Investment trusts

About this investment trust

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

The Company aims to achieve an annual dividend target and, over the long term, capital growth by investing primarily in securities of companies operating in the mining and energy sectors.

Why choose it?

Mining and energy companies lie at the heart of the global economy. Without them, countries cannot grow and develop. Mining companies provide everything from materials to build wind turbines to lithium for electric cars. They play an important role in the long-term de-carbonisation of the global economy. Energy companies power our cars, our homes and drive economic development. On the sustainable energy side, the path to a lower carbon global economy is forecast to disrupt many industries and business models. However, this evolution is also expected to create remarkable opportunities. Investment in a specialist trust gives targeted exposure to these important companies, as it is positioned to capture such industry shifts and reap the benefits from this transition.

Suited to…

Investors looking for a specialist energy and mining trust that provides long-term diversification of income and capital, geared to economic expansion. These companies can be volatile, so some tolerance for market uncertainty is important.

What are the risks?

• Capital at risk.The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
• Overseas investment will be affected by movements in currency exchange rates.
• Emerging market investments are usually associated with higher investment risk than developed market investments. Therefore the value of these investments may be unpredictable and subject to greater variation.
• Mining shares typically experience above average volatility when compared to other investments. Trends which occur within the general equity market may not be mirrored within mining securities.
• Investment strategies, such as borrowing, used by the Trust can result in even larger losses suffered when the value of the underlying investments fall.

Useful information

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Fees & Charges

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The Board's approach to ESG

Capital at risk.The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Environmental, social and governance (ESG) issues can present both opportunities and risks to long-term investment performance. The Company’s investment universe comprises sectors that are undergoing significant structural change and are likely to be highly impacted by increasing regulation as a result of climate change and other social and governance factors. Your Board is committed to ensuring that we have appointed a manager that integrates ESG considerations into its investment process and has the skill and vision to navigate the structural transition that the Company’s investment universe is undergoing.

The Board believes multi-year engagement with management is, in most cases, the most constructive way of building our understanding of a company’s approach to addressing material business risks and opportunities. Engagement can lead to stronger relationships with companies and more constructive outcomes for shareholders and businesses alike.

This is particularly true for the Company’s Manager given the extent of BlackRock’s shareholder engagement (BlackRock held 3,693 engagements with companies based in 55 markets for the year to 30 June 2022, and voted on more than 173,000 management and shareholder proposals at 18,100 meetings). The Board believes that BlackRock is well-placed as Manager to fulfil these requirements due to the integration of ESG into its investment processes, its constructive approach in its investment stewardship activities and its position in the industry as one of the largest suppliers of sustainable investment products in the global market.

Sustainable investing: BlackRock's approach

Sustainability is BlackRock’s standard for investing, based on the investment conviction that integrating sustainability can help investors build more resilient portfolios and achieve better long-term, risk-adjusted returns. BlackRock believes that climate change is a defining factor in companies’ long-term prospects and that it will have a significant and lasting impact on economic growth and prosperity. BlackRock believes that climate risk equates to investment risk and this will drive a profound reassessment of risk and asset values as investors seek to react to the impact of climate policy changes. This in turn is likely to drive a significant reallocation of capital away from traditional carbon intensive industries over the next decade.

ESG: integration into BlackRock’s investment management process

Environmental, Social and Governance (ESG) investing is often conflated or used interchangeably with the term “sustainable investing.” BlackRock has identified sustainable investing as being the overall framework and ESG as a data toolkit for identifying and informing its solutions. BlackRock has defined ESG Integration as the practice of incorporating material ESG information and consideration of sustainability risks into investment decisions in order to enhance risk-adjusted returns. BlackRock recognises the relevance of material ESG information across all asset classes and styles of portfolio management. ESG information and sustainability risks are included as a consideration in investment research, portfolio construction, portfolio review, and investment stewardship processes. The Investment Manager considers ESG insights and data, including sustainability risks, within the total set of information in its research process and makes a determination as to the materiality of such information in its investment process. ESG insights are not the sole consideration when making investment decisions. and the extent to which ESG insights are considered during investment decision making will also be determined by the characteristics or objectives of the Company. The Investment Manager’s evaluation of ESG data may be subjective and could change over time in light of emerging sustainability risks or changing market conditions. This approach is consistent with the Investment Manager’s regulatory duty to manage the Company in accordance with its investment objectives and policy and in the best interests of the Company’s investors. The Investment Manager’s Risk and Quantitative Analysis group will review portfolios to ensure that sustainability risks are considered regularly alongside traditional financial risks, that investment decisions are taken in light of relevant sustainability risks and that decisions exposing portfolios to sustainability risks are deliberate, and the risks diversified and scaled according to the investment objectives of the Company.

BlackRock’s approach to ESG integration is to broaden the total amount of information the Investment Manager considers with the aim of improving investment analysis and understanding the likely impact of sustainability risks on the Company’s investments. The Investment Manager assesses a variety of economic and financial indicators, which may include ESG data and insights, to make investment decisions appropriate for the Company objectives. This can include relevant third-party insights or data, internal research or engagement commentary and input from BlackRock Investment Stewardship.

Sustainability risks are identified at various steps of the investment process, where relevant, from research, allocation, selection, portfolio construction decisions, or management engagement, and are considered relative to the Company’s risk and return objectives. Assessment of these risks is done relative to their materiality (i.e. likeliness of impacting returns of the investment) and in tandem with other risk assessments (e.g. liquidity, valuation, etc.).

ESG integration does not change the Company’s investment objective or constrain the Investment Manager’s investable universe, and does not mean that an ESG investment strategy or exclusionary screens has been or will be adopted by the Company. Similarly, ESG integration does not determine the extent to which the Company may be impacted by sustainability risks.

Investment Stewardship

BlackRock undertakes investment stewardship engagements and proxy voting with the goal of protecting and enhancing the long-term value of clients’ investments for relevant asset classes. In our experience, sustainable financial performance and value creation are enhanced by sound governance practices, including risk management oversight, board accountability, and compliance with regulations. We focus on board composition, effectiveness and accountability as a top priority. In our experience, high standards of corporate governance are the foundations of board leadership and oversight. We engage to better understand how boards assess their effectiveness and performance, as well as their position on director responsibilities and commitments, turnover and succession planning, crisis management and diversity. BlackRock takes a long-term perspective in its investment stewardship work informed by two key characteristics of our business: the majority of our investors are saving for long-term goals, so we presume they are long-term shareholders; and BlackRock offers strategies with varying investment horizons, which means BlackRock has long-term relationships with its investee companies. For further detail regarding BlackRock’s Investment Stewardship approach please refer to the website here.

Engagement with portfolio companies

The Board receives regular updates from the Investment Manager in respect of engagement activity undertaken in respect of portfolio companies. Over the year to 30 November 2022, 94 total company engagements were held with the management teams of 40 portfolio companies representing 66% of the portfolio by value at 30 November 2022. To put this into context, there were 61 companies in the BlackRock Energy and Resources Income Trust plc’s portfolio at 30 November 2022. In total 985 proposals were voted on at 67 shareholder meetings.

Fund manager commentary

30 April 2023

Please note that the commentary below includes historic information on sector performance, commodity price performance and the Company’s NAV performance.

The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results.

The Company’s Net Asset Value (NAV) per share decreased by -1.4% during the month of April (in GBP terms).¹

Global economic data released in April provided a mixed message. The Chinese economy continued to rebound, US economic growth data for Q1 suggested a slowdown, growing 1.1%, compared to 2.6% for Q4 2022, whilst inflation continued to ease, it remained well above target in the US, EU and UK. The US Fed raised interest rates by a further 0.25%. There were renewed concerns over US regional banks and the potential tightening impact on lending conditions.

Energy equities were supported by positive oil prices over the month. OPEC’s action at the beginning of the month to pro-actively announce a reduction to production targets suggests OPEC no longer sees a threat from US shale oil production of undermining their control if they cut production early to support the oil price. Europe has ended the winter period with natural gas storage levels higher than expected at 56%, which is well above the 5 year average of 34% and viewed as reducing pressure on natural gas prices over the summer period. The relative weakness in oil and gas prices in recent months has contributed to the US rig count falling from 621 rigs at the start of the year to 591², suggesting that capital discipline is being maintained by producers. The US Henry Hub natural gas prices was rose 10.7% during the month to $2.32/mmbtu (Metric Million British Thermal Unit). Brent and WTI (West Texas Intermediate) oil prices rose by 2.7% and 1.4%, ending the month at $81/bl (barell) and $46/bbl respectively.

April was a challenging month for the mining sector as economic data from China was softer than expected. China’s manufacturing PMI (Purchasing Managers Index), for example, fell to 49.5, down from 50.0 in March. Industrial mined commodity prices were weak, with the copper price falling by 4.7% and the iron ore (62%fe) price sliding down by 17.3%. China also announced plans to cap 2023 domestic steel production (for which iron ore is a key input) at 2022 levels to limit potential oversupply and contain carbon emissions. Battery minerals prices also continued to fall sharply, with lithium prices in China falling by 21.7%, on faltering sentiment surrounding electric vehicle demand. Further weakness in the US dollar helped precious metals performed strongly, however, with gold, silver and platinum prices rising by 0.5%, 3.8% and 9.5% respectively. Lastly, Q1 production results were reported during the month and were generally poor, highlighting ongoing operational issues faced by many of the miners.

Within the energy transition theme, the IEA released two reports, one outlining how energy policy is evolving/needs to evolve to support demand switching towards clean energy technologies.³ The IEA also released its Global EV Outlook April 2023, with an expectation that EV sales continue to surge and reach a new high in 2023. In the US, California’s NEM 3.0 solar policy replaced its existing policy with one which revises the incentive structure and favours adding storage capacity in combination with solar panels.

Commodity price moves sourced from Thomson Reuters Datastream as of 30 April 2023.

Unless otherwise stated all data is sourced from BlackRock as at 30 April 2023. All data points in US Dollar terms unless otherwise specified.

¹Source: Bloomberg, 30 April 2023.
²Source: Reuters, 5 May 2023.
³Source: Tracking clean energy progress, April 2023.

Risk: Reference to the names of each company mentioned in this communication is merely for explaining the investment strategy, and should not be construed as investment advice or investment recommendation of those companies.

Any opinions or forecasts represent an assessment of the market environment at a specific time and are not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research, investment advice or a recommendation.

Portfolio manager biographies

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Tom Holl is co-manager of the BlackRock Energy and Resources Income Trust plc and is a member of BlackRock's Natural Resources team. Tom is responsible for the nutrition strategy, the gold and mining sectors and co-manages a number of the team's gold and mining portfolios as well as income strategies. He moved to his current role in 2008, but his service with the firm dates back to 2006. Previously, Tom was a member of the Global Equity team and the Real Estate team. Tom has a degree, with honours in land economy.

Mark Hume is co-manager of the BlackRock Energy and Resources Income Trust plc and is a member of the Natural Resources team within the Fundamental Equity division of BlackRock's Active Equity Group. He is responsible for covering the energy and new energy sectors.

Prior to joining BlackRock in 2017, Mark was an energy portfolio manager at Colonial First State Global Asset Management. He had previously worked at Bank of America Merrill Lunch, Credit Suisse, JP Morgan and Wood Mackenzie as a senior equities analyst covering large-cap energy stocks. He holds a MEng in Petroleum Engineering from Heriot-Watt University, and a BSc in Mathematics from the University of Edinburgh.

Board of directors

All of the Directors are non-executive and are independent of the Investment Manager.

* Denotes Member of the Audit and Management Engagement Committee.

Adrian Brown (Chairman) (appointed 10 December 2019) is a senior advisor for MJ Hudson Allenbridge. He was formerly an Investment Analyst and Corporate Finance Manager at Morgan Grenfell & Co before joining Pearson plc as a Corporate Resources Executive. In 1992 he joined Boots plc, holding a range of senior roles before returning to work in the financial services sector in 2006 as a Senior Portfolio Manager in the Equity / Multi-Asset Group at AllianceBernstein LP and subsequently at JPMorgan Asset Management, where he was a Managing Director and Client Portfolio Manager in the Global / International Equity Group from 2011 until his retirement in 2018. Mr Brown is also a trustee of the Boots plc pension scheme.

Dr Carol Bell* (Senior Independent Director) (appointed 1 December 2014) A Non-Executive Director of Tharisa plc, Bonheur ASA and a Trustee of the National Museum Wales. Dr Bell was formerly a Managing Director of Chase Manhattan Bank's Global Oil & Gas Group, Head of European Equity Research at JP Morgan and an Equity Research Analyst in the oil and gas sector at Credit Suisse First Boston and UBS. She has also previously been a Non-Executive Director of Petroleum Geo-Services ASA, Transglobe Energy Corporation and Ophir Energy plc and a Director of Salamander Energy plc, Hardy Oil & Gas plc, Det norske oljeselskap ASA and Caracal Energy Inc. (now Glencore E&P (Canada) Inc.). Dr Bell is also currently an Independent Board Member of the Football Association of Wales.

Mrs Carole Ferguson* (appointed 22 December 2021) is a Partner and Research Director of Signal Climate Analytics. She is also on the advisory board of WHEB Asset Management, an impact investor focused on the opportunities created by the transition to a low carbon and sustainable global economy, and was also formerly a Managing Director of Industry Tracker, a climate research house. Mrs Ferguson has extensive experience in the financial services sector in research, finance and sustainability. She began her career in fund management with BZW Investment Management, moving to work in equity derivatives with Swiss Bank Corporation, JP Morgan Securities and later with Jardine Fleming (Hong Kong) and Robert Fleming (London). Subsequently she was a senior member of the UK fund management team at SG Asset Management before moving to work as a mining analyst at SP Angel for four years. In 2017 she became Head of Investor Research at CDP, the charity that runs the global disclosure system for investors, companies, and others to manage their environmental impact.

Andrew Robson* (appointed 8 December 2020) is a qualified chartered accountant with over 15 years of corporate finance experience, gained at Robert Fleming & Co Limited and SG Hambros. He has considerable experience as a finance director and as chairman of audit committees, including for a number of investment companies, and has a business advisory practice. He is currently a Non-Executive Director of Aberdeen New India Investment Trust plc and Baillie Gifford China Growth Trust plc. He was also a Non-Executive Director of AVI Global Trust plc (formerly British Empire Trust plc) until 2017, Shires Income plc until July 2020 and JPMorgan Smaller Companies Investment Trust plc until November 2020. Mr Robson has a degree in History from Trinity College, Cambridge.