Environmental regulations could benefit thematic funds

Politics and regulation can be a tailwind for the renewables sector, claim fund managers

The tightening of environmental regulation and standards will benefit investors with a focus on ESG themes.

Speaking at a roundtable hosted by the Association of Investment Companies, portfolio managers agreed that, while generally regarded as a headwind, there are benefits to more stringent regulations.

Richard Crawford, manager of The Renewables Infrastructure Group (TRIG), said: “Over the shorter term, politics and regulation can be a headwind if you are restricted to investing in certain markets.

“However, over the longer term, politics and regulation is a tailwind for our sector, with most governments and supranational organisations generally supportive of decarbonisation.”

Jon Forster, manager of Impax Environmental Markets, added that environmental markets reliance on environmental subsidies for returns is a persistent myth.

“The reality is that we benefit from the tightening of regulation, and it isn’t just environmental regulation,” he said. “Tightening standards in recycling, water quality, building regulations, emissions, food standards – you name it, they all demand more resource efficient solutions.”

Investor demand within the renewable energy infrastructure sector has soared since the start of 2019, with £1.06bn of new money raised via IPOs and secondary issuance from existing companies.

This includes the launch of Aquila European Renewables Income, which listed on 5 June 2019.