Green economy in focus: Downing Renewables & Infrastructure Trust
Tom Williams, Head of Energy & Infrastructure and Partner at Downing LLP gives his views on the launch of its newest fund, Downing Renewable & Infrastructure Trust (DORE). The fund is the latest London-listing to receive the Green Economy Mark on admission, which is given to companies and funds with 50% + revenues derived from the green economy. The blog reveals why sustainability is central to the fund's investment strategy, the significance of receiving the Green Economy Mark, and their views on the latest developments in sustainability.
Can you provide an overview of the fund?
Downing Renewables & Infrastructure Trust PLC (DORE) is a renewable energy and infrastructure trust designed to deliver stable and sustainable returns through diversification across technology, geography and project stage. It has a diversified portfolio of renewable energy generating assets and other infrastructure assets across the UK, Ireland and Northern Europe. DORE is managed by Downing LLP (Downing), a fund manager with over a decade’s track record deploying capital and delivering exits in the renewables space.
What does receiving the Green Economy Mark mean to your company?
The Green Economy Mark provides validation of DORE’s commitment to a sustainable investment approach. One of the key benefits we recognise is that the Mark is a certification received from a third party and based on pre-determined qualification criteria, which raises the visibility of sustainable investment. This objective recognition is crucial to how we approach sustainable investment, by ensuring we meet recognised industry standards. Our commitment is reflected in Downing’s role as a signatory to the UN Principles of Responsible Investment, incorporating the PRI’s six principles into our Responsible Investment System.
In addition, the Green Economy Mark facilitates transparency for investors in recognising DORE’s sustainable investment approach and clearly demonstrates the fund’s ESG credentials. This allows investors seeking a sustainable and strong risk adjusted return the reassurance that they are investing in a greener future and supporting the UK’s commitment to net-zero.
How have you incorporated sustainability into your investment mandate?
Sustainability is central to the fund’s investment mandate, which focuses on core renewables (wind, solar, hydro and geothermal) and infrastructure (utilities, multi-utilities and district heating). We have adopted a pragmatic approach in that natural resources are different between geographies, enabling us to diversify regulatory and policy risk. Each asset, whether at construction or operational stage, will be subject to Downing’s Carbon Lifecycle Assessment which enables the in-house asset management team to identify and reduce emissions throughout its lifecycle. This means Downing is accountable for each asset throughout its life, down to where materials are sourced, the carbon impact of operating and maintaining an asset, to considering the extension or recycling options at the end of an asset’s lifecycle.
Why have you chosen the closed-end fund structure to invest in renewables?
We feel that the Investment Trust structure is a natural choice for investing in renewables and infrastructure given its closed ended structure. The long-dated, stable cashflows that are offered by renewables and infrastructure assets are conducive to achieving stable dividends which can provide income for investors.
What key developments in sustainability will impact your industry over the next 5 years?
The UK Government recently published its ‘Ten Point Plan for a Green Industrial Revolution’, setting the benchmark for the industry in the future. It provides much-needed clarity and certainty on the UK’s direction of travel, providing ‘powerful long-term markers for investments’ that DORE is ideally positioned to capitalise on to deliver long-term sustainable returns.
The most relevant element of the plan is the need for considerable upscaling of renewable energy generation and electrification across the UK to support low-carbon hydrogen and zero emission vehicles. Hydrogen requires an increase in cheaper energy to support its clean production in order to decarbonise sectors such as transport, industry and heating. Transferring excess energy from wind and solar to these end-uses will be an essential part of the energy mix to meet net-zero targets.
Electric vehicle (EV) charging will only achieve wide-scale adoption if the size and speed of the charging network is rapidly increased and is powered from renewable and clean energy sources. This is a key factor in achieving the public support needed to meet the UK Government’s 2030 ban on the sale of diesel and petrol cars.
The plan covers green finance and innovation; calling out the need for private finance to support the net-zero transition with funding for innovation. Mandatory reporting of climate-related financial information will come into effect in the UK by 2025. DORE will be at the forefront of meeting and reporting on its contribution to growing the global green economy.
This year, the UK Government also announced that in 2021 solar and onshore wind projects can bid for the Contracts for Difference (CfD) scheme, which incentivises investment in renewable energy by protecting developers from volatile wholesale prices, while also protecting consumers from paying additional costs when electricity prices are high. This will continue to be a key mechanism for supporting low-carbon electricity generation and has already catapulted the UK to fifth globally in the Renewable Energy Country Attractiveness Index.
We are encouraged to see developments in sustainability that support our industry. Collectively, we’re striving towards a greener future.