Jupiter Green (JGC)

20/12/2023

Results analysis from Kepler Trust Intelligence

In the six months to 30/09/2023, Jupiter Green (JGC) delivered a NAV total return of -10.0% and a share price total return of -11.4%. In comparison, the trust's benchmark, the MSCI World Small Cap Index, increased by 0.1% over the period.

The challenging macroeconomic environment weighed on the trust's performance during the period, with the threat of 'higher for longer' interest rates prompting a deterioration in investor sentiment towards growth equities. A headwind to environmental solutions equities was the UK government's push-back in net-zero targets for the phasing out of gas boilers and non-electric vehicles.

The trust's discount widened from 12.7% to 18.6% during the period and has subsequently widened again to 20.6% since the period end. The board has used share buybacks to manage the trust's discount, buying back £1.9 million of shares at an average discount of 15.9% to NAV during the period.

Chairman Michael Naylor said: "We are disappointed with the performance of the portfolio over the period, however due to the prevailing macroeconomic environment, we are of the belief that the prospects for the portfolio companies and their respective addressable markets remains undimmed. As attitudes toward addressing climate solutions shift, there is a broadening of the value chain beyond the conventional lens. The opportunities throughout the market that this creates will be plentiful and we firmly believe the Jupiter Green Investment Trust remains well-positioned to identify them."

Jupiter Green (JGC) has a broad-ranging remit to invest in companies providing solutions to environmental challenges from across the global investment universe. Manager Jon Wallace has identified six key themes that underpin the trust's investing strategy, with around 70% of the portfolio allocated to the circular economy, clean energy and green buildings and industry (as at 30/09/2023).

The environmental sector offers strong long-term growth drivers, reinforced by recent events. The invasion of Ukraine prompted a renewed focus on energy security, and the role of renewables in diversifying energy mix. There has also been increasing regulation in the sector, including the US government's landmark commitment to investing in clean energy and other environmental solutions in the US Inflation Reduction Act (IRA) last year. And in the last few weeks, the COP28 summit in Dubai has prompted a wave of new international pledges from UN members on decarbonisation, food security and climate change.

We think the accelerating pace of regulatory change is supportive of the investment thesis for environmental solutions companies, despite the challenge of rising interest rates for capital-intensive businesses over the last year. It's also an area that benefits from active management by experts that can identify the likely success stories amongst a large group of innovators targeting different themes. Despite a challenging half-year, JGC has delivered a strong long-term performance for investors, with a five-year NAV return of 38.4% (as at 17/12/2023).

A reversal in the interest rate cycle and improvement in investor sentiment towards small-caps could provide the impetus for a recovery in valuation. Given that environmental solutions are likely to remain at the forefront of regulation and global development, the current discount may prove an attractive entry point for investors wanting exposure to an actively-managed trust in this sphere.

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