A Global Equity Portfolio to Advance the THIS IS YOUR PRESENTATION - - PowerPoint PPT Presentation

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A Global Equity Portfolio to Advance the

Team:

• 1. INTRODUCTION

THE CHALLENGE

$90,000,000,000,000

to achieve the SDGs National Action & International Collaboration are necessary

Market Leadership needed to

• Signal feasibility
• Innovate
• Set industry standards

but...

Intentionality Additionality Measurability

OUR PROPOSAL Novo SDG Global Equity Value Fund

SDGV

High Impact Standard:

1. Overperforming MSCI ACWI Sus. Impact Index

SDG Global Equity Value

Setting a high standard

2. Universe where revenue & impact work in lockstep

• 3.

Value investing

3-Yr =

4%

3-Yr =

1.08

Sharpe Ratio =

1.43

• 2. OPPORTUNITY

$1 out of every $5 US assets under professional management Sustainable investing tools have evolved to address complexity Managing risk associated with long-term shareholder value

SUSTAINABLE INVESTING TRENDS

Approaches

Exclusion

Inexpensive, easy to apply Not intentional, non-additional

Thematic

Intentional on limited SDGs Non-additional

Impact Inv.

Intentional, additional Riskier, mostly private

Integration

Reconciling profits & impact Non-additional, advanced analyses

Activist Inv.

Additional Depends on influence

Exclusion

INVESTING APPROACHES

The rise of impact stock exchanges Combining Approaches

A methodology to combine the basic approaches for maximum impact

Enhanced Data Collection/Reporting Institutional Context to Act Together

Comprehensive & industry-specific

OPPORTUNITY IDENTIFICATION

Novo SDG Global Equity Value Fund

SDGV

Value Fund

Setting a high standard

• 3. ACTION PLAN

STEP SDG Analysis STEP Selection based

• n 2 key

dimensions

SDG SELECTION

Criteria for SDG Assessment

❖ Root causes of the issue ❖ Influence of public sector ❖ Influence of private sector ❖ Essential partnerships to drive progress ❖ Strong links with other SDGs for positive feedback

STEP

SDG Confirmation

• SDG SELECTION

BUILDING THE PORTFOLIO

1) Defining themes

A revenue exposure & thematic approach

Filter in if > 50% of revenues from tackling at least 1 SDG*

123 stocks in 23 markets around

the world

*Tackling SDGs = products in basic nutrition, major disease treatments, sanitation, SME Finance, Education, Alternative Energy, Energy Efficiency, Green Building, Sustainable Water

Top-10 issuers Mark.Cap Sector SDG SEKISUI HOUSE LTD 692,955 Consumer Disc. 13 UMICORE SA 681,335 Materials 12 EAST JAPAN RAILWAY 664,724 Industrials 13 SCHNEIDER ELECTRIC 663,293 Industrials 7 GILEAD SCIENCES INC 654,131 Health Care 3 SUEZ SA 644,300 Utilities 6 ABB LTD 643,962 Industrials 7 PROCTER & GAMBLE 637,215 Consumer Staples 3 ABBVIE INC 632,311 Health Care 3 PEARSON PLC 589,082 Consumer Disc. 1

BUILDING THE PORTFOLIO

13

2,468 stocks

13 3 3 12 3 1

2) Excluding Laggards

An exclusionary approach

123 stocks tackling min. 1 SDG

Exclude based on negative effect on

• ther SDGs:

80 stocks tackling 1 SDG without

hindering* others.

*Hindering SDGs = Filters applied are “MSCI ESG Rating = BB or above”, “No ESG Controversies”, no tobacco, alcohol or predatory lending, “No Climate Lobbying” among others.

Exclusion list at inception

BUILDING THE PORTFOLIO

3) Adding High Impact Investments

An impact investing approach An impact investing approach

80 mid to large cap

equities Diversified Portfolio of 85 stocks across cap size & Value-Growth spectrum across cap size & Value-Growth spectrum Adding micro-caps from Impact Stock Exchanges such as……….……... micro-caps from Impact Stock Exchanges such as……….……...

Company Market Cap Activity SDG GOOD ENERGY GROUP PLC 41M Electricity 7 OBTALA RESOURCES LIMITED 45M African Forestry and Agriculture 2 ITM POWER PLC 51M Energy Storage, Clean Fuel 7 ACCYS TECHNOLOGIES PLC 57M Constructions & Materials 12 ASSURA PLC 969M Primary Care 3 12 2 3

BUILDING THE PORTFOLIO

4) Picking Value Stocks

Value Investing Approach

Security weights computed as follows: Revenue Exp. x Free-float Market Cap Market Cap of Issuer With following caps: single security, industry, emerging market exposure & high impact investment allocation

Value Investing Approach

Universe of 85 stocks (steps 1, 2 & 3) Selecting the best value stocks based on P/E & P/B multiples Final Portfolio of 50 value stocks with a high standard impact definition Security weights computed as follows: follows: Revenue Exp. x Free-float Market Cap Revenue Exp. x Free-float Market Cap Revenue Exp. x Free-float Market Cap Revenue Exp. x Free-float Market Cap Revenue Exp. x Free-float Market Cap Revenue Exp. x Free-float Market Cap Revenue Exp. x Free-float Market Cap Market Cap of Issuer Market Cap of Issuer With following caps: single security, industry, emerging market exposure & high impact investment allocation & high impact investment allocation

BUILDING THE PORTFOLIO

5) Company Engagement and Divestment Activist Investor Approach Activist Investor Approach

Final Portfolio of 50 value stocks Publishing a Watch List Supporting sustainability resolutions Engaging with boards

BUILDING THE PORTFOLIO

Watchlist at inception

Actively managed portfolio that divests from non-responsive issuers

Benchmark

MSCI ACWI Sustainable Impact Index Cash position < 5% Range of securities: 45-50

Fund Pricing Fund Size & Entry Net Assets: $ M USD Min Investment: $. M USD Target: Institutional Investors

Management Fee 1% Incentive Fee 10% Hurdle Rate 5% High Water-Mark

PORTFOLIO FACTS

3Y Portfolio Value VS Benchmark & MSCI ACWI

Portfolio Benchmark MSCI ACWI 3-Yr Return

18.1% 14.1% 7.9%

3-Yr Standard Deviation

11.3% 9.9% 7.8%

3-Yr Sharpe Ratio

1.43 1.22 0.76

• +4% Annual Return

compared to bench.

• Slightly higher

volatility, = 1.08

• Better Risk-Return

profile than bench & MSCI ACWI

Portfolio Bench. MSCI ACWI

FINANCIAL PERFORMANCE

TARGET MARKET

Foundations’ Endowments Conscious Asset Managers Conventional Asset Managers TARGET 1: Early Adopters TARGET 3: Late Adopters TARGET 2: Majority

• 2017

2030

• 4. IMPACT

PORTFOLIO OUTPUTS OUTCOMES

• $9.6 M invested in this theme at inception
• 12 companies actively advancing this SDG
• # of interactions with issuers & response rate

Fatalities associated with company’s products Recalls and market withdrawals Total injury rate Legal and regulatory fines

SDG IMPACT

• Fatalities associated with company’s products

SASB Metrics Examples

Portfolio MSCI ACWI Δ Fossil Fuel Exposure O% 10.9% ↓100% Weighted Carbon Intensity 95 tCO2e/$M 186 tCO2e/$M ↓50% Clean Energy Exposure 9.6% 0.6% x16 Portfolio green exposure versus Global Equity Market

GREEN EXPOSURE

OVERALL IMPACT

APPENDICES

• APPENDIX 1:

Simulated portfolio at inception