Sunday, 21 July 2019

Greencoat UK Wind - Portfolio Addition

Last year I made a start in aligning my portfolio towards my values and lifestyle with a re-jig of my portfolio away from oil and gas and introducing new additions such as TRIG, Bluefield Solar and Foresight Solar. In May I topped up my holdings in Orsted and BG Positive Change and also decided to add this large renewable infrastructure trust to my green portfolio. The recent share offering raised an additional £375m and UKW is the largest renewable infrastructure trust with a market value in excess of £2bn and a constituent of the FTSE 250.

The trust has a fairly simple business model operating a portfolio of 34 onshore and offshore wind farms throughout the UK. The trust was launched in 2013 and over this period, returns for investors including dividends have just about doubled making it the best performing trust in the renewables sector. Total returns over the past 5 years compare well with other holdings... UKW 73% v TRIG 70% v Vanguard SRI Global 80%

In February, the trust agreed to purchase a 35.5% share in two Scottish windfarms owned by SSE with a combined capacity of 322MW from 99 wind turbines. This takes UKW total capacity to around 950 MW of electricity, sufficient to power 550,000 homes.

Stronelairg Wind Farm Nr Fort Augustus, Scotland
UKW's aim is to maintain progressive dividends for shareholders in line with RPI inflation and preserve capital over the long term. The trust pays quarterly dividends and the target for the current year is 6.94p. which means a yield of 5% based on the current share price. The company's target is for a total shareholder return including dividends of 8% to 9% per year.

In the coming week, UKW will announce interim results for the 6 months to end June 2019.

I don't imagine the re-alignment of one small investor's portfolio towards more climate-friendly investments will be moving the climate emergency dial very far. This will be done by the likes of large sovereign wealth funds and pension funds.

However, I think that when lots of small investors start to rethink the relationship between financial goals and the future security of the environment, it could have a significant impact. Apart from all this it just makes me feel a bit better. This now takes the total 'green' portion of my portfolio to 50%.

“I have always been that girl in the back who doesn’t say anything. I thought I couldn’t make a difference because I was too small.” Greta Thunberg.

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!


  1. I, like you, topped up with UKW and I'm happy to have them in my portfolio.
    Money invested in UKW goes to buying generating assets in wind power and freeing the developers up to develop their new projects/fields. These new fields will help offset out CO2 production.
    So, there's a very clear link between investing in UKW and helping the climate.
    What I would say is that the strength of soverign wealth funds and pension funds over overstated. For SWFs, there's maybe less money out there than you imagine and for pension funds (already large holders of UKW) they can't go gung-ho into one asset class and UK funds will maybe see more selling down than investing over the next number of years.
    There's still a very real part to play for retail investors like ourselves. You are not alone in putting your money where your mouth is and with things like the pension freedoms, there's potentially a lot of money looking for a home and UKW with an easy to understand business model, secure business income and a generous dividend, it would be hard to find a good reason not to invest.

    1. You are right GFF, there must be lots of small investors thinking about climate issues and realigning their portfolio towards more climate-friendly options and away from the more traditional funds containing all the usual suspects which continue to damage the climate.

      I was reading about an interesting new fund launch today from Schroders - Global Energy Transition which doesn't contain fossil fuel companies or nuclear. One to follow up in the near future.

  2. there's a lot of demand out there - for green products/services, just look at the popularity of green deals for gas/electricity.
    I think that the solution for our climate emergency must be consumer led, producer led and supported by governments.
    I'm happy to hold UKW knowing that the money invested by me stimulates more demand and development of renewable energy.
    The same can't really be said for investing in the FTSE100 or a general tracker.
    I'll ahve a look at Scroders - Global Energy Transition, it might be worth it for the diversification

    1. I think the transition is being spearheaded by the young people such as schools strike for climate started by Greta Thunberg. Governments have been shamed into taking action however, it looks like there is now more momentum as more people understand the concerns and the implications of doing nothing.

      I don't think ordinary people however realise how much they will need to change their lifestyle to achieve net zero emissions by 2050. Travel, diet, work, energy use and general consumption will need to change. The average person in the UK accounts for around 7Kg of carbon each year (USA 16Kg) and this needs to come down to under 1Kg for net zero to work.

      As for stimulating more demand, I'm not so sure. Monevator has argued that you are merely acquiring the shares that someone else is selling. Obviously with new issues for additional wind farms, that's different. Either way, it's a feel-good factor which I believe is important.

      I agree that the FTSE 100 is not the best place for low carbon sustainable options!

  3. I'm hoping this will become available to buy on the Freetrade platform so I can start with a small investment, which I think will make a nice addition to my holding in TRIG. Still find it difficult to purchase on a high premium but I can't see it falling much in the near future.

    1. I was wondering about general availability of investments via Freetrade. This is one of the larger ITs so I would expect it should be offered.

      The premium of between 10% to 15% has been the norm for quite some time. This seems to be the norm for all renewable infrastructure trusts. One of my other holdings Bluefield Solar was at a premium of 20%+ recently. Obviously one of the disincentives but then if investors wait and the share price rises you are no better off and you have missed out on the 5% dividends which forms a big part of the total return for this sector.

      Sometimes we just have to pull the TRIGger....(I'll get my coat!)

    2. UKW is now available on Freetrade so I have now invested!

  4. You are not alone in your green investment thinking. I'm holding UKW in my SIPP and TRIG in my ISA, together with INRG and Foresight UK Infrastructure which holds approximately 40% renewables. I'm looking to also add IEM as and when there's a market correction.

    Incidentally, i had a long and ultimtely fruitless correspondence recently with Vanguard regarding their current lack of genuine ESG tracker options to offer UK retail investors. Initially they pointed me to their SRI tracker but when i then pointed out that it contained a global fossil fuel producer in its top 10 holdings they responded with:
    "Vanguard have only a small presence in the UK and Europe and as such do not offer an ESG fund that excludes fossil fuel at this point in time. As previously communicated, we are continually looking at our range of fund offerings and
    listening to client feedback as we look at options for future funds, but are unable to speak about specific time frames regarding any new products."
    Very short-sighted on their part!
    I'd urge others who hold Vanguard investents and are similarly concerned about climate change to up the anti and put pressure on them. Only through such communication might things begin to change.

    Keep up the great work, DIY Investor. Your posts are really appreciated.

    1. I share your frustration in relation to Vanguard UK bernie. I have tried to get them to up their game on climate-friendly funds for the past 9 months. I am getting close to the point when I will call time and move my investments elsewhere.

      I am wondering if the top managers there are Trump supporters to be honest. If they wanted to help investors who were concerned about the climate emergency, they could easily have introduced some options by now.

      Like you, I would urge any readers who are concerned about climate to check what's in their portfolio and to contact fund managers to express concerns and lobby for climate-friendly options for investments. Also to consider divestment where appropriate...things need to change very quickly.

  5. 9 months!!...that's so dispiriting.

    For a huge global asset management company like Vanguard, when it comes to deciding new 'products' i'm not sure politics necessarily plays a part. If i recall correctly, they already offer genuine ESG tracker options in the US. Here in the UK their thinking arguably appears to be that there isn't yet sufficient demand for it to be a worthwhile (ie profitable) proposition. A simple case of supply and demand economics. As i said in my previous post, a wholly short sighted outlook. And all the more reason for folks to contact them, to urge them to introduce such a tracker not 'sometime in the future' but now!

    As regards whether or not to divest, I agree this course of action is what might help to make them sit up and take notice. The dilemma for the average retail investor though is of course is that provided one holds with Vanguard direct they remain cheap - much cheaper than via a platform like HL. And half the battle with any portfolio is, as you know, keeping those charges right down to a bare minimum.

    Please keep us updated as to what alternative tracker options you're considering.

    1. Supply and demand, you're probably right but how do Vanguard UK assess demand? They may think that any new product will dilute demand for existing products.

      Regardless of demand, providing climate-friendly funds is just the right thing to do.

  6. This useful article about sustainable investing was published today on the Citywire site;

    It lists several funds that i for one will be looking into further.

    Note too what it says about the Vanguard SRI tracker.

    1. Thanks for the link bernie. A couple of funds there I have not seen before.

      You would hope that investing to preserve life as we know it would catch on at some point!