Purpose Investments Inc., a Toronto-based asset manager, announced it would terminate its energy transition fund because of management challenges from insufficient assets.
The decision to close the Purpose Energy Transition Fund was driven “primarily by the fund’s relatively low assets under management, which has made it difficult to manage the fund efficiently in accordance with its intended investment objectives,” according to a release.
Planned for closing at or around March 28, 2024, Purpose Investments will redeem all of its issued and outstanding ETF units, Series A units, Series F units and Series I units in the fund, the release continued.
As of Jan. 26, the Purpose Energy Transition Fund held $2.9 million in assets under management, according to the fund’s website.
Investing in the ‘tailwinds from the global transition’
Previously named the Purpose Global Climate Opportunities Fund, the energy transition fund was founded to profit from the net-zero transition by investing in five themes: clean energy, the energy transition, transportation and infrastructure, energy efficiency and the circular economy.
Clean energy dominated the energy transition fund with 52 per cent of assets invested in the sector. Energy efficiency made up 23 per cent, followed by transportation and infrastructure at 22 per cent and the circular economy at three per cent.
Investments were made into:
- Tempe, Ariz.-based solar panel manufacturer First Solar Inc.;
- Toronto-headquartered financing company ECN Capital Corporation that finances energy efficiency and remodelling projects; and
- Arlington, Va.-based energy company AES Corp.
More than half of the fund was invested in the U.S., with 46 per cent in Canada and two per cent in the U.K.
The fund struggled to perform across its history. Its ETF recorded a 7.26 per cent decline from year-to-date on Dec. 29, 2023, and a 4.50 per cent drop since its inception on April 27, 2021.
In a commentary document published Oct. 11, 2023, Purpose Investments noted an “exodus from the clean energy sector” due to the “higher‑for‑longer rate narrative” that impacted highly leveraged renewables projects which are long‑term in nature. It also noted industry‑specific dynamics affecting renewable energy projects that worsened sentiments.
The closing of the Purpose Energy Transition Fund joins a wider trend of sustainable investing facing challenges.
According to Bloomberg News, ESG funds suffered net global outflows for the first time due to exits by U.S. investors from ESG strategies. ESG funds struggled in 2023 due to political attacks and greenwashing allegations, but largely held on, Reuters reported.
Purpose Investments also has a thematic fund that invests in North American ETFs covering the energy transition and electric vehicles sectors.