We recently sent out a formal letter to our clients, making them aware of a strategy Sarasin are pursuing. Their approach involves investing in carbon credits. The logic around this activity is that the EU is steadily reducing the number of available credits to encourage energy-heavy industries to use ‘green’ renewable power rather than ‘brown’ coal and gas.
Sarasin’s move with carbon credits is called an alternative strategy, with an overall aim of holding diversified assets in the hope that they will help maintain portfolio values in troubled times like these.
Holding Gresham House Energy Storage is another alternative strategy. This investment trust is listed on the London Stock Exchange and is an asset held within Sarasin’s Tomorrow’s World fund. Renewable energy is generated when the sun shines and the wind blows, but that doesn’t always coincide with peak electricity demand. In other words, we don’t boil the kettle when there is a gust of wind.
This investment in Gresham House Energy Storage works by investing in battery storage in Great Britain and Ireland. These batteries store electricity when generators are selling it cheap (basically when the wind’s blowing) and then selling it back to the National Grid when demand is high (when we’re all boiling the kettle in time for PopMaster).
The current energy crisis is proving beneficial for this investment. The difference between the cost of buying off-peak energy and selling it back at peak times has significantly increased, resulting in returns of 38% over the last year.
The alternative strategies Sarasin are pursuing haven’t prevented their portfolios from falling in value, few are immune to the current state of the markets. But they have, to a degree, cushioned the fall.