Redwood Grove publishes its first impact report to give our investors a more quantifiable and comparable way to understand how the portfolio performs from a climate perspective. We spotlight the strategic addition of PGT Innovations, a leading manufacturer of impact-resistant windows positioned for growth amid extreme weather.

Climate research and analysis has been an integral part of Redwood Grove Capital’s (RGC) investment process since its inception in 2016. RGC’s process has always had two distinct and equally important parts – fundamental value analysis and climate impact analysis. With this report, we dive into the impact our portfolio companies have on climate through their operations and products and compare them to market benchmarks.

In this update, we discuss how climate change remains inaccurately priced into public equity markets, and why this mispricing represents a significant source of alpha. We look at the impact of extreme weather events, highlighting the disconnect between scientific research and market analysis, and the opportunity to integrate thoughtful fundamental and climate research.

Redwood Grove shares the origin story of our firm name and explores the impact of extreme weather on agriculture and companies like Lamb Weston, a major supplier of the American french fry. We explore investment opportunities in companies with sustainable and climate-resilient approaches, such as Gibraltar Industries and their focus on reducing agricultural greenhouses.

Our latest letter discusses the recent Intergovernmental Panel on Climate Change (IPCC) report which emphasizes digitization and solar energy, aligning with Redwood Grove’s investment themes. We delve into recent regulatory challenges in the solar industry, examining tariffs and labor law issues, expressing confidence in the long-term prospects of utility-scale solar despite short-term concerns.

With approximately 40% of global greenhouse gas emissions stemming from publicly traded firms and the surge in corporate Net Zero commitments, Redwood Grove discusses how we separate the signal from the noise. As a member of the Net Zero Asset Managers Alliance, we divide companies across three categories—those aligned with Net Zero by 2050, those with emission reduction targets, and those lacking meaningful reduction goals. Our analysis process goes further with comprehensive company specific climate research that goes beyond mere pledges, providing a nuanced, holistic view of which companies are well positioned for a low carbon transition.

This Redwood Grove update highlights the importance of incorporating climate science into public equity investing, contrary to the belief that public companies are too big and diverse to have real climate impact. Given the critical role these companies play in transitioning to a low carbon economy, we discuss the investment opportunities presented, highlighting the energy consulting firm Willdan as an attractively valued company responding to increased demand for energy efficiency programs.

Listen to Jon Powers in conversation with Ted Roosevelt, co-Founder of Redwood Grove Capital, as they discuss the evolution of sustainability and climate investing, the need for standardized, audited metrics in ESG investing, and the opportunities for investors when it comes to climate change mitigation and adaptation.

In this quarterly update, we share the challenges in finding attractively valued clean energy companies and highlight investment opportunities in Array Technologies and Flextronics. We look at the growing attention around Net Zero commitments as a useful framework and starting point, while emphasizing the need for concrete plans in approaching these goals for a meaningful transition to a low-carbon economy.