The push for renewable energy is a revolution with the potential to be as disruptive as the digital revolution.

Markets are failing to factor in the speed of the transition to clean energy, says George Whiting, Head of Institutional & Retail Business Development for the Perennial Better Future Trust, in a presentation delivered titled The Energy Transition: Some empirical cause for optimism.

Whiting draws a bullish picture of a world transitioning away from fossil fuels faster than anticipated with solar and roof top solar poised to be a significant source of energy by 2026. Wind is also increasing its percentage share of energy capacity, while coal and natural gas are reducing as a percentage of the overall energy mix.

“Morgan Stanley expects renewable generation to contribute 45 per cent of global electricity consumption by 2030, and the share of solar and wind will nearly triple by 2030 in the power consumption mix.”

“In Australia, the uptake of renewables has been significant, especially since 2021-22, a trend we expect to continue.”

Whiting says despite the empirical evidence about the speed of the energy transition, it’s the Trust’s belief that markets have not factored this into their investment thinking.

“When it’s considered that one-third of the ASX will be directly impacted by the energy revolution and another third indirectly, it doesn’t seem feasible for it not to be a critical element of any investment strategy. But despite this tailwind, we believe that markets are inefficient and are not pricing it in the short term.”

“What we do is use our negative screens to really focus on avoiding headwinds from this energy revolution and tap into the tailwinds to invest in those companies that will benefit.

“So, in our portfolio, we have companies such as Calix that is effectively decarbonising the cement and lime manufacturing process.”

“We also have a stake in Meridian Energy, which is 100 per cent renewable energy retailer in New Zealand, and Alpha HPA that has commercialised the world’s first adoption of the solvent extraction purification technique to aluminium to produce ultra-high purity aluminium materials with a dramatically lower carbon profile.”

He says the myriad of drivers behind this energy transition are short, medium, and long term. “Climate change, estimated to cause $2.9 trillion in health and economic costs via air pollution, the pressing need for energy security, and the push to net zero (90 per cent of the world’s GDP has pledged to net zero) prompting at least $US500 billion via the Inflation Reduction Act in direct subsidies for low-carbon equipment manufacturing are part of the equation.

“Reoccurring energy crises due to demand or supply side issues with fossil fuels – recently highlighted by the lack of supply in 2022 – the rapid uptake of electric vehicles (the road transport sector accounts for more than 15 per cent of global energy-related emissions) and the benefits of decentralised energy systems that reduce transmission losses and increase the security of supply are other pertinent factors.”

He adds the push for renewable energy is a revolution with the potential to be as disruptive as the digital revolution of the past 20 years.

“The rate of technological change is enormous, and we think people underestimate this. For example, the batteries that are in today’s electric vehicles (EV) are quite different to those sold a few years ago.”

“A Swedish company has just announced that it’s come up with a sodium ion battery that doesn’t use lithium, cobalt, or nickel. Although this is an early stage of development, it is quite a step forward, as having access to more cheaply available materials will bring the price of EVs down and open up markets in the developing world.”

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L to R: George Whiting, Emilie O’Neill, Damian Cottier and Christelle-Hannah Manila.

The Perennial Better Future Strategy, an actively managed portfolio focused on small and mid-cap companies that are shaping a better future, has been appointed to manage a A$100 million mandate from Mercer Investments.

A business of Marsh McLennan, Mercer is a highly regarded global asset management and consulting firm. The appointment demonstrates Mercer’s confidence in Perennial’s Better Future approach to sustainable investment.

Perennial Better Future Portfolio Manager, Mr Damian Cottier, says: “It is pleasing to be recognised for our differentiated and authentic approach to ESG and sustainable investing.”

“We are leveraging Perennial’s large and experienced investment team to find companies that are shaping a better future while pursuing strong, consistent returns for our investors. In this way, we are empowering investors and companies that are seeking to shape a better future.”

The Perennial Better Future Strategy provides investors with an opportunity to allocate capital in a way that empowers companies that are shaping a better future. While more traditional ESG or sustainable focused funds are mainly concerned with negative screening, the Perennial Better Future Strategy has a significant portion of the portfolio invested in companies which are focused on addressing global sustainability challenges.

These companies are often operating in global markets in areas that improve environmental or social outcomes such as healthcare, education, renewable energy, technology improving energy efficiency or resource use, as well as technology improving occupational health and safety outcomes.

“Mercer’s significant commitment to Perennial Better Future is a vote of confidence in our process and approach to sustainable investment. We are pleased to be recognised for our performance track record and authentic ESG-first investment strategy, which includes our proprietary in-house Environment, Social, Governance & Engagement (ESG&E) scoring system, and our dedicated company engagement to improve ESG outcomes in small & mid-cap ASX listed companies.”

Globally, Mercer advises on more than US$17 trillion in assets (as at 30 June 2021) and manages US$388 billion in assets (as at 31 March 2022). Mercer’s award-winning Sustainable Investment team of 25 dedicated specialists have been advising institutional investors on adopting sustainable investment approaches for over 10 years.

“Mercer’s long standing track record within the industry further highlights the true nature of an endorsement of this nature into the Perennial Better Future Strategy, and also the strength and the impact sustainable investing has on a global scale,” Cottier added.

During the last 12 months, the Perennial Better Future Trust (“the Trust”) has experienced strong growth in funds under management, which is now at ~A$220 million^[1] on the back of increasing demand from the market for authentic ESG products.

“It is a key goal of the Trust to demonstrate that there is no performance trade-off investing in companies shaping a better future. Since its inception over four years ago, the Trust has delivered a +7.0% p.a. return net of fees, outperforming the S&P/ASX Small Ordinaries Accumulation Index benchmark by +5.1%^[2]” Damian Cottier

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[1] As at 3 June 2022. Past performance is not a reliable indicator of future performance.
[2] Ibid.

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Brendan Lyons

Perennial is pleased to announce the launch of a new private growth ventures fund.

The Perennial Private Ventures Fund will open to wholesale investors on 26 April 2022. Pre-marketing for the new fund has already commenced, with strong initial interest and cornerstone capital already identified. The target raise for the new fund is $200m+ from a mix of wholesale private investors, family offices and super funds.

The fund will offer investors access to high growth private businesses located primarily in Australia. The fund will leverage Perennial’s experience and track record in private company investing via its existing funds in this rapidly growing sector of the market.

Portfolio Manager Ryan Sohn said: “The Perennial Private investment team is seeing a rapidly increasing pipeline of high-quality growth stage private companies. These companies are staying private for longer, and this drives the need for patient institutional capital which this new fund will help supply. Perennial is uniquely positioned to partner with the very best founders and companies on their complete journey.”

Investment strategy

The Perennial Private Ventures Fund will target the high returns of early-stage venture capital, but with a faster route to liquidity and lower overall portfolio risk. This will be achieved through a combination of layered portfolio management, deal structuring, value discipline, and a proactive management style regarding the fund’s investments.

Ryan Sohn said: “There is an increasing gap in the domestic market at the private growth stage – the new Perennial Private Ventures Fund is solving for this. There has been increased activity in early stage investing in Australia, however this market has now evolved, and these companies are increasingly looking for institutional capital to help drive the next stage of their private growth strategy.” 

Strong track record in Private Growth Stage Investing

Perennial has a strong track record of deploying capital into private markets, including the Private to Public Opportunity Funds (PPP) and the Perennial Value Microcap Opportunities Trust. Perennial has partnered with many successful private companies including Koala, Animoca Brands, Spriggy,  Indebted, Emesent, Xpansiv, Sonder and Songtradr.

Brendan Lyons, Portfolio Manager and Head of Private Investments, said: “Perennial has invested in over 80 private companies in the last five years, and a third of these have now transitioned to IPO or private takeover. The Perennial Private investment team has deep experience in both private and public markets as well as managing corporate transactions.”

The first Perennial Private to Public Opportunities Fund (PPP1) launched in August of 2019 and has returned +169% (net of all fees) since inception or a 2.7x net multiple on invested capital as at the end of January 2022.

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Damien Cottier

Perennial Partners has announced the establishment of its next-generation sustainable investment business, Perennial Better Future Pty Ltd.

Perennial Better Future will develop and manage investment strategies that aim to generate strong, consistent returns while contributing to a better future.

The investment strategy includes the Perennial Better Future Trust, and the eInvest Better Future Fund (Managed Fund) (ASX:IMPQ). The business will also manage ESG initiatives across the Perennial group.

The new boutique investment firm will be led by Damian Cottier, Portfolio Manager, together with Emilie O’Neill, ESG and Equities Analyst, and George Whiting, who will head up the institutional and retail business development for the boutique. Perennial Partners’ broader distribution team and 15 investment analysts will provide additional support.

Anthony Patterson, Executive Director of Perennial Partners, said the Perennial Better Future business was born out of a passion for sustainable investment.

“The world of sustainable investment has made a 180-degree turn in the last 15 years. Today, an investment in a sustainable business contributing to a better future is far more likely to lead to better returns than investing in conventional businesses,” he said.

“Perennial Partners has developed a leading-edge capability in sustainable investment and this business has been four years in the making. It launches having proven its investment thesis that benchmark outperformance can be achieved by investing in companies that are contributing to the improvement of society.”

Since its inception in 2018, the Perennial Better Future Trust has returned 13.3% per annum. It has outperformed the S&P/ASX Small Ordinaries Accumulation Index by 6.2% per annum and the ASX 300 Accumulation Index by 5.6% per annum since inception to the end of March 2021.

The Perennial Better Future Trust is rated ‘Investment Grade’ by Lonsec and ‘Approved’ by Zenith. Zenith has also assigned the Trust a Responsible Investment Classification of ‘Impact’, its highest classification.

Damian Cottier said rather than merely choosing the most sustainable stocks within sectors, the strategy is predicated on finding companies that derive the majority of revenue from positive outcomes, with zero revenue from harmful activities.

“We are focused on finding innovative smaller Australian companies.  Many of the companies in the portfolio have entered into global markets and have significant growth potential – they are often disruptors in their chosen markets, improving health outcomes, increasing efficiency and reducing costs,” he said.

“We have been pleased to play a role in driving these positive outcomes further by participating in capital raises to support the growth of these companies.”

Cottier added that the launch of Perennial Better Future Pty Ltd provided a new opportunity for Australians to invest for ESG impact.

“With the help of the financial advice community, we look forward to bringing a means for everyday investors to contribute to a better future by investing in companies that are helping to solve some of society’s biggest challenges,” he concluded.

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