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When you hear the words renewable energy it’s tempting to think of sprawling wind farms and industrial solar parks. But there’s much more to it, from hydropower to hydrogen, geothermal to biomass and energy from waste. And that’s before we’ve considered the businesses that service and maintain these enterprises.
Much of the sector has had a torrid time since the pandemic, as rising interest rates and inflation have made financing costs for these often highly capital-intensive businesses unaffordable and forced them to put new projects on hold. A political backlash hasn’t helped either.
But with both rates and inflation now falling, many of the world’s best investors are betting these companies are poised to enjoy a renaissance, aided anew by a concerted effort among the world’s governments to strengthen the push towards net-zero.
A relatively rare beast in the area, and one that would benefit handsomely from a revival, is HA Sustainable Infrastructure Capital. This US company, which until earlier this year was a real estate investment trust (Reit), is a renewables investor. It takes debt and equity stakes in a wide range of projects in America that are facilitating the energy transition.
The business, referred to as Hasi, after its stock market ticker, decided to drop its Reit status for tax reasons and to give it greater flexibility to invest in a growing range of new sustainable technologies.
These are areas in which it has invested some of its $13bn of managed assets, including residential solar power, storage projects connected to the grid and renewable natural gas plants.
Hasi’s shares are owned by some of the world’s best portfolio managers, all ranked among the top 3pc of the more than 10,000 equity managers tracked by financial publisher Citywire based on their risk-adjusted performance. Their conviction has meant Hasi has been awarded an AAA-rating from Citywire Elite Companies, which rates companies according to smart-money backing.
Among the seven Elite managers backing Hasi is Patric Lindqvist, who counts the company as the second biggest holding in his £1.3bn Handelsbanken Hållbar Energi fund.
Lindqvist said: “Hasi is a unique and at the same time diversified investment into climate change, playing in niche financing of smaller energy-efficiency projects for highly creditworthy companies and institutions.”
For him, Hasi represents a solid long-term investment in opportunities around the energy transition, marked out by a dividend that has risen 6.5pc each year on an annualised basis over the past decade. It also has an ambitious target of generating a total shareholder return of up to 13pc a year.