Investment Objective
The aim of the Arkx Clean Energy Fund is to achieve long term wealth creation for investors via the allocation of capital to clean energy sectors and listed, global companies that Arkx believes have proven, profitable technologies supported by strong balance sheets.
The Fund seeks to achieve these objectives by entering into an investment approach across global markets that captures the investment opportunities that may exist as a result of the transition to a low carbon economy.
The Fund aims to deliver a 3% per annum return above the MSCI World Index benchmark.
Arkx Investment Management is a signatory to the United Nations Principles for Responsible Investment (UNPRI) and these principles will be adhered to in the investment process.
Investment Philosophy
We believe that clean energy investment is a compelling theme. It has significant macro and microeconomic implications and stands to bring about a process of fundamental structural economic and social change.
Broadly, this change is being driven by a three-fold global focus on:
1. The growth of energy consumption;
2. Risks relating to energy security and;
3. The evolving formulation of Government policy in response to the science of climate change
The transformation will likely be comparable in magnitude to what was experienced by the countries that first experienced the impact of the Industrial Revolution - only significantly faster. At its most essential, Arkx considers that the move to a low carbon economy will fundamentally alter what goods and services are produced, how they are produced and where they are produced.
Investment Strategy
The Arkx Clean Energy fund is thematic in that that invests across an international universe of listed companies that operate in the sectors of clean and renewable energy (solar, wind, hydro, geothermal), as well as energy efficiency, energy storage, electric vehicles and clean building technologies. The fund is also 'high conviction' in that it holds a concentrated portfolio of 20-30 stocks.
We use a robust investment process implemented in 5 stages. In Stage I we apply a review of all companies in our investment universe of more than 400 companies globally to select only those listed companies that generate at least 50% of revenues and/or profits from clean energy or energy grid / storage efficiency operations. Stage II involves a Geographic and Sector Analysis, where we review sector thematics so as to position the Arkx portfolio in particular sub-sectors with the most favourable characteristics. Stage III reviews key Financial Metrics Screens to ensure we are investing only in companies with sensible balance sheet gearing, proven, profitable operations (that is, we specifically do not invest in loss-making start-ups or early stage technology) to which we also apply a market capitalisation threshold of greater than US$200m plus a check to ensure sufficient liquidity. Stage IV involves a Qualitative Assessment of the relative company fundamentals, particularly valuation parameters across the 60-70 stocks in our focus list. Finally, Stage V looks at Portfolio Construction, to ensure suitable diversification across geographies and technologies within our final 20-30 stock portfolio. We continually monitor the portfolio for valuation, performance and technology developments across each company under review as well as for risk assessment.