Charlie Thomas Interview
Charlie Thomas (Head of Strategy, Environment and Sustainability, and Manager of the Jupiter Ecology Fund) talks to Ian Aylward (Head of Manager Selection at Barclays) about managing a portfolio focused on sustainable investments, and the changes he has witnessed in this marketplace.
IA: What sustainability themes give rise to most investment opportunities?
CT: Where to start?! I am now in my 15th year of managing the Jupiter Ecology Fund and have, in that time, seen multiple themes, concepts and technologies come, go and come again. As is the way with capital markets, issues of the moment tend to attract significant short-term capital across the investment spectrum (from venture capital to private to public markets). Historically, this interest leads to bursts of new issuances and ‘sell-side’ interest. As a result, sustainability trends get squeezed into quite short term capital markets cycles. This presents both challenges and opportunities for investors.
Ultimately the long-term opportunities arise from themes which:
- Are significant in scale
- Tend to have an associated human impact (typically health) and
- Where the number of solutions and investment options are diverse.
IA: And for which themes is it hardest to find related investments?
CT: One of the most significant ‘environmental’ elephants – and one I have long sought to invest more into – is around soil degradation and the long-term chronic issue around worsening land productivity.
IA: Do you buy sustainable investment research? Or do you conduct it in-house?
CT: Simply put, we buy in very little. Jupiter originally undertook all its sustainability research internally. In the early days this was largely because there was no other option. Since then, we have, at times, used external providers to support the work that we do ourselves.
IA: Why do you choose to do so much research yourself?
CT: Ultimately, we believe that as managers we need to be connected to the investments that we make and that we achieve this by embedding sustainability research into our investment process. This research is then at the heart of what we do as investment managers. We feel most comfortable with this approach and believe that it is a contributor to our longevity in this sector.
IA: How important is access to companies for you?
CT: Access to management is fundamental. And for me, management quality is a cornerstone of any investment. Indeed, I often say they are “many great green ideas but many fewer good green investments”. And the bridge between good ideas and good investments is, time and time again, management.
IA: And what do you look for when you meet companies?
CT: As investors, we need to look deeper than the presentation and, for this, we engage with company management. In our meetings we look to see whether company executives understand the pertinent issues that they face and the impact that these will have on a company’s long-term returns. This is important as our investment horizon is between 6-7 years (and, in many cases, much longer).
Since I started working in ESG back in 2000, I genuinely believe we have seen a significant improvement in management’s understanding of sustainability issues. But, are we there yet? Not yet.
IA: How has sustainable investment changed over the past ten years? What changes do you foresee in the next ten years?
CT: The sector is going through a transformation. What was once a cottage industry is becoming substantive, respected and more disciplined. There will be greater accountability, transparency and evidence-based reporting, and regulation is playing a part in moving this all forward.
The push for more standardisation of the lexicon will continue and should remove one of the major blockages to greater uptake of sustainable investment. Although this will require some adjustment for everyone, it is probably inevitable.
From an investment perspective, those of us that focus on solutions or ‘impact’ must deal with greater ‘interdependence’. This is the concept that a lot of environmental and sustainability issues are connected to each other. For example, agriculture is inexorably connected to issues of water and energy usage. In fact it is becoming increasingly rare that we see a single theme (such as water or waste) in isolation. We now have to consider multiple themes together – but, there is still substantial value to be unearthed in this more complex but rich investing landscape.
Charlie joined Jupiter in 2000 and is currently Head of Strategy, Environment and Sustainability. He is the manager of the Jupiter Ecology Fund. Before joining Jupiter, Charlie spent three years working for BP, first as an environmental policy adviser where he helped develop climate change strategies and sustainable energy policies for the group, and later as a commercial analyst working on new business development. He has also worked for the United Nations Environment Programme as well as other financial institutions. Charlie has an MSc in Environmental Technology from Imperial College, London and a degree from Nottingham University.