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.