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Is it Safe to Invest in AES?

·3 min read

ClearBridge Investments, an investment management firm, published its “Large Cap Growth ESG Strategy” second quarter 2022 investor letter – a copy of which can be downloaded here. The ClearBridge Dividend Strategy outperformed its S&P 500 Index benchmark during the second quarter. On an absolute basis, the Strategy had gains in one of the 11 sectors in which it was invested for the quarter: the health care sector. The IT, financials and materials sectors, meanwhile, were the main detractors. Go over the fund’s top 5 positions to have a glimpse of its finest picks for 2022.

In its Q2 2022 investor letter, ClearBridge Large Cap Growth ESG Strategy mentioned The AES Corporation (NYSE:AES) and explained its insights for the company. Founded in 1981, The AES Corporation (NYSE:AES) is an Arlington County, Virginia-based electric power distribution company with a $16.1 billion market capitalization. The AES Corporation (NYSE:AES) delivered a -0.33% return since the beginning of the year, while its 12-month returns are down by -1.54%. The stock closed at $24.22 per share on August 05, 2022.

Here is what ClearBridge Large Cap Growth ESG Strategy has to say about The AES Corporation (NYSE:AES) in its Q2 2022 investor letter:

"In many cases, ClearBridge engagements have specific objectives, such as encouraging the retirement of fossil fuels and increasing use of renewables. Such has been the case with electric power company AES (NYSE:AES), with whose executives and board members we have been engaging for several years on the company’s path to reduce its carbon footprint. We believe our voice, as a top shareholder, has been a valuable addition to AES’s decision making along this path, and our engagements have helped us identify where climate-related risks in a company’s operations could be climate-related opportunities.

Several years ago, we began discussing with AES the lack of terminal value from coal (Exhibit 2), and we expressed how coal-related ESG concerns were weighing on AES’s valuation multiple, as the ESG risk premium was rising. We helped convince AES to stop investing in coal plants and start shutting down existing coal capacity. The next step was to add renewable energy exposure in the form of wind, solar and industrial scale battery storage (Exhibit 3), in line with U.N. Sustainable Development Goal (SDG) 7: Affordable and Clean Energy (we discuss how an investment framework may further the SDGs in our 2022 Stewardship Report). We shared our belief that any lost near-term operating earnings would be made up with a higher valuation multiple."

15 Biggest Government Owned Utility Companies in the US
15 Biggest Government Owned Utility Companies in the US

High-voltage power lines. Electricity distribution station. high voltage electric transmission tower. Distribution electric substation with power lines and transformers.

Our calculations show that The AES Corporation (NYSE:AES) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. The AES Corporation (NYSE:AES) was in 37hedge fund portfolios at the end of the second quarter of 2022, compared to 41 funds in the previous quarter. The AES Corporation (NYSE:AES) delivered a 15.66% return in the past 3 months.

In July 2022, we published an article that includes The AES Corporation (NYSE:AES) in 5 Best Utility Stocks To Invest In. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q2 page.

Disclosure: None. This article is originally published at Insider Monkey.