Climate Impact Asia Fund Investor Communication: Fund Update Amidst COVID 19 and Looking Forward

March 18, 2020

BY Alexander Kalis

As COVID-19 continues to spread, we want to assure you that Milltrust International, its affiliates have a comprehensive, regularly tested, Business Continuity Plan to ensure that the interests of our clients and our employees will continue to be served in events such as this.  We can confirm that our operations and those of our underlying investment teams are still operating at full capacity. We will continue to take all necessary steps as the situation unfolds to safeguard the interests of our investors and employees and we will notify you of any changes.

Climate Impact Asia Fund Update Amidst COVID-19

Although not immune to the extreme market volatility, the Climate Impact Asia Fund’s unique impact investment strategy focusing on companies that derive at least 50% of revenues and/or 50% earnings derived from the low carbon environmental goods and services sector has proven relatively resilient during the ongoing turmoil up to March 17th.

As the contagion of COVID 19 and the correlated economic dislocation picks up pace throughout Europe and North America, signs that the virus has, for now at least, peaked and been contained in China, Hong Kong, Singapore, Taiwan, Korea and Japan points to the green shoots of recuperation and the probability that Asia will be the key driver for the eventual recovery of the world economy. The boosting of domestic consumption is also key to China’s plans to resume the workings of the mainland’s twin levers of supply and demand, with designs and policies afoot to redirect the circa US$300 billion from the outgoing tourism industry back towards more sustainable domestic consumption, which should benefit a number of the funds sectors including green consumer staples and new energy vehicles.

The Fund’s Chinese low carbon names have begun to announce FY 19 earnings, with encouraging results and outlooks being already reported (March 16th) by our coal to gas play, our photovoltaic solar and glass manufacturer which declared a sustainable 100% payout ratio of earnings, translating into a final dividend which represented a yield of 6.5%. The Fund is presently holding a cash position of 24% and we have targeted investments in the new energy vehicle, green consumer staples and low carbon utility sectors once clear evidence appears of an end to the ongoing rout in global markets.

Looking Forward

These are challenging times we are facing but we believe that the importance of continuing our fight against climate change, shifting the world towards a low carbon economy, and supporting sustainable human co-existence with the rest of the animal kingdom are all as important today as ever.

China’s 14th Five Year plan (FYP) for National Economic and Social Development (covering 2021–25) will be a crucial element in shaping this new era, for China and for the world, and will be critical to China’s energy transition and global efforts to tackle climate change. Considering China’s determination and efforts to accelerate the energy transition, renewable energy will continuously be the focus of new demand growth in the upcoming 14th FYP. If the previous 13th FYP is any indication, China will be embarking on an investment plan for tens of trillions of yuan, with green growth set to benefit strongly.

This may well be a propitious time to increase exposure to the climate impact theme and we continue to believe that our Climate Impact Asia Fund will be amongst the best performing funds in its category. Moreover, the fund also proudly makes significant revenue-based impact contributions in support of local and Asian Regional conservation programmes focused on making a real difference in protecting biodiversity and against species extinction. We hope you will all remain safe and we look forward to continuing to manage your investments.

Click here to read a message from Milltrust CEO’s on his views on COVID-19.
Click here to read an update on our Milltrust Global Emerging Markets Fund and from our underlying investment teams.

If you have any questions or concerns, please do not hesitate to contact us on [email protected]

Alexander Kalis
Managing Partner – Milltrust International LLP

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