Pendragon Capital Management has a passion for sustainable investing and alternate energy sources. Hence the Climate Impact Portfolio which energy sector expert, Andrew Fairbanks, manages with company founder, Ian Green. In this article, we introduce you to Andrew.
Meet Energy Sector Expert Andrew Fairbanks
PCM: Andrew, tell us about yourself and your background.
AF: I have covered the energy sector for over 25 years.
I received my MBA from Columbia Business School and hold a BS from the Georgia Institute of Technology.
I have spent my career focusing on finding the best investment opportunities in the energy sector and more broadly across global companies.
Prior to founding the Climate Impact Portfolio Strategy with Ian, I was Director of Research at two relative value energy hedge funds for 7 years and covered global energy/utility companies at Merrill Lynch-Bank of America, and other firms, for 16 years.
PCM: How did you get interested in money management and the energy sector?
AF: At Columbia, I was influenced by great professors such as Bruce Greenwald who ignited my fascination with the investment process, and inspired my interest in deeply understanding individual companies and the markets in which they participated.
I began following energy companies in 1995 and have enjoyed analyzing energy production, markets, and technological systems ever since.
PCM: Which are your favorite financial instruments and why?
AF: I prefer equities and commodity futures.
Supply-demand balances are critical to understanding both. But with equities, you have to understand more: their corporate strategy, company culture, strengths and weaknesses, competitive positioning, and of course, valuation in the market.
PCM: What are the biggest issues confronting energy?
AF: The energy transition that is required to reduce greenhouse gas emissions and limit climate change is the largest disruption facing the industry in a century.
The energy system is changing very rapidly as power and transportation systems decarbonize. Yesterday’s fossil fuel giants are struggling to make the transition, while new players and utilities move aggressively to reduce carbon emissions by deploying low-cost wind and solar power plants, as well as electric vehicles.
These changes impact a huge range of companies from traditional auto manufacturers to utilities and fossil fuel producers.
PCM: What about the biggest opportunities in the energy sector?
AF: There are opportunities across the board in the ongoing energy transition; from improving buildings’ carbon footprints to limiting emissions from power generation.
We invest both in young innovative companies that offer new technologies and products to solve the climate problem and in traditional, 100-year old firms that understand the changes taking place and are transitioning their own businesses to meet the climate challenge.
For example, we see very strong long-term growth rates in wind and solar deployments, which drive robust earnings growth among renewables development companies worldwide (what we call ‘green utilities’) and the manufacturers of wind and solar equipment.
There are also select companies that offer very compelling investment and social returns in the transportation, building, agricultural, and industrial sectors. We balance our investments across all these areas.
PCM: What makes a worthwhile inclusion in the Climate Impact Portfolio?
AF: We look for companies that are truly making an incremental difference in future CO2 emissions through the products and services they sell. But that alone is not enough for us. They must also offer attractive risk-adjusted returns. We think of this as our dual mandate, some call it a double bottom line.
Within the climate impact space, we invest in this diverse set of global companies with solid financial returns. We also evaluate emerging energy transition companies and technologies for positive climate impact potential and long-term earnings growth.
Assets are primarily global equities, as well as some carbon/commodity futures positions and equity options.
PCM: How should investors evaluate their options for sustainable investing?
AF: Look for key growth areas but beware of taking on too much risk, including valuation risk.
Some green energy equities and ETFs can be extremely volatile. Both up and down. That is why in the Pendragon Climate Impact Strategies we balance higher volatility stocks with lower beta companies such as green utilities.
PCM: How does the Climate Impact Portfolio differ from other options available?
AF: We focus on contribution to climate solutions and prospective financial returns, not simply one or the other. We base our inclusion decision on forward looking climate impact and financial metrics.
Most climate ETFs and ESG funds are backward-looking in terms of selection criteria. Companies making progress on improving their historical emissions performance is good news of course, but this is commonplace among major companies now.
The key differentiator for true impact is their future performance (in both climate and financial terms), in our view.
PCM: What advice do you have for someone wanting to invest in a sustainable way?
AF: Invest in our fund.
However, if you like to find individual stocks on your own, make sure you look not only at the mechanical ESG ratings provided by data vendors, but really think about the products and services the company offers, and how they can contribute to improving the sustainability of economic activity on our planet.
PCM: What do you like to do outside of Pendragon?
AF: I practice the Japanese martial art of Kendo (fencing).
In addition, I enjoy hiking and fishing with my family and friends.
PCM: Thank you, Andrew.
Are You Looking to Invest Sustainably in the Energy Sector?
If yes, then consider investing in the Climate Impact Portfolio which benefits from Andrew Fairbanks’ energy sector expertise.
Don’t hesitate to reach out to Pendragon Capital Management with any questions you have about the energy sector and sustainable investing.
Thanks for reading.
— The Pendragon Capital Management Content Team
Note: This blog article is intended for general informational purposes only. Nothing in it should be construed as, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy or hold, an interest in any security or investment product.