BlackRock Energy and Resources Income Trust plc

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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ESG Integration

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 our 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. The Investment Manager may incorporate sustainability considerations in its investment processes across all investment platforms. 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 ESG 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 their investment objectives and policies 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 or impact focused investment strategy or exclusionary screens have 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.

Fund manager commentary

31 May 2024

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) returned by 2.9% during the month of May (in GBP terms).

In 2024, US inflation and growth have been higher than expected resulting in bond yields rising, to price in one or two interest rate cuts by year end, having previously indicated up to six cuts. In May, however, US core PCE inflation eased, and payroll growth was less than expected. US Tech and AI-related Q1 earnings growth was strong, with evidence of a broadening of earnings growth beyond these areas supporting global equity markets. Mining equities outperformed broader equity markets in May, however, helped by improving sentiment around China, mined commodity prices remained at strong levels. Economic activity in China showed signs of improvement and support measures for its struggling property market were announced, with its central bank setting up a CN¥ 300 billion (US$42 billion) facility for local state-owned enterprises to buy unsold homes. After a strong run in April, most mined commodity prices were relatively flat through May. The copper price reached a new all-time high of US$5.20/lb during the month but pulled back to end the period up just by 0.2%, whilst the silver price rose by 14.8% on strong physical demand in Asia. In company news, after a month of negotiations, BHP withdrew its proposed takeover of Anglo American after the companies failed to reach an agreement.

Within energy, economic data that was lower-than-expected and a normalisation of refining margins during the month from higher levels, created uncertainty around oil demand growth and relative weakness in energy equities. M&A activity within energy remained a feature: Conocophillips announced plans to acquire Marathon Oil at a relatively low premium, in a further sign of US shale consolidation and indicative of industry capital discipline. The Brent oil price fell by 10.0%, whilst WTI fell by 6.6%, ending the month at $79/bbl and $78/bbl respectively. The US Henry Hub natural gas price rose by 32% during the month to end at $2.58/mmbtu.

Within the energy transition theme, recent analysis forecast rapid increases in electricity demand from the build out of AI data centres (Thunder Said Energy estimate +1000TWh in in the US by 2030). Not only does the expected increase in power demand require huge investment in new electricity generation, but it will also necessitate investment in the electricity grid and related infrastructure. The hyperscalers building the AI data centres have previously announced decarbonisation targets and therefore these may further accelerate investment in renewable power. Microsoft recently announced a global framework with Brookfield to supply 10.5GW of new renewable projects between 2026-2030. Clean power utility RWE announced two power purchase agreements with Microsoft for onshore wind projects in Texas. Private equity groups appear to be recognising the valuation opportunity in the publicly listed sector with a number of acquisitions of renewable energy developers announced at significant bid premiums to where the stocks were trading. KKR bid for Encavis at a 60% premium, EQT bid for OX2 at a 43% premium and BNN Bloomberg reported that Brookfield was in negotiations to purchase a majority stake in Neoen.

All data points in US dollar terms unless otherwise specified. Commodity price moves sourced from Thomson Reuters Datastream.

Unless otherwise stated all data is sourced from BlackRock as at 31 May 2024. All data points in US Dollar terms unless otherwise specified.

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.

Mr Adrian Brown (Chairman) (appointed 10 December 2019) is a senior advisor for Apex Group. 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.

Mrs Carole Ferguson* (appointed 22 December 2021) is CEO of Carbon Transition Analytics and a Non-Executive Director of Henderson Far East Income Limited. 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.

Mr 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 abrdn New India Investment 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, JPMorgan Smaller Companies Investment Trust plc until November 2020 and Baillie Gifford China Growth Trust plc until 16 June 2023. Mr Robson has a degree in History from Trinity College, Cambridge.

Mrs Anne Marie Cannon* (appointed as Senior Independent Director 15 March 2024) has over 40 years experience in the energy industry and investment banking and is an experienced director holding executive and non-executive roles. She is currently Deputy Chair at Aker BP ASA and was formerly a Non-Executive Director of Harbour Energy plc, STV Group plc, Aker ASA and Aker Energy AS. In addition, she is a Senior Advisor in the Strategic Advisory business at PJT Partners. Mrs Cannon was previously a Senior Advisor at Morgan Stanley and a Director at Schroder Wagg and was an Executive Director on the boards of Hardy Oil & Gas plc and British Borneo plc. She has also held financial and commercial roles at Shell UK and Thomson North Sea. Mrs Cannon is a Fellow of the Energy Institute.