We wanted to share an update from Parnassus’ work with clean energy and transportation via their investments in railroad companies. It is important for you to know how your investments are making a difference. Blue Summit uses Parnassus Funds in our model portfolios.
A pivotal industry throughout the history of the US, railroads are again playing an increasingly important role in helping to support North American economies. Railroads can offer an attractive opportunity for investors looking for growth and environmental responsibility.
Railroads offer a relatively cheap, efficient choice for long-haul transportation, coupled with very strong pricing power. The average cost to ship over long distances by rail is approximately one-third the cost of shipping by truck. Moreover, their fully established track infrastructure provides railroads with high barriers to entry. These features create wide moats that allow railroads to remain fully focused on reducing costs and improving their operations to increase profitability.
Railroads are one of the most fuel-efficient and environmentally responsible means of transportation in North America. They have adopted precision scheduled railroading (PSR) practices to streamline operations, for example scheduling longer trains, which in turn cuts costs. Freight trains can transport far more goods per gallon of fuel than trucks, reducing fuel costs while emitting about 75% fewer greenhouse gasses on average. As industrial/logistics customers seek transportation options with lower emissions to meet climate goals, railroads become more attractive.
Canadian Pacific (CP), a holding within Parnassus funds, is a great example of a best-in-class railroad. Canadian Pacific has made forward-looking climate commitments and is piloting a project to develop North America’s first hydrogen-powered locomotive with zero-emissions technology.
We hope you find this on-the-ground Shareholder Impact story interesting and insightful. As always, feel free to pass these articles to others or share your comments with us!
Blue Summit does not directly invest in Canadian Pacific. They are a holding within the Parnassus Core Equity and Parnassus Endeavor Fund. Some, but not all clients, are invested in this fund.
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