Clean Slate Newsletter #8

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ISSUE #8:  July 26, 2018

If You Build It…

One of the most discussed topics of the pace of electric vehicle (EV) adoption is the supporting infrastructure.  As with many new technology roll-outs, the EV industry is faced with the proverbial chicken and egg quandary, or in this case, how can we get rapid EV adoption without a comprehensive electric vehicle charging network and vice-versa.   This issue is a key reason why Tesla has built out a proprietary network of more than 1,200 charging stations globally.  Others are now following suit with Volkswagen’s Electrify America announcing a $2 billion plan for EV infrastructure in the US (although we should point out that VW was required to invest in this effort as part of its “diesel-gate” settlement).  Also, there have been a number of independent charging company start-ups over the past several years, and now these companies are being acquired by fossil-fuel companies.  Companies like BP, Shell and others are either starting to see the EV opportunity or are worried about their legacy businesses.  In the latest transaction, BP announced the purchase of Chargemaster, the owner of the largest charging network in the United Kingdom.

https://www.bp.com/en/global/corporate/media/press-releases/bp-to-acquire-uks-largest-electric-vehicle-charging-company.html

 

Take Back

Despite advances in technologies that are quickly reducing the need for subsidies for renewable energy projects, solar and wind installations continue to be impacted by changes in subsidy programs.  The most recent example of this being a severe slowdown in solar installations in China over the past couple of months following a reduction in the subsidies paid to utility scale projects in that country.  While these policy shifts are challenging enough for investors, there is something that really shakes investor confidence in renewable projects:  retroactive adjustments to subsidy programs.  In such cases, the government reduces the amounts that they had previously contractually agreed to pay to the project owners, thus upending the expected investment returns on the project while also destroying confidence in any future programs.  Usually these retroactive changes are a result of a local government that is facing severe economic hardship from subsidy programs that created far more demand than anticipated.  Examples of places where we have seen such retroactive cuts to renewable energy subsidies include Spain, Czech Republic, Bulgaria and Greece.  The latest to propose retroactive cuts to subsidies for renewable projects is the Government of Ontario, Canada, which is succumbing to public outcry over rising utility bills.  It’s a concerning development.

https://www.greentechmedia.com/articles/read/inside-ontarios-clean-energy-contract-cancellations-uncertainty-and-optimis#gs.eknjCc8

 

Harnessing the Power of the Ocean

Anyone who has spent any time on or near the ocean is well aware of the incredible power of the waves and water.  Over the past few years, there have been a number of startup companies trying to develop technology (underwater turbines, buoys, etc.) to capture this ocean energy.  Most of these efforts have failed due to costs.  Recently, a Japanese inventor is attempting to harness the energy of the waves with a more modest, cheaper turbine.  It is currently being tested on a small scale off an island in the Pacific and if it works, it could have a big impact on coastal communities and the environment.

https://www.bloomberg.com/news/features/2018-07-18/physicist-thinks-he-s-solved-the-electricity-wave-power-puzzle

 

The March to a Cleaner Future Continues

Corporations continue to invest significant sums of capital to procure clean energy.  Thirty-one deals for nearly 1.4 GW of power capacity were announced during the second quarter of 2018.  Interestingly, Walmart is becoming one of the biggest buyers of renewable energy, announcing two deals for 300 MW during the quarter.  Walmart is keenly focused on profits, squeezing suppliers on costs and relentlessly seeking to increase returns everywhere they can.  We’re sure they are buying renewable energy because it makes economic sense for them to do so.  This is a positive sign for the industry and speaks to the competitiveness of renewables.

https://www.greenbiz.com/article/clean-energy-deal-tracker-att-facebook-and-walmart-stand-out-another-strong-quarter

 

Smart Cities

In its quest to have one of the smartest and most connected cities, San Diego has been building out its network of street lights with sensors and other technologies that enable the city to monitor crime, measure air quality, detect traffic patterns, etc.  These efforts will make the city safer, cleaner and more efficient.  An interesting read:

https://www.digitaltrends.com/cool-tech/how-3000-streetlights-turned-san-diego-into-americas-smartest-city/

 

 


You should carefully consider the Fund's investment objectives, risks and charges and expenses before investing.  This and other important information is contained in the Fund's prospectus and summary prospectus, which should be read carefully before investing.  To obtain a fund prospectus or summary prospectus, call (800) 700-9929.  The Fund is distributed by Ultimus Fund Distributors, LLC.

Investing involves risk, including loss of principal.  There is no guarantee that the fund will meet its investment objective.  Because the Adviser's GEOS criteria exclude securities of certain issuers for non-financial reasons, the Fund may forego some market opportunities available to funds that do not follow the environmental themes inherent in the GEOS strategy.

As of 6/30/18, the Fund's top ten holdings are TPI Composites Inc. (4.26%),  Kornit Digital Ltd (4.15%), Lindsay Corp. (3.55%), Itron Inc. (3.52%), Umicore S.A. (3.47%),  Xylem Inc. (3.34%), Trimble Inc. (3.33%), Kingspan Group plc (3.26%), Raven Industries, Inc. (3.20%), and Keyence Corp. (3.18%)


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The opinions and analyses expressed in this newsletter are based on Essex Investment Management Company, LLC’s (“Essex”) research and professional experience, and are expressed as of the date of our mailing.  Certain information expressed represents Essex’s opinion and assessment at a specific point in time and is not intended to be a forecast or guarantee of future results, nor is it intended to speak to any future periods.  Essex makes no warranty or representation, express or implied, nor does Essex accept any liability, with respect to the information and data set forth herein, and Essex specifically disclaims any duty to update any of the information and data contained herein.
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