NextEra Energy is a US utility company which ranks as the world’s largest producer of wind and solar energy. With a broad geographic footprint across the US, NextEra Energy is the nation’s leading provider of clean energy including natural gas, a key transition fuel for the reduction of carbon emissions. It is also a market leader in energy storage, with more capacity than any other company in the US, to improve the efficiency of energy use.
Sustainability is at the core of the company’s strategy to benefit a broad range of stakeholders: the environment by way of its focus on clean sources of energy, customers by way of a reliable service and lower costs, and shareholders by way of consistently rising cashflows and dividends. We invested in NextEra Energy at the fund’s launch in October 2017 and we have been duly rewarded with higher dividends and a higher share price.
Enel, the Italian utility, shares the same philosophy of sustainable growth, with a vision of becoming a ‘super major’ in renewables over the next decade. Enel is a domestic champion but also a global company with a significant presence in the long-term growth markets of South America. Enel’s strategy combines significant and growing investment in renewables with an acceleration in decarbonisation by way of phasing out coal. Renewables capacity is expected to triple over the next 10 years, with renewables accounting for more than 80% of group power generation capacity in 2030, up from 55% today.
Enabling the development of electric mobility is another key initiative, with Enel embarking upon the single largest deployment of charging stations in Europe. The company is proposing to increase the number of charging stations across the group by more than fourfold over the next three years, from 175,000 today to 780,000 in 2023. Charging points for electric buses is expected to increase by a multiple of six over the same period to support cities in their path towards sustainability.
Enel also has a clear commitment to returning cash to shareholders. The company’s guidance for dividend growth over the next three years is approximately 7% per annum.
We invested in Enel in June 2018 when concerns about the political and fiscal situation in Italy led to indiscriminate selling in the Italian stockmarket, particularly in the more interest-rate sensitive sectors. Enel’s business is not confined to the domestic market and we saw the sentiment-driven weakness as a buying opportunity. The stock was purchased on a historic yield of more than 5% with robust and reliable growth in the dividend stream.
The value and income from the fund’s assets will go down as well as up. This will cause the value of your investment to fall as well as rise. There is no guarantee that the fund will achieve its objective and you may get back less than you originally invested.
The fund can be exposed to different currencies. Movements in currency exchange rates may adversely affect the value of your investment.
The fund holds a small number of investments, and therefore a fall in the value of a single investment may have a greater impact than if it held a larger number of investments. Investing in emerging markets involves a greater risk of loss due to greater political, tax, economic, foreign exchange, liquidity and regulatory risks, among other factors. There may be difficulties in buying, selling, safekeeping or valuing investments in such countries. Further details of the risks that apply to the fund can be found in the fund's Key Investor Information Document and Prospectus.
The fund invests mainly in company shares and is therefore likely to experience larger price fluctuations than funds that invest in bonds and/or cash.