As an asset manager and energy provider, Octopus is combining its specialisms to float the Octopus Renewables Infrastructure Trust which sounds like a textbook example of an impact investment.
At Fund Forum’s ESG and Impact event in Amsterdam two weeks ago, a lot of time was spent discussing what certain terms meant and how to spot firms who are ’greenwashing’, i.e. calling their products ESG when they really aren’t.
Matt Setchell, co-head of Octopus Renewables told Fundeye: “The key differentiator with this trust is the emphasis on construction, we’re building new assets which will have a positive effect on the planet. We’re an impact investment.”
As discussed at the Amsterdam conference, the definition of impact investing is not simply to do no harm but to actually do good. Aside from having clear ethical investing attributes, this trust also sounds like it should be a decent source of income, forecast to have a 3 percent dividend yield in year one, then 5 percent thereafter.
Also given it’s actually constructing the assets, the trust won’t be at the mercy of rising asset prices to the same degree as other firms in the increasingly competitive sector.
Unlike some of the aforementioned competitors, the trust will have both solar and wind power assets and its diversity is also aided by its global footprint. The trust will have assets in Europe but also Australia, where it will have both onshore windfarms and solar panels.
Compared to renewable energy trusts already listed that only have assets in the UK, the issue of currency comes up with Octopus’s prospective trust.
Mr Setchell told Fundeye that the distributions (dividends) will be hedged as will the value of constructing new assets. However, the trust won’t hedge the value of the assets on an ongoing basis.
As the UK government no longer provides subsidies for new solar projects, many large corporates are looking to strike deals with renewable energy trusts to lock-in supply for a set period. Mr Setchell confirms this is one option their upcoming trust is looking to use.
“A lot of the large corporates are committed to having between 50-100% of their electricity provided by renewable and they’re all trying to lock in that green electricity. We’re seeing contracts by corporates trying to hedge out energy over 5-10 years maybe even more,” said Mr Setchell.
The trust is targeting £250 million by means of a placing for its IPO. Given its projected 7-8 percent total shareholder return and its ESG attributes, this trust should be in demand in an admittedly competitive market.
