ESGClarity: Sustainable Property Outlook – Solar Power and Affordable HousingGeneral/ 29 January 2021
Renewable Power Generation and Storage will Boost Sustainability in Property Markets in 2021
James Clark, senior fund analyst, Hawksmoor Investment Management
We see good value in quite a few areas of the property and infrastructure markets, more in the way of specialist areas than mainstream areas (such as offices and particularly retail). For example, among the investment trusts we hold within Hawksmoor’s Sustainable World discretionary portfolio management service are Gresham House Energy Storage and SDCL Energy Efficiency Income Trust. Both benefit from a strong supply and demand picture, have strong sustainability credentials and generate an attractive level of income.
Gresham House Energy Storage has a portfolio of battery storage facilities in the UK that assist National Grid in maintaining the balance of supply and demand in real time. Increased renewable power generation has led to increased intermittency of supply (as solar and wind power generation are weather-dependent, for example) and greater intraday price spreads.
Battery storage facilities such as those owned by Gresham House can earn revenue from ‘frequency response’ (real-time power balancing for National Grid), trading (taking advantage of intraday price spreads to buy power at times of excess supply and sell power at times of high demand) and ‘capacity mechanism’ (long-term contracts to meet extremes of demand).
SDCL Energy Efficiency Income Trust has a portfolio of energy-efficient power generation assets plus assets that use power more efficiently. Examples include combined heat and power (CHP) engines, biomass and gas boilers and rooftop solar arrays, in addition to LED lighting. The assets are critical to the functioning of the buildings in which they are located, providing the users with cleaner, cheaper, more reliable energy.
This trust also has a great pipeline of opportunities, perhaps best illustrated by a £50m investment in August 2020 in 112 electric vehicle charging stations across the UK – an investment, which opens up a very strong pipeline of opportunities with the vendor. The outlook for income generation here is a key factor – SDCL Energy Efficiency Income Trust has a 5.5p dividend target for the year to March 2021, growing progressively thereafter.
John Williams, head of property funds and investment director, Resonance
2021 will see the greater emergence of residential impact property funds and them finally coming of age.
The UK’s demand for affordable homes (ordinary houses on ordinary streets) is on the increase, Covid-19 has seen an even greater surge in demand, in particular with underserved groups such as women experiencing domestic abuse.
There will be an increase in demand for funds that focus on residential property and tackle big societal issues, such as the Resonance Homelessness Property Funds which has already seen pension fund investment and growing interest from a wide range of institutional investors.