NEXTENERGY FOUNDATION ENDOWMENT FUND

NextEnergy Foundation (“NEF”) launched an endowment fund in March 2023. The endowment strategy operates in five-year cycles and the income generated will supplement the Foundation’s grant-making activities. The Trustees of the NextEnergy Foundation have appointed an investment manager, EQ Investors, to manage the fund.

The fund’s investments fully align with NEF’s mission – to participate proactively in the global effort to reduce carbon emissions, provide clean power sources in regions where they are not yet available, and contribute to poverty alleviation – and 100% adhere to ‘do-no-harm’ principles. Please refer to the Investment Policy Statement for more details about the investment strategy.

Our Positive Impacts

Investments

EQ Investors (“EQ”) invests in companies and projects whose core products and services provide solutions to address global sustainability challenges. EQ uses the UN Sustainable Development Goals to select these solutions, and to avoid investments that prevent progress on the goals. For example, this includes investment themes:

  1. AI for good
  2. Health and well-being
  3. Social inclusion & empowerment
  4. Climate
  5. Natural capital and biodiversity protection

Positive impacts associated with the investments held in NEF’s portfolio as at 31 October 2024 include:

Disclaimer: All data and analysis provided by EQ Investors. Portfolio weightings as at 31 October 2024. Investing (e.g. buying shares in a company) does not create these outputs and outcomes: they are generated by the activities of our underlying portfolio holdings. An investment can be associated with these measures based on company disclosures and share of ownership. The impact made is associated with the amount invested. For an in-depth explanation see: eqinvestors.co.uk/positive-impact-methodology. Household equivalents calculated using average UK household consumptions and emissions.

In addition, 88.0% of NEF’s portfolio contributes solutions aligned to the SDGs. The fund’s investments fully align with NEF’s mission and adhere 100% to ‘do-no-harm’ principles.

Disclaimer: All data and analysis provided by EQ Investors. Portfolio weightings and underlying holdings are shown as of 31 October 2024. To produce this data, we use a snapshot of the funds held at the last rebalance. Underlying fund holdings are updated on a quarterly basis. This data draws on EQ Investors’ own proprietary database based of companies and projects mapped against the EQ UN Sustainable Development Goal’s methodology. Companies and their bonds, as well as infrastructure assets, are assessed for their core revenue alignment to positive and negative criteria.

Percentages may not add up to 100% as they are rounded to the nearest decimal. Global Goals with no figure indicate the portfolio has 0% exposure; this is because either the Global Goal presents few investable opportunities, or companies within the portfolio provide exposure to multiple goals and the most relevant goal has been selected. *The Climate Action goal overlaps with more specific goals, so we have instead mapped our exposure to these.

Investment Case Study: Carrrier Global

Carrier Global is a US-based company that manufactures products for heating, ventilation, and air conditioning (HVAC), refrigeration, and fires and security. Its products are designed to improve buildings performance and energy efficiency.

Carrier Global manufactures heat pumps which can be used as alternatives to electrical heaters and gas boilers and are up to 5 times more energy efficient.  It also offers sustainability as a service that helps customers lower their energy usage and achieve their decarbonisation goals.

Carrier Global’s technology helped customers avoid 155 million tonnes of greenhouse gas emissions in 2023, highlighting the critical role the company plays in reducing the environmental impact of buildings through its innovative products and services.

This investment is advancing UN Sustainable Development Goal Target (SDG) 9.4:

By 2030, upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies and industrial processes, with all countries taking action in accordance with their respective capabilities.

Stewardship and Engagement

EQ also actively engages for change towards a more sustainable world. EQ tracks the impact that its investment strategy makes through a multi-layered stewardship framework which comprises the following:

  1. Assessment and Monitoring of external fund managers’ own engagement and voting policies, processes, and records.
  2. Engagement with external fund managers on identified weaknesses, and strategic engagement themes, with an aim to affect ESG/sustainability and stewardship ambition.
  3. Collective, collaborative engagement on underlying holdings to elevate concerns on strategic engagement themes.
  4. Annual General Meeting (AGM) attendance and board questioning on sustainability strategy of selected underlying holdings.

For more details about EQ’s approach to engagement, please refer to its Stewardship Code.

Engagement Case Study: Engagement on Climate

EQ avoids investing in the largest carbon polluters, but it still uses engagement to push for decarbonisation across key industries. Banks and their role in climate change remain a key focus for EQ. In 2024, EQ’s strategic engagement on climate once again focused on the banking industry. This year we focused on assessing how fund managers assess banks on green financing, as this is an important component of banks overall climate policy. EQ formally joined the ShareAction investor collation on banks. This meant that we had the opportunity to directly engage with HSBC’s Head of sustainability, which was also supplemented with a trip to their AGM to ask for further disclosure on emissions associated with the banks underwriting activities. We also attended the Standard Chartered AGM to ask a question around the banks green financing target. The bank has good disclosure of how much green financing it does, but was yet to introduce a target to increase this year on year.

This year we also engaged with fund managers on physical climate risk. Physical climate risk is becoming more of a prevalent risk and can no longer be viewed as a problem in the distance. We engaged with to 16 fund managers to understand how physical climate risk is incorporated into their investment process and push them to incorporate best practice emerging in the asset management sector.