do happen to buy it, please remember to leave a review on the Amazon site. I will be donating proceeds from the sale of each book to The Woodland Trust who do such good work promoting tree planting throughout the UK.

Prices : 'Free' on Amazon Prime, Ebook £3.95 and Paperback £5.75

Feel free to post your thoughts and feelings on the climate crisis and what needs to be done.

Thursday, 2 January 2020

2019 Portfolio Review


Another year rolls by and this is now my 7th end-of-year review since starting my blog in 2013.

It's been quite a year.. climate change has risen to the top of the political agenda,  a change of Prime Minister followed by general election to resolve the Brexit deadlock, the impeachment of President Trump ...and despite all the political turmoil, the markets have continued to surge ahead.

Climate Change

I feel this has been a breakthrough year for the climate - everyone is more aware of the importance of the challenges we face and the need to make some significant changes to many aspects of our everyday living. I guess the coming decade will be a make or break period. We either make the changes to limit global warming or we fail and face the consequences.

The past 5 years have been the hottest on record and unless we tackle the climate emergency, the Met Office have forecast that temperatures in the UK could be 3 to 4 degrees warmer on average by 2100. ( they have risen by just 1C over the past 150 years)

I have been trying to make sense of the big picture this year and my thoughts were set out in May in what I think is probably the most important article I have posted over the past 7 years.

Of course there are many positive signs and I have been encouraged by the direct actions of Extinction Rebellion in recent months and also the school strikes for climate inspired by Greta Thunberg. Our Parliament has set a target of zero emissions by 2050 and we now await the policy decision to map out how we achieve this.

"This can no longer be news among other news, an "important topic" among other topics, a "political issue" among other political issues or a crisis among other crises. This is not party politics or opinions. This is an existential emergency. And we must start treating it as such".
Greta Thunberg

I have been working on a new book on this topic for the past few months and which I hope to publish very soon. Also, I managed to get out during national Tree Week and plant a few trees with my family and hope to do more in the coming few months.
 
National Tree Week - November 2019

Brexit

After 3.5 long years, we are almost there!! I hope I can drop this from next year's review....

In July, Boris Johnson became our new PM with a promise to deliver Brexit, deal or no deal by end October and a 'do or die' approach. Against everyone's expectations, he managed to renegotiate a deal with the EU but struggled to make progress with our remain parliament and decided to call a general election - the first in December for almost a century. The outcome was a landslide victory for the Tories gaining a majority of 80 and a crushing rejection of a hard left Labour Party which lost 59 seats and no support for the Liberal (anti)Democrats who stood on a manifesto to revoke Article 50 and a slogan "Bollocks to Brexit"!

Labour managed their worst result since 1935 as life-long Labour voters from the ex mining communities of Yorkshire and Durham trudged through the wind and rain to vote TORY for the first time in their lives. My old grandad and uncles were proud miners from a close-knit community near Doncaster, South Yorkshire and they would have had a few choice words for this current leaders of this so called Labour Party.

Sport

As long-term readers will know, I am a big follower of sport and this has been another vintage year. Cricket... we won the World Cup in a thrilling match v New Zealand which went to the wire. However, the highlight for me was the 3rd Ashes test at Headingly v Australia and the last wicket partnership between Ben Stokes and Jack Leach. I remember the 1981 test match at the same ground when Botham and Willis pulled off a remarkable victory but I think this was even more remarkable. Sadly Bob Willis passed away this year.



When Leach came to the crease they still needed another 72 runs against one of the best bowling attacks in the world. Leech was resolute in defence at one end whist Stokes set about knocking off the runs. It was tense and the pressure was getting to the Aussies who dropped a catch, got a dodgy lbw decision(no reviews left) and fumbled a run-out near the end. But somehow England got over the line...Stokes hitting 71 of the runs in a thrilling finish to level the series. It was no surprise to see Ben Stokes voted BBC Sport's Personality of the year and receive an OBE in the New Year honours.

Likewise Rugby Union...the World Cup in Japan - a thrilling game to beat the All Blacks in the semi-final but we fell short in the final against S Africa.

Although a life-long supporter of Everton, it was good to see Liverpool win the Champions League trophy after the disappointment of losing in the final the previous year. They also won the World Club Champions tournament and are on course to win the Premiership title.

In athletics, Dina Asher-Smith took gold in the 200m sprint and silver in the 100m whilst Katarina Johnson-Thompson put in a stunning performance taking gold in the heptathlon. In world gymnastics, Max Whitlock became a three-time world champion taking gold on pommel whilst Joe Frazer made history by taking GBs first-ever gold on parallel bars. Roll-on the Tokyo Olympics next year! 

Investments

Following my decision to create a more climate-friendly green portfolio last year, I realised at some point that to be true to my values, I needed to completely ditch fossil fuel companies from my portfolio. The process which started last October was completed a year later in September.

Over the past year I have sold my investment trust which hold oil shares - so, City of London and Aberforth Smaller were disposed of in February. Later in the year I sold my global index funds - Vanguard Lifestrategy 40 & 60, Vanguard SRI Global and HSBC Global Strategy and also my Baillie Gifford Managed fund. I also sold Edinburgh Worldwide trust and Scottish Mortgage which both recently acquired Elon Musk's SpaceX and related companies involved in rocket development and space exploration.

Portfolio Returns

I have just put in the final figures for the spreadsheet of my investment portfolios - sipp flexi drawdown and ISAs - for the full year to 31st December.

The FTSE 100 has seen a late surge to finish the year at 7,542 and a total return of 17% for the full year. The FTSE All Share index is up 19.0% for the year.

As a matter of interest, the FTSE 100 finished at 6,749 when I did my first annual review to the end of 2013.

The Vanguard Lifestrategy 60 fund is a diverse mix of global equities and bonds and although I have disposed of my holding, it provides a good benchmark for a balanced global portfolio. The fund is up 14.5% over the past year.


Investment Trusts

Over the 12 month period, I sold several trusts and replaced them with more climate-friendly investments such as my renewable infrastructure holdings.

The better returns for the year came from TR Property 40%, Mid Wynd 31%, Polar Capital 35%, Edinburgh Worldwide 30%, Scottish Mortgage 17%, Finsbury Gr. & Income 23% and Tritax Big Box 21%.

I have held on to just the two trusts going into 2020 - Mid Wynd which has been building a low carbon theme to its global portfolio and TR Property IT.

The total return for my basket of trusts over the year was 24.5%.


Index Funds

Over the past year I have sold all multi-asset index funds as I decided to divest my portfolio of all fossil fuel stocks as well as the big banks which finance their global operations. So far, it has not been possible to find a multi-asset global replacement to satisfy my requirements but I am hoping the industry can offer some alternatives in the coming year which are more climate-friendly and do not contain fossil fuel companies. However I would not return to Vanguard until they stop shielding the big oil companies from climate scrutiny.

The contribution from my index collectives have seen good gains over the past year (until sale) with a total return of 16.0%.

Green

Over the year I have been gradually building my climate-friendly section which now represents over 75% of the total with a further 10% in cash. Most of the investments have not had a full year so I am pleased that the total return for this sector compares well with the market generally and also with other sectors of my portfolio.

The better returns have been provided by offshore wind specialist Orsted which was acquired in April +32%, green hydrogen smaller companies ITM Power +90% and AFC Energy +220%. And with the collectives...Impax Environmental 26% (now sold), TRIG 22% and Bluefield Solar 15%.

The total return including dividends from my green portfolio has been 23.5% which I guess is reassuring and shows that it's possible to invest ethically, align my investments with my values and still make a decent return. Maybe it's just beginners luck!

The Complete Basket

As a whole, the portfolio has delivered a total return of 21.9% over the past year which takes account of all dealing costs - the best annual return by quite a margin for a decade. Here's my portfolio returns covering the past 10 years. 

2010   9.9%
2011  -3.0%
2012 15.5%
2013 13.3%, 
2014   5.4%, 
2015   2.7%  
2016 11.4%
2017 11.3%
2018  -2.7%
2019  21.9%
 
(click to enlarge)

A sum of £1,000 at the start of 2010 has more than doubled to £2,220 and an average annualised return over the past 10 years of 8.3%. This has enabled me to take my 4% income each year since moving to early retirement in 2008 and leaving some held back to build reserves.
  
Most Popular Posts

The most popular this year have been:

1. My Index Funds Under The Spotlight (link)
2. Vanguard LS 60 - Year 4 Update
3. Brexit Revisited
4. Orsted - Portfolio Addition
5. Getting Up to Speed on Climate Emergency (link)
6. Divesting My Portfolio of Fossil Fuels (link)
7. We Are Leaving the EU...At Last!

My thanks to The Investor from Monevator for the ongoing links throughout the past year (despite our opposite views on Brexit!)

Conclusion

In these times of low interest rates and corresponding low returns from cash deposits, for a little more risk, an average annualised return of over 8% over the past decade is for me very acceptable. Return on my investments have been positive in 9 of the past 11 years.

Obviously as a grandfather to five, I am concerned about the climate emergency and how badly it will impact the world over the coming years. The devastating images we have seen from Australia in recent weeks should  be a warning of what's coming down the line for the planet if we carry on with business as usual. Hopefully in the coming year we will get some real leadership and start to reverse the warming otherwise the consequences are dire. Either way I am in no doubt that the global economy will be affected including equities which is why I have moved my portfolio to climate-friendly alternatives.

I think it's fairly obvious that we just cannot continue with our current economic model pursuing GDP growth and unlimited consumption above everything. What exactly is the point if we end up with an uninhabitable planet in 50 years time? And as an investor, I am a part owner of everything I choose to hold in my portfolio so I have a responsibility for what those companies do or don't do. I have come to the conclusion that it's totally unacceptable to be a part owner - however small - of the big oil companies that continue to be the big drivers of climate change.

For me at this stage, investing is no longer about finding the best strategy to maximise returns. It's more about directing my resources towards those areas that are trying to promote a sustainable planet and avoiding the fossil fuel companies and associates which refuse to change and that have little or no regard for our environment. If supporting those greener companies can also deliver a decent return on capital, then that will be a bonus but it's no longer my primary driver.

I don't have a crystal ball but my strong feeling would be that the game could soon be up for the big oil companies that refuse to change their business strategies and fall into line on climate change. Likewise the banks that continue to fund their operations. 2020 could be a make or break year as we head towards COP26 in Glasgow....as they say, it's going to be very interesting!

Finally, thanks to all for dropping by during the past year and wishing everyone all good things in 2020 - especially good health.

As always, if you keep track of portfolio returns, feel free to leave a comment and share with others how your investments have fared over the past year.