Our latest update looks at undervalued opportunities, particularly in the Industrial and Technology sectors, while addressing short-term risks like tariff and trade tensions. We discuss our focus on investments in companies contributing to both climate change mitigation and adaptation, leveraging technologies like Artificial Intelligence and internet of things (IoT).

In this letter, we explore the socialized costs of climate change, particularly in the context of real estate and insurance. We share our portfolio’s climate themes, including low carbon technological innovations and changing consumer behavior, spotlighting General Motors as an example of a traditional company strategically navigating the shift toward a low carbon economy.

Reflecting upon our learnings from our first year as a fund, Redwood Grove shares our central thesis: while traditional factors like business fundamentals and management are crucial, climate change remains a significant, yet unpriced risk in public equity markets. The letter delves into our portfolio themes, highlighting investments in companies poised for the transition to a low carbon economy.

Against the backdrop of heightened challenges with existing Environmental, Social, and Governance (ESG) data, Redwood Grove shares its distinctive approach to sustainable investing, which integrates fundamental analysis with in-depth climate research into companies’ actual commitment to carbon reduction. We share portfolio examples, including Google, Ameresco, and the newly added Disney.

Redwood Grove’s first quarterly update draws attention to the significant divergence between growth and value stocks, highlighting the historically high premiums attached to growth. We discuss the challenges faced by value managers in identifying industries undergoing cyclical rather than secular decline, with a focus on the global transition to a low-carbon economy and its impact on public equities.