AJ Bell - Portfolio Addition

I've held my SIPP with this platform (previously Sippdeal) for the past 15 years or so and in 2011 I transferred my ISA from Interactive Investor. Over that period I have been very happy with the service provided and tend to follow news and progress especially since they went public a couple of years back.

Established in Manchester in 1995, the company has grown steadily and is now the second largest platform in the UK with a market cap of £1.5bn. They became a FTSE 250 company in December 2018.

I was very pleased that their founder and CEO, Andy Bell agreed to write the foreword to my "DIY Pensions" book.

Results

The company have recently released results for the full year to end September 2021 (link via Investegate),

This has been a record year with assets under management growing 29% to £72.8bn, profits up 13% to £55m and earnings per share up 13% to 10.67p.

As a result the dividend has been raised by 13% for the year to 6.96p and in addition there will be a special dividend of 5.0p payable in January. This gives a yield of 3.2% at the current price.

New App

In 2022, they will be launching their new low cost app - dodl - with no charges for buying/selling and an annual charge of just 0.15% compared to 0.25% + dealing for Youinvest. It will offer the full range of ISA, Lifetime ISA, Pension and General (Non-ISA) accounts and existing customers will be able to consolidate existing investments onto the new platform.

However, the range of investments will be initially limited to around 50 of the FTSE 100 shares and a further 30 or so funds including the Vanguard Lifestrategy and their own low cost index funds. US stocks will be added sometime later and other shares, investment trusts and funds according to customer demand.

This move is clearly a response to the competition from the fintech offerings from the likes of Freetrade and Revolut. In the US, the popularity of Robinhood has forced some brokers to lower their commission rates which is obviously good for investors.

The minimum charges for each account will be £1.00 per month however, unlike Youinvest, there will be no maximum cap. Charges for the average ISA with say £50,000 would be £75 p.a. compared to Youinvest charges currently £87.50 (funds) or £42 (shares/ITs) plus dealing charges. I currently pay £9.95 for each share purchase/sale.

I will need to do some analysis to see whether I would be better off with the dodl platform or carry on with Youinvest as normal...clearly it depends on the size of the portfolio and the likely frequency of trades. It will obviously be attractive to new investors with a few hundred pounds to 'invest' who will likely do a lot of buying and selling...because it's free. Whether that will produce good long term returns is debatable!

3 Yr Share Price compare HL v AJB
(click to enlarge)

Conclusion

I was surprised to see the share price fall back some 9% after the results were released. Maybe there is some concern about future profitability with the commission-free app. Anyway, I am hoping that the dip will be temporary.

This seems to be a well-run ship...record new customer numbers, record revenues and profits, new products, high retention rates year on year, 17 years of consecutive dividend growth and strong balance sheet with no borrowing.

I seem to recall being in receipt of some shares following the float but they were possibly sold to release funds for my house purchase. I have some spare proceeds from other disposals so decided to take advantage of the share price dip last week. The purchase price was 370p and the addition accounts for just 2% of my portfolio. 

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!

Personal Assets Trust - Update

This 'Steady Eddie' capital preservation investment trust was added to my portfolio back in 2013...sold a couple of years later but then re-purchased in May last year as I was re-evaluating asset allocation following the Covid-19 shock to global markets.

Results

The trust has this week published results for the half year to end October 2021 (link via Investegate)

Over the past 6 months, net assets have increased by 5.9% (total return) compared to 5.4% for the FTSE All Share index. Over the past 3 years the returns were 28.8% and 17.6% respectively. The trust's share price is maintained close to NAV and the price has increased by £22.00 to £493 since April.

At the end of the period, asset allocation remained defensive with liquidity at 59.3% (cash, gold and bonds etc.).

I was really pleased to note that the trust has now sold its last tobacco holding, Philip Morris which was previously my main concern. I was hoping they would consider dropping this unethical holding and I am sure my email correspondence on the subject last year swung the decision!  They also disposed of Buffett's Berkshire Hathaway, one of the reasons being the management have not yet fully grasped the ESG nettle.

3 Yr Share Price v FTSE All Share
(click to enlarge)

Commenting on the results, investment manager Seb Lyon said:

"For the past two decades, with a few brief exceptions, we have lived in an era of benign inflation.  Central banks, if anything, have been fighting deflationary shocks since the Asian and Long-Term Capital Management crises of the late 1990s and, more recently, the Great Financial Crisis of 2008, followed by the Eurozone debt crisis of 2011.  Investors may be ill-prepared for rising interest rates; fixed income investors offered low nominal and negative real returns are being driven to higher-return equities, which supposedly offer 'real' protection.

The discount rate, the basis of which is determined by the 10-year US Treasury yield, is key.  Equities have been supported by four decades of falling interest rates.  Should this dynamic change, investors may be in for greater volatility as the support from low rates is questioned.  This raises uncertainty over the value of the expected growth in earnings from equities, which becomes less precious when eroded by inflation.  A battle lies ahead between the 'inflation-protecting' qualities of stocks and the threat of nominal interest rate rises in the future. There is a risk that some 'alternative assets' such as highly geared real estate similarly may not offer much defence.

We consider these risks when structuring the Trust's portfolio.  Gold bullion and inflation-protected securities provide a foil for our equity exposure, which in turn is focussed on durable, profitable companies that continue to grow and have pricing power.  Looking ahead, the Trust's liquidity will provide both downside protection and the ability to add to our equities as opportunities present themselves, as we did in the first quarter of 2020".

The trust has paid a small dividend of £5.60 p.a. (paid quarterly) for several years and this is likely to continue for the foreseeable future. This gives a current yield of 1.1%.

Holdings

Currently equities make up 40% and top portfolio holdings include Microsoft (6.2%), Google (6.0%), Unilever (3.6%), Nestle (3.6%), Visa (3.4%) and Diageo (3.2%).

US index linked bonds make up just over 30% with cash and UK treasuries a further 21%. Gold accounts for just under 8% of the portfolio.

The shares were re-purchased for my portfolio at £432 last May and have advanced to currently £501... just off their all-time high point.

The US markets continue to march onwards & upwards but with rising debt levels resulting from Covid, inflation on the rise and the threats posed by climate change, I think in these uncertain times it's probably a sensible idea to think about the potential downside of the markets and with an eye on capital preservation. I have also added the Trojan Ethical fund to my green portfolio which is managed by the same stable on very similar lines. 

I topped up my holding in both earlier this year and these two combined make up around 12% of my portfolio...up from 6% at the start of this year.

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!

COP26 - What Was Agreed?

Last month I took a look at what we could reasonably expect from the COP26 gathering in Glasgow. To be honest, I was not really expecting a great deal of progress from our world leaders given their track record over the past 25 years. Now the dust has settled, let's have a look at progress...

Well, we've had two weeks of intense climate talks, representatives from 200 countries, thousands of demonstrators, wall to wall media coverage ...so what has all this achieved? Are we on track to limit global warming to 1.5C?

Here are some of the main points:

* Over 100 countries representing 85% of the world's forests signed up to an agreement to protect the world's forests from illegal logging and land degradation by 2030. Importantly, this included Brazil.

* India, the world's third biggest CO2 emitter pledged to get to 50% renewable energy by 2030

* The US, UK and EU have pledged to cut methane emissions by at least 30% by 2030

* 40 countries including the US, EU, China and India are signed up to a UK plan to speed up affordable green technology worldwide by 2030. The 'Glasgow Breakthrough' covers clean power, road transport, steel manufacturing, hydrogen and agriculture which together are responsible for 50% of global emissions.

* Coal accounts for just over one third of global energy and is the single biggest cause of global warming. 40 countries agreed to phase out coal use by 2040 but some large coal users refused to sign up including China, Australia, India and the US so this is a big disappointment. An agreement to 'phase out' coal was watered down to 'phase down' at the last minute.

* There was no agreement on the phase out of oil and gas but merely a call to phase out 'inefficient' fossil fuel subsidies.

* More countries signed up to the 'Beyond Oil & Gas Alliance' BOGA. Initiated by Costa Rica and Denmark, it aims to build an international coalition of governments and other stakeholders to take practical steps to phase out oil and gas production. Other members include France, Sweden, Ireland, Portugal, Wales, Quebec, California and New Zealand. So far the UK has declined.

* By 2023, all UK listed companies will be required to set out their plans showing how they will move to a low carbon future in line with our 2050 net zero target.

* Having already missed the target for $100bn per year by 2020, they agreed to raise $500bn for poorer countries over the coming 5 years to deal with the transition to cleaner forms of energy and also for 50% of this money to be spent on adaptation to the increasing severity of storms and flooding and rising sea levels.

* The US and China - together responsible for 43% of global emissions - announced they would work more closely over the coming decade and increase efforts to close the significant gap to achieve the 1.5C of warming.

Analysis by the IEA suggests that if all of these pledges are implemented, and that's a big IF, warming would fall from the 2.7C pre-COP figure to 1.8C. Obviously a big step in the right direction but still not where we need to be. The general consensus however is that 2.2C to 2.4C is more likely at this stage which still leaves a big gap to be closed.

Conclusion

Unfortunately, despite all of these pledges, we are still nowhere near on track for 1.5C. I prefer to side with the analysis by Climate Action Tracker, which suggests we are currently heading for 2.4C by the end of the century...assuming all of the pledges are implemented which is never a given.

Of course, this has huge implications for investors both large and small. "Global warming above 1.5C presents irreversible, foreseeable and large scale risks to investors and financial markets" Rebecca Mikula-Wright, CEO AIGCC (link) 

The big problem is that whilst many countries have a long term ambition for net zero, they mostly lack a solid plan of how to get there so the long term pledges lack credibility. However, they did agree to come back next year (and the year after) with more ambitious climate plans (NDCs) to try and close the gap. Also, it is encouraging that the focus is now firmly on this 1.5C limit rather than 'well below' 2.0C.

Of course, 2.4C  is still a little better than the 2.7C projections before the conference so some progress is made and maybe they can get to under 2.0C next year but I still feel there is a lack of urgency and plans for action over the coming few years to 2030 which is the critical period. But it must be incredibly difficult to get consensus from 200 global countries.

The recent IPCC 'Code Red for Humanity' report suggested that 1.5C was still possible "but only if unprecedented action is taken now". Sadly, the global world leaders have so far failed to take sufficient notice of this warning, and so on we go with more or less business much as usual for the time being and of course more intense floods, more widespread wildfires and billions more spent on the after effects and adaptation.

So, did the gathering achieve the main objective of keeping 1.5C within reach? Well, I think just about although many commentators say it is hanging by a thread.

But I get the feeling that climate change has become more of a priority for some of the big world players such as China, US and EU and I feel a little more optimistic that there is a genuine will to address the problem. Whether they actually implement all these decisions will be crucial but I hope we will look back to Glasgow and see it as a big turning point in the battle to move away from fossil fuels and avoid some of the worst effects of the climate crisis which await a world should we fail to keep warming below 2.0C.

So, I am a little more optimistic than before and I continue to be inspired by the younger generation who are protesting and seem determined to find a way through to a more sustainable world order.

So, on we go to Sharm el-Sheikh, Egypt starting 7th November 2022 and COP27.

Over to you...what do you think about the climate issues and the COP26 gathering? Leave a comment below.

Gore St Energy Storage - Portfolio Addition

Earlier this year, the government decided to up its ambition on climate change and pledged to reduce emissions by 78% by 2035 and totally decarbonise our electricity grid by the same date. This will basically mean less oil and gas and much more renewable energy. More wind - both offshore and onshore and more solar...however the drawback is intermittency so we will require far more energy storage capacity to facilitate the transition.

Renewable energy currently provides over 40% of our energy - up from just 5% a decade ago - and this will only increase as we move to electric vehicles and heat our homes and offices with heat pumps.

There are several ways of storing energy...battery, hydro, flow and hydrogen and we will need at least 20GW by 2030 so quite an increase from the current 1.4GW.

Surprisingly there are still only the two energy storage plays in the UK renewable infrastructure sector - Gresham House (GRID) which joined my portfolio two years ago and Gore St Energy Storage which I have just acquired.

The Set-Up

The fund invests in a portfolio of utility scale energy storage facilities located throughout the UK and more recently Ireland. The fund will have a combined stored capacity of 577MW when the latest acquisitions come on stream later this year. This is rapid growth compared to the 29MW capacity at launch back in 2018.

These facilities provide energy storage for the National Grid and help to provide more stability and flexibility for the entire grid system. The majority of revenues are from frequency response services to the grid. This is mainly dynamic containment which is designed to give a rapid response to significant frequency deviations and then balancing mechanism which is the energy platform used by the grid to buy and sell electricity and manage the system in real time.

As we have witnessed this year, wholesale energy prices have been volatile with gas increasing five-fold due to increased global demand. The company recently announced that this volatility resulted in a doubling of normal revenues for September. This volatility is likely to continue for several months so it will be interesting to see the effect for the energy storage market. Half year results should be out next month.

Alex O'Cinneide, CEO of Gore Street Capital, the Company's Investment Manager, commented:

"It is a critical time for the energy infrastructure systems of the GB and Irish grids as they continue to face new challenges to deliver consistent energy supply, and meet our important obligations towards further onboarding intermittent sources of renewable power. We are only at the start of the growth curve in our industry, as energy storage continues to play an increasingly vital role in balancing energy systems.

Gore Street's portfolio of technologically advanced assets uniquely combined with our in-house expertise of engineering and energy markets, means that we are well positioned to capitalise on the highly attractive pricing available for our services, just as we did when we took first mover advantage and moved our GB portfolio into Dynamic Containment contracts during Q3 2020. We will continue to monitor closely the situation in the energy markets going forward over the Winter months and shall optimise revenue stacking strategies to create additional value for our shareholders."

The company recently raised £74m from a share placing (107p) which will be used to expand the operation with an expected 1GW of capacity in the US and Western Europe.

The trust is attractive to those seeking income and pays 7.0p  in annual dividends (paid quarterly) which gives a yield of 6.0% at the current price.

Conclusion

The global transition to clean energy is now becoming a priority for governments in the UK, Ireland and globally. I expect this to become more urgent in the crucial period to 2030 as we try to curb emissions and limit warming to 1.5C. Energy storage is likely to expand rapidly over the coming decade and will play a pivotal role in the green transition.

One of the factors which has put me off this trust until now has been the relatively high charges - over 3% in 2019/20 incl. performance fee (applied where NAV exceeds a 7% hurdle) but this came down to just under 2% this year and I hope it will continue to become a lower percentage as the company grows. The share price currently trades at a premium to NAV of around 15% which seems to be par for the renewables sector.

GSF share price & NAV past 3 years

The trust is not as sensitive to power prices compared to the likes of the wind/solar infrastructure trusts but benefit more from price volatility which is likely to increase as we continue to reduce our dependence on fossil fuels. The shares were purchased at 115p last week and account for just 2% of my green portfolio.

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!

A SIPP Can be a Great Way to Save the Planet!

With all the attention on climate due to the COP26 gathering in Glasgow, it may be worth a reminder that our global investment universe will have a big part to play in the transition to net zero carbon emissions by 2050. There will not be many rewarding investment opportunities in a world where warming is over 2.0C...and that is just where we are heading at present.

More and more investors are switching on to the risks associated with climate change. Over recent years there has been the higher profile to climate issues from  the Greta effect and direct action from the likes of Extinction Rebellion.

There are almost daily news items of devastating extreme weather events all around the world...the flooding in Germany, wildfires in Turkey, Greece, California and Siberia this summer. Globally, July was officially the hottest month on record....the past five years have been the warmest years ever. The ice polar sheets are melting at a rapid pace.

Greece...August 2021

It's clear the free market capitalism is not working and at some point in the near future governments will respond to the ever increasing public pressure and intervene as they did in relation to Covid. One option could be the introduction of a global carbon tax...basically a tax on carbon pollution (fossil fuels) which would dramatically change the investing landscape. I'm not sure whether capitalism can actually go 'green' as its basic idea is all about growth whereas green is about the limits to growth on a finite planet...however it can certainly accommodate greener and more sustainable ways of doing things.

Investors, small and large, are part owners of the companies held in their portfolio. Do they really want to own a part of a company involved in fossil fuels such as coal mining or oil & gas exploration? More and more are thinking about this and coming to the conclusion that no, they don't.

Pensions

It's now 3 years since I started to move my investments away from fossil fuels and into more climate-friendly areas. Here's my SIPP drawdown review for the year to June 2019 recording the sale of City of London, Edinburgh and Vanguard Lifestrategy and a switch to Global Clean Energy and renewable energy infrastructure funds.

Most people in work - whether self-employed or employed in the private or public sector will pay into a pension. This is more so today since the roll-out of auto enrolment.

But how do you know that your monthly contributions are not propping up these polluting fossil fuel  industries?

What will the future be like in 20 or 30 years time when savers are ready to retire and take that pension? Probably a very different world than we see today for sure.

Most of these pensions will be invested in a range of diversified funds. However, a recent analysis of one third of global funds with assets of $27 trillion revealed that less than 1% were aligned with the Paris Agreement and limiting temperatures to well below 2.0C. The study carried out by non-profit charity CDP looked at the holdings in 16,500 investment funds and revealed that just 158 funds were compatible with Paris whilst over 8,000 were aligned with a temperature of 2.75C.

Low cost passive investing has become more popular in recent years. However, around one third of the average global index fund is made up of companies that are doing more harm than good and comprise of industries that continue to accelerate the climate crisis. Therefore it's most likely that your pension will be invested in funds which are not aligned with Paris and in companies that continue to add to the climate crisis.

Yet the majority of people say they want their investments to take account of people and planet as well as profits and say that responsible and sustainable investment is important.

UK pensions hold around £3 trillion invested in the global economy...it could make a big difference if it was aligned with Paris and invested in responsible companies.

SIPPs

A self-invested personal pension is a way for investors to take control over where their hard-earned savings are invested. If you are vegan you would not want to invest in meat companies. If you are concerned about the environment and climate change, you will want to avoid the fossil fuel companies and the big banks which finance their operations. You would want to see your funds invested more in green technology and sustainable solutions.

Most people do not really know where their pensions are invested...maybe ignorance is bliss! But it is definitely becoming easier to find greener options such as iShares World SRI ETF covered here iShares Clean Energy ETF covered here or BG Positive Change...here - a sample of just three funds held in my green portfolio.

For those who are trying to reduce their personal carbon footprint, research from Make My Money Matter suggests that greening your pension is a staggering 21x more powerful than stopping flying, going veggie and changing energy supplier combined or 20x more effective than switching to an electric car!

Obviously it would make things a lot easier for ordinary savers if the whole industry became much greener but the research from CDP suggests this is just not happening.

Conclusion

It's long overdue for the global finance sector to get its act together on climate change. Former Bank of England governor Mark Carney has recently launched a net zero alliance of financial service which includes index providers, credit rating agencies and stock exchanges. The aim is to align all products and services to achieving net zero emissions by 2050 at the latest. The alliance say they have mobilised firms controlling 40% of global assets and worth $130 trillion to align with the 1.5C warming limit. (I suspect it may take a little while before the banks stop pouring billions into fossil fuels).

This should compliment the net zero banking alliance and the net zero insurance alliance both established earlier this year.

At the COP26 gathering this week, the Chancellor outlined plans for new rules for large UK firms to show how they are meeting climate reduction targets. By 2023 they will have to show how their business will move to zero carbon emissions in line with the governments 2050 net zero pledge.

These initiatives are all heading in the right direction but with less than 1% of global companies currently aligned with Paris, there's a long way to go. However, we have to remain optimistic...the world will transition to a low carbon economy and this process will speed up...companies will inevitably start to adjust to the new reality (some more quickly than others), the markets will adjust and the money will start to move away from fossil fuels and into more sustainable pathways. The young people are demanding change...they have the most to lose in the long term but it will take some time.

In the meantime, investors can be a part of this process and make an immediate impact on the climate by taking more control of how and where their savings are invested by going DIY! Of course, we need to also see some big moves from governments and big business, but we can all make a contribution...however small. When we feel we are making a difference, we feel empowered and just better all round.

When all said and done, a pension or SIPP is just a tax efficient way of saving for a more comfortable retirement in 20, 30 or maybe 40 years time. But the climate scientists all agree...unprecedented action is required now if we are to limit global warming to 1.5C. This will require urgent coordinated action from all governments, especially the G20 as well as the global business community and individuals. We all have a part to play.

If you manage your own SIPP and have made a decision to align your investments with climate in mind, feel free to leave a comment below and share your thoughts with others.

COP 26 - What's It All About?

It's just over a week away...one of the most important global gatherings of world leaders and climate scientists will commence which could have huge implications for the future of our world.

The COP gatherings (Conference of the Parties) are held every year. They provide an opportunity for the world to focus on our warming planet and finding ways to tackle the problems caused by our addiction to fossil fuels such as coal, oil and gas. The first one took place in Berlin in 1995. Unfortunately we have not made much progress over the past 25 years as the warming effect from greenhouse gases continues to increase every year...currently we are 1.2C above pre-industrial levels.

The most significant COP was held in Paris in 2015 when the world leaders finally agreed to limit global warming to well below 2.0C and preferably a lower target of 1.5C. Each country has promised to reduce carbon emissions and to align their economy with this globally agreed target and these are reviewed every five years to see which countries are on track and which are lagging behind.

These targets and pledges are voluntary, there are no sanctions if countries fail to meet their targets or even if they fail to take any action to reduce emissions.

Why Is This COP Important?

This should have been held in 2020 but was postponed due to the global pandemic. At Glasgow, each country is required to submit their first 5 year progress report since the Paris agreement - these are called NDCs (Nationally Determined Contributions). Unfortunately we have not made much progress over the past 6 years and the Intergovernmental Panel on Climate Change (IPCC) recently declared 'Code Red for Humanity'. Rather than the 1.5C or even 'well below' 2.0C target, we are currently on track for warming of 2.9C by the end of this century.

COP26 President Alok Sharma said "The world will soon face catastrophe from climate breakdown if urgent action is not taken".

What More is Needed?

Everyone knows what steps are required to reduce carbon emissions to a sustainable level

quickly phase out coal

phase out oil and gas

more investment in renewables plus energy storage

more help for developing countries with $100bn each year for climate

protect and improve biodiversity

reduce meat consumption and increase plant-based options

Whilst everyone knows what is needed, no one is actually prepared to do it. Queen Elizabeth recently commented “It’s really irritating when they talk, but they don’t do"

In May, the International Energy Agency released its roadmap to net zero which called for an immediate end to all new coal, oil and gas and instead  make a massive investment in clean energy.

How is the UK Doing?

Compared to most other developed countries, not too bad...we have legislated for net zero emissions by 2050 and the government have recently pledged to make our energy grid carbon neutral by 2035 by which time we should have reduced emissions by almost 80% compared to 1990 benchmark. Currently we are just over 40% reduction based on 1990 levels.

Earlier this week the government released its strategy for net zero and also a strategy to decarbonise heat and homes with the aim to phase out gas boilers by 2035 and push ahead with heat pumps. Both have received a mixed response from the climate experts and media. Unfortunately the chancellor refuses to borrow the required funds to meet the challenges which seems to confirm that the government does not regard climate warming as a crisis.

Therefore in absolute terms, it currently looks like we are not likely to hit our net zero target by 2050 and we are certainly not aligned with the IPCC's 1.5C target. According to the CCC, we are failing to meet carbon reduction targets for the period 2023 to 2028 and whilst we have made progress on energy, we have failed to tackle transport and home heating.

We are responsible for less than 2% of global emissions compared to China 28% and USA 15%. However on a per capita basis, the average Brit emits twice as much as the average person in China whilst the average American holds the record and emits 2x the average Brit and 4x the average person in China.

Also, we run a mainly service-based economy with our manufacturing off-shored to the likes of China. All of our clothing, TVs, Phones, garden furniture, washing machine etc. etc. is mostly imported along with all the carbon footprint associated with extracting the raw materials, manufacture and transport of the huge volume of goods.

Our real emissions are therefore probably closer to 3% so we should not be too complacent.

What About Other Countries?

The world's biggest carbon emitter China has pledged to become carbon neutral by 2060 and has recently announced that it will not finance new coal production in other countries. However its domestic consumption is heavily dependent on coal which accounts for two-thirds of electricity demand with solar and wind providing 30%

The US is the world's second largest carbon emitter behind China. It has pledged to reduce emissions by 50% by 2030 compared to 2005. It is aiming to become net zero by 2050 and Biden has pledged to aim for 100% carbon-free electricity by 2035.

India is the world's third largest carbon emitter and has pledged to reduce emissions by 35% by 2030 which is clearly unambitious. It has not set a target date for net zero and has not (so far) delivered an updated NDC for COP26. India has announced plans to increase coal production as part of it's post-covid economic recovery.

The EU is responsible for around 8% of global emissions and has legislated to reduce GHG emissions by 55% by 2030.

Whilst many countries have pledged to reduce emissions over the longer term...2050 or 2060, action on short term reductions are important so there needs to be much more focus on ways to get emissions down by at least 50% by 2030. This looks increasingly unlikely with just over 8 years to go. Currently we are seeing carbon emissions still rising year after year (except 2020 due to Covid lockdown) and we are on track not for a reduction but an increase of 16% by 2030.

Conclusion

A lot of focus will be on securing net zero emissions by 2050 and keeping the lower target of 1.5C "within reach". The recent IPCC report confirmed that 1.5C was still possible "but only if unprecedented action is taken now".

There is no sign of unprecedented action from any G20 country. The pledges from each country made in Paris in 2015 were not enough to keep warming below 2.0C let alone 1.5C and the updated pledges (NDCs) for COP26 are still not enough.

Personally, I can only conclude that our world leaders do not yet take the climate issue seriously...they are not responding with the urgency required to tackle a climate crisis because they don't really accept we have an emergency. Sure they will make promises and the event will be hailed as a success...but then it will be back to economic growth and business as usual. Subsidies and licences for new coal, oil and gas to grow our economies and preserve jobs; more and more consumption and more air travel and world cruises...in fact just more of everything.

And of course the climate problems will get worse each year and on we go to COP27 in Egypt...as if by arranging a conference each year and reading lots of reports and discussing the issue they are actually doing something.

So, I am really not expecting very much but would like very much to be surprised! Until there is sign of real progress, I will continue to take an increasingly defensive position with my investments...it may be some time!

Over to you...what do you think about the climate issues and the COP26 gathering? Leave a comment below.

Bluefield Solar - Final Results

Bluefield Solar (BSIF) was added to my SIPP portfolio in March 2019. It's initial focus was purely on solar power in the UK but last year the Company resolved to broaden its focus to include up to 25% in other forms of renewables such as wind and also energy storage and also expand overseas. They have recognised that storage of renewable energy will become a vital part of the transformation towards net zero emissions over the coming years and I certainly think this is a smart move.

In June, the company announced a deal to acquire 109 small-scale onshore wind turbines for £63 million located throughout the UK. 90% have government subsidies and the remainder will be exposed to fluctuating power prices. BSIF have tapped investors for a further £105m to fund the purchase with an offer of shares at 118p which represented a premium of 8%.

Approximately 60% of solar assets are covered by the old subsidy scheme which provides a guaranteed return for 20 years from the date of connection to the grid. The other 40% have rolling power purchase agreements which generally last for 3 years and are then renewed.

Results

The company has today issued full year results to end June (link via Investegate). Underlying earnings per share reduced by 3.9% to 9.16p and the share price total return including dividends fell by -3.8% due to a 10% fall in the share price from 135p at the start of the period. There has been a corresponding drop in the premium to net assets - 18% last year but now around 8%.

The company pays quarterly dividends and will pay out a total of 8.0p for the year which gives a yield of 6.5% based on the current share price of 123p. However, the board have now de-linked dividend increases from RPI.

The total annualised return for shareholders since launch in 2013 has been 75%.

Chairman John Rennocks said: "We are pleased with the strong earnings performance in the period despite covering a particularly challenging time for the energy markets due to the turbulence caused by Covid 19. We were pleased to deliver a sector leading dividend of 8p per share, post debt amortisation to shareholders while the Net Asset Value also held up well which we believe will support the share price going forward. The robust nature of the earnings from the portfolio during the pandemic highlights the durability and defensive nature of the Company's investment strategy. We look forward to updating the market on further attractive investment opportunities in due course."

Storage

The ability to store excess renewable energy will be the key to a full transition on the UKs path towards net zero by 2050. The government have recently relaxed the rules to encourage far more storage capacity which should be good for the likes of Bluefield. They have excess capacity and spare land which could lead to productive partnerships with storage providers subject to planning considerations.

Energy Pricing

The recent rise in wholesale energy prices should be good for the Company's model over the coming year. The average contracted price for the coming year from June 2021 is £61.7/MWh compared to just £48.2/MWh over the past year mainly due to Covid. Solar+storage and wind+storage can replace the baseload capacity previously provided by coal and now by gas. An increase in storage capacity will be essential to manage and smooth out the intermittent nature of renewable energy - the wind doesn't always blow and the sun doesn't always shine.

BSIF have now increased the life expectancy of its solar assets from 25 years to 40 years. Unfortunately, so far, this has not resulted in a boost to NAV which one might have expected to see.

Share price & NAV(red line) past 12 months

Conclusion

Obviously a disappointing year for this fund and the renewables sector generally. However, the longer term prospects remain bright and the government have recently announced its ambition to make the UK grid fossil free by 2035 which should support increased funding and opportunities for wind and PV solar.

A further focus on decarbonisation will come from the COP 26 gathering next month where global leaders will lay out their plans to limit global warming to 1.5C and set out how they aim to reach net zero emissions by 2050.

Over the past year I have been reducing my weighting to the renewable infrastructure sector and have therefore sold several holdings and reduced my holding in Bluefield Solar from 5% to just 2% of my 'green' portfolio. However I plan to continue to hold this lower weighting in the hope of a better performance from Bluefield going forward.

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!

Ceres Power - Interim Results

Ceres is a fuel cell technology and engineering company and is listed on AIM. It is a world leader in low cost, next generation fuel cell technology which can facilitate the transition to zero-carbon emissions. They aim to play a central role in the global transition to clean, affordable energy to help address the climate crisis and this is why Ceres Power was added my green portfolio in February 2020. The technology can be used in a variety of applications - transport, heavy industry, data centres and home heating.

Fuel cell technology is already a core component of energy strategies in Japan, Korea, Germany and the US. Ceres are working with global leaders such as Bosch to embed their technology in mass market products. The stationary global fuel-cell market is estimated to be worth over $40bn by 2030

Expansion

In January 2020, German engineering giant Bosch increased its holding in Ceres from 4% to 18% citing their steel fuel cell technology as potentially the best in the business. Bosch say the market for the fuel-cell power station could be worth €20bn by 2030. It plans to invest €400m into its solid oxide fuel cell business between now and 2024 and will also install 100 small scale fuel cell power stations this year to generate power for industrial and residential customers as well as data centres.

Other partners include China's engines giant Weichai Power who hold a 20% equity stake.

The company has licence agreements signed up with four of the world's largest engineering and power companies including Japan's Miura and Doosan of S. Korea who are a global leader in the stationary fuel-cell market.

Results

The company has this week released results for the half year to end June 2021 (link via Investegate).

Ceres is growing quickly. From just under £1m in 2015, they have increased revenues significantly in the past four years. Just in the past 6 months revenues increased by 95% to £17.4m (2020 £8.9m). They anticipate around £31.5m for the full year. Current market cap. is around £2bn with a share price of £10.80.

Gross profits increased to £12.2m (£7.1m) on margins of 72%.

The company has a strong balance sheet with no debt and cash in the bank of £263 million boosted by a placing of new shares in March which raised £180m.

The company plan to move to the main market next year and should enter the FTSE 250 which means they will be picked up by various index funds.

Share price past 12 months

Commenting on the results, CEO Phil Caldwell said: "We are pleased to report a strong performance for the Company in the first half of 2021, including a notable increase in our revenues at sector-leading gross margins. The outlook for clean technology innovation and hydrogen remains strong, buoyed by growth in strategies, regulation and green investment. Our partners continue to announce significant developments in the scale and application of our technology and the high level of interest and early engagement around its use for electrolysis to produce green hydrogen is very promising."

Huge Potential

The company are working on a first-of-a-kind 1MW solid oxide electrolyser which is hoped will be operational in 2022. This should unlock the potential for green hydrogen for use in industrial processes and energy generation.

Whilst there are many companies in the proton membrane fuel cell sector, global companies are signing up solely with Ceres in the solid-oxide fuel cell department where the company is a global market leader.

Solid Oxide Fuel Cell

The company doesn't want to focus on fuel cell manufacturing but rather a technology licensing company working closely with a range of partners who are looking to adapt their business' and address the huge challenges posed by climate change. Over the past 6 months these account for 60% of revenues.

Analysts at Berenberg have likened the companies licensing model to ARM Holdings whose RISC technology became the default during the smartphone revolution of the past decade. The broker suggests they could generate revenues of £800m each year from licensing agreements with their partners over the coming decade.

With the COP 26 climate gathering coming next month, the focus is on the ambition of decarbonisation and hydrogen technology. Ceres is well placed to play its part in the global transition to affordable clean energy supported by some of the world's most progressive players in those markets.

The shares currently account for 5% of my green portfolio.

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!

My Year in the Veg Garden

It's Autumn, the nights are drawing in, the leaves are falling and Strictly is back...

Time flies, it will soon be a year since moving to my new house in the leafy suburbs with a garden. So I thought it would be a good opportunity to give an account of my efforts towards self sufficiency in the garden.

The first job was to install a water butt to collect rainwater for the Summer months. My house is on a water meter and I don't like the idea of paying for watering the garden when I can collect gallons of rain water for free. Luckily, the local water company United Utilities had an offer for a half-price 100L container and also a garden compost bin both made from recycled plastic. It was a simple job to connect to the downpipe of the garage and the container was full within the first week.

The next project was to construct a raised bed to grow some of the root veg that needs plenty of deep soil for best results. I bought a few lengths of pressure treated timber from a local supplier in their sale. This was cut into lengths approx. 2m x 1m...roughly coffin shaped! I then chose a sunny aspect in the corner of the garden and removed the turf from the the lawn and was pleased to see lots of earthworms which is a good sign of soil fertility. My family made good use of the turf to repair patches of their lawn dug up by their dog.

The raised bed was constructed and put in place in early Spring. I then filled the bed with a mix of well-rotted manure, soil and peat-free compost and allowed it to settle for a month or so to remove any air pockets.

I ordered my veg seeds from an old friend Cathy from my days in Devon who runs Tamar Organics. Beetroot, Leeks, Runner Beans, Various Salads, Parsnips, Cougette and Chilli Peppers would be a good start.

Sowing

I have a conservatory to the back of the house and this was an ideal place to sow the leeks, courgette seeds and beans. This started in March and April and I used some old cardboard egg boxes and the middle of toilet rolls (thanks weenie) filled with a mix of soil and peat-free compost. It was really good to see the new shoots poking through after a couple of weeks.

The parsnips and beetroot are best planted out in the garden as they don't like being disturbed. The Spring had a few unseasonal cold snaps in April, also very dry but after a slow start they seemed to get going with some heavy rain and then warm sun in late May. I also put up a wigwam of canes in the border for the beans and transplanted them as well as sowing some spares directly at the base of the canes. The salad was sown throughout May and June in the flower borders.

July turned out to be hot, sunny and dry with temperatures reaching 29C so I was out most evenings watering from the rain harvested earlier in the year. When the water butt was full I siphoned some off into a spare empty wheelie bin which holds a further 200L...unfortunately, with no tap, it was a bit of a problem transferring it to my watering can when half empty!

I think climate change will put a lot of pressure on our precious water supply in the coming years so it seems like a good idea to try to conserve the plentiful amount of rain water and conserve mains water for drinking.

Harvest

For the past few months I have enjoyed lots of organic, fresh veg...at times far too much coming at once so family and neighbours have enjoyed the surplus. The runner beans have been prolific throughout August and September, the beetroot is delicious...simply boiled whole and then eaten still warm with a slice of thick wholemeal bread and hummus. The leeks and parsnips are to be enjoyed later in the year.

Runner Beans, Courgette, Beetroots & Jalapenos

The chilli peppers were grown indoors on a sunny window sill but needed to be put out each day so the flowers would pollinate. In the end, just one plant produced around 30 peppers...not quite as hot as I like for jalapenos but still very acceptable. Some of the surplus was made into jars of chutney by my daughter and was very tasty!

I also have a mature apple tree in the garden which has provided fruit over the past month or so (windfall) with more to come in the Autumn. I had a go at apple pie and also apple and blackberry crumble...certainly room for improvement but passable with lots of custard.

Benefits

Of course, there are lots of environmental benefits to growing veg apart from the cost savings. It cuts down on food miles, much of the green beans sold in the supermarket is flown in from the likes of Kenya. Likewise with salads which are transported many road miles for cleaning and packaging in plastic before distribution to the stores. How much simpler to walk to the end of the garden!

The flowering plants such as runner beans are great for bees and pollinating insects

Jalapeno chutney...delicious!

Also there's the sense of achievement in the whole journey of nurturing the lifecycle of the various vegetables from seed to plate over the season and then composting the plant. Finally, there is the benefits to mental health from just getting your hands dirty and working with the soil and its amazing just how much produce can come from a single small seed. This is not just any old courgette, nor is it a M&S courgette but its MY courgette!

Next Year

So, a good start and already thinking about what to try next year. I like radish so they are on the list, maybe also some celery, peas and different types of beans and maybe some spinach which I hear is fairly easy and also outdoor tomatoes. I will also have a go at preserving some of the produce and also making some chutneys.

If there are any veg gardeners reading, let me know what has worked for you...leave a comment below.

And to finish...from John Keats "To Autumn" seems appropriate:

Season of mists and mellow fruitfulness,
Close bosom-friend of the maturing sun;
Conspiring with him how to load and bless
With fruit the vines that round the thatch-eves run;
To bend with apples the moss'd cottage-trees,
And fill all fruit with ripeness to the core;
 To swell the gourd, and plump the hazel shells
With a sweet kernel; to set budding more,
And still more, later flowers for the bees,
Until they think warm days will never cease,
 For summer has o'er-brimm'd their clammy cells.