- Renova develops and operates solar, biomass, onshore and offshore wind power plants
- It should benefit from Japan's aim to cut its emissions
Eiji Saito, co-manager of JPMorgan Japan Small Cap Growth & Income (JSGI), explains why he invests in renewable energy company Renova (JAP:9519).
"Japan is home to a vibrant, yet under-researched stock market where the emergence of a dynamic new generation of companies is creating compelling investment opportunities. Of the over 2,000 companies in the Topix index, well over 50 per cent are covered by no more than one sell-side analyst which can lead to pricing inefficiencies. This makes Japan an attractive market for active, bottom-up investors on the ground in Tokyo.
"One key structural trend positively impacting the Japanese equity market is renewables, particularly given the Japanese government’s commitment to reducing Japan’s emissions to net zero and realising carbon neutrality by 2050.
"Around one-third of Japan’s energy is sourced from coal and it is heavily reliant on natural gas. Renewable energy sources are a relatively small part of the mix compared with Europe, so Japan is at a very early stage in its transition to greener energy sources. As well as contributing to Japan’s environmental commitments, the move to renewables will reduce its heavy dependence on imported fossil fuels. Although there are various technical challenges to overcome, we expect the contribution of wind, solar, biomass and geothermal power to the country’s requirements to rise significantly over time.
"We believe that Renova, the only Japanese utility company focused solely on renewable energy sources, will benefit from these policies. Renova is a renewable energy supplier operating solar, biomass, onshore and offshore wind power plants in Japan, with an established track record in the development and operation of renewable energy plants. So the company is very well positioned to lead the expansion of Japan’s renewable energy industry."
Renova accounted for 1.38 per cent of JPMorgan Japan Small Cap Growth & Income's assets at the end of September.
