Ecofin Strives to Make a Positive Impact Without Compromising Returns

Who We Are

Ecofin is a sustainable investment firm that’s passionate about striving to deliver strong risk-adjusted returns while making a true impact on the environment and society.

Our roots date to the 1990s as a London-based boutique advisory firm focused on water and energy infrastructure. In the early 2000s, Ecofin began managing money as a utility-focused investment manager and by the end of the decade, was awarded an environment-related mandate from a large Scandinavian sovereign wealth fund.

In 2018, we sought a partner to help fuel our growth, including in the US. We ended up merging with Tortoise, an essential asset investment firm, which had begun shifting its strategic focus to sustainability in 2016. What we found was a shared vision that sustainable investing does not compromise performance to make an impact. Moreover, we shared a view that we are experiencing a sustainability revolution with decades of growth ahead of us, along with exponential impact to the environment, society and in communities.

When we joined Tortoise in 2018, we retained the Ecofin brand as a platform for our products, which now includes all of our sustainability-oriented strategies. Today, Ecofin is the result of a deliberate process between 2016 and 2018 to bring together experts and world-class investors with decades of experience in sustainable investing. Our team invests in both private and public market strategies across the following major themes: climate action, water and social impact.

What makes us different and is the source of our strength, is our talented team. This is demonstrated in our performance and in our perspectives on the future, which aligns with our devotion to the sustainability revolution and our commitment to investments that help solve pressing global challenges, while creating compounding wealth opportunities for our clients.

What We Do

We are a sustainable specialist dedicated to climate action, social impact and water.

First, climate action is the drive to reduce emissions, and includes both the energy transition and waste transition.  This means conventional categories such as solar, wind, hydro and batteries, in addition to the electrification of transport, energy efficiency, waste-to-value (recycling) and waste-to-energy (cleaner fuels such as renewable natural gas).

Second, our investments in social impact focus on providing access to quality education, particularly the underserved population, as well as affordable housing and equal access to healthcare and sustainable communities.

Third, our water investments endeavor to help provide access to clean water and improve water scarcity and sanitation.

Across all themes, we focus on companies and assets that we believe provide investors with the opportunity to compound wealth and preserve capital, while providing a social good.

Why We Do It

Some of the world’s most pressing challenges have been given newfound attention. The devotion to these issues is the bedrock of the Sustainability Revolution. These are long-term secular themes and structural changes occurring on a global scale. We believe we are in the early stages of a multi-decade tectonic shift. The consequences of these changes are shifts in how we make basic decisions, how we consume resources and how we live on the planet. The shift in behavior is also re-shaping the investment landscape.

After decades of debate and procrastination, in our view, it is now clear these forces of change are irreversible and here to stay, strengthened by demands from multiple generations. The power of these forces makes sustainable investing a GARP-like strategy (Growth At a Reasonable Price), and in some cases, tech-like, in which companies’ growth potentials and valuations are misunderstood. They have aggressive growth prospects where value is not appreciated.

Addressing societal and environmental challenges can be a highly profitable business. This is part of the conscious capitalism philosophy that businesses should operate ethically while pursuing profits. Many companies are growing their top and bottom lines and benefitting from rapidly improving growth prospects, multiple expansion and lower cost of debt. Moreover, the expanding pool of ESG capital is bringing greater awareness and receptivity to their stocks. In addition, we think these companies will have better access to talent, and be less exposed to certain regulatory risks and the risks posed by environmental and social variables. The companies that are dedicated to sustainable practices – and providing transparency – have been attracting lower costs of capital and experiencing the early stages of a “sustainability premium”.

Key Drivers of Growth

Three key bills are before Congress that could have a significant impact on the energy sector: The Build Back Better, Green and Clean Future Acts.  Of course, others may well emerge. One of the biggest objectives of the Biden administration is to commit America to a Zero Net Carbon goal by 2050 and to attach some meaningful near-term targets and opportunities to achieve that. Specifically the White House wants 100 percent decarbonization of the utility system by 2035.

These bills will undoubtedly take multiple twists and turns, but with control of the White House and Congress we think it is highly likely some form of these bills will pass. Wealth creation with adding new sources of energy to the system over the past 100 plus years has been bigger than you can calculate. But it was all carbon. Now we’re decarbonizing and we have options because of technology.  We have the will because people, governments and corporations know it’s worth their time.

Looking to the Future

The case for a return-oriented approach to sustainable investing has become clear. The impact of addressing sustainable issues, from climate change to racial and social justice, has become a compelling investment case and, just as important, not factoring these issues represents an investment risk. Societies desire to accelerate the transformation to greener, decarbonized and more sustainable economies. These powerful and secular forces can generate substantial wealth creation and compelling risk-adjusted investment opportunities for both companies and investors for the many decades to come. Ecofin is up for the challenge of striving to deliver strong risk-adjusted returns to investors, while also making a positive impact on society.

 

Article by Brent Newcomb, President of Ecofin.  Mr. Newcomb joined the firm in 2014 and is a member of the Executive Committee and Ecofin Development Committee and serves as President of Ecofin. He is a member of investment committees for various Ecofin investment strategies as well as Tortoise Essential Assets Income Term Fund. Previously, Mr. Newcomb worked for GCM Grosvenor where he focused on portfolio management. He earned a Bachelor of Science degree in business administration from the University of Kansas and a Master of Business Administration degree from the University of Chicago Booth School Of Business.