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Infrastructure companies are leading a global shift to cleaner energy, next-gen transport networks and increasing mobile connectivity. Our Responsible Listed Infrastructure Fund is a high-conviction portfolio with an unwavering focus on responsible investment and positive, long term outcomes.
The Fund's investable universe includes utilities, toll roads, railroads, airports, energy infrastructure, mobile towers and data centres. These assets have high barriers to entry, effective pricing power, sustainable growth and predictable cash flows. Within this space, we seek companies that are contributing to sustainable development within a framework of good corporate governance.
Why invest in Sustainable Listed Infrastructure?
Make a positive difference - The strategy invests in high quality infrastructure companies that take a responsible approach to sustainability.
Long-term focus - A sustainability lens can provide important insights into how a company operates, its long term risks and potential rewards for investors.
Attractive performance - A sustainability focus has the potential to improve performance and help deliver positive risk adjusted returns, thanks to a strong focus understanding of ESG related risks.
Inflation protected income - The nature of infrastructure assets means they are typically able to increase prices in line with inflation, providing a stable and growing distribution yield over time.
Diversification - As well as low correlation with other asset classes, the portfolio itself is well diversified by sector and country, reducing exposure to event, regulatory and political risk.
Liquid and transparent - The size of the listed infrastructure market is more than US$2 trillion, so investors can have freedom to move in and out of positions. Listed funds also provide daily pricing so investors know exactly what their portfolio is worth.
Xcel Energy is a US-listed regulated utility serving 3.5 million electric and 2 million gas customers in eight Midwestern and Western states, primarily Colorado and Minnesota. We have invested in the company due to its combination of strong environmental credentials, and an attractive 5-7% earnings per share growth. This growth is being driven by its investment in decarbonising its power generation assets: replacing coal with wind; rid advancement; smart meters; transmission; and electric vehicle infrastructure.
Colorado and Minnesota are at the forefront of climate change with adaptive policies promoting cleaner energy generation and electric vehicle infrastructure. Minnesota recently announced a new set of policy proposals that would require the state's electric utilities to generate power using 100% carbon-free resources by 2050. Colorado has set statutory targets for the state to cut climate pollution by at least 90% by 2050 (relative to 2005 levels). These policies have enabled Xcel Energy to significantly grow its wind portfolio, with plans to add 4,700 megawatts of wind capacity to their system - enough to power approximately 2.3 million home per year.
Its significant investment in renewable energy with limited, if any, impact to customer bills aligns Xcel Energy with the United Nations' Sustainable Development Goal 7 of "Affordable and Clean Energy: ensure access to affordable, reliable, sustainable and modern energy for all". The company is tracking ahead of its home states climate policies, and is aligned with the UNFCCC Paris agreement to limit global temperatures rise this century to "well below 2 degrees Celsius above pre-industrial levels".
Source: Xcel Energy and First Sentier Investors, as at 30 June 2020