Team: A Global Equity Portfolio to Advance the THIS IS YOUR PRESENTATION TITLE
1. INTRODUCTION
THE CHALLENGE $90,000,000,000,000 to achieve the SDGs National Action & Market Leadership needed to but... Signal feasibility ● International Collaboration Innovate ● are necessary ● Set industry standards �
OUR PROPOSAL Novo SDG Global Equity Value Fund SDG Global Equity Value SDGV Setting a high standard High Impact Standard : 1. Overperforming MSCI ACWI Sus. Impact Index Intentionality 2. Universe where revenue & impact work in lockstep 3. Value investing Additionality Sharpe 3-Yr � = 3-Yr � = Ratio = 4% 1.08 Measurability 1.43 �
2. OPPORTUNITY
SUSTAINABLE INVESTING TRENDS $1 out of every $5 US assets Sustainable investing tools have Managing risk associated with under professional management evolved to address complexity long-term shareholder value �
INVESTING APPROACHES Approaches Inexpensive, easy Not intentional, Exclusion Exclusion to apply non-additional Intentional on Thematic Non-additional limited SDGs Intentional, Riskier, mostly Impact Inv. additional private Reconciling profits Non-additional, Integration & impact advanced analyses Depends on Activist Inv. Additional influence �
OPPORTUNITY IDENTIFICATION The rise of �impact� stock Combining Approaches exchanges A methodology to combine the basic approaches for maximum impact Novo SDG Global Equity SDGV Value Fund Value Fund Setting a high Enhanced Data Institutional Context to Act standard Collection/Reporting Together Comprehensive & industry-specific �
3. ACTION PLAN
SDG SELECTION STEP STEP SDG Analysis Selection based on 2 key dimensions 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 ��
SDG SELECTION STEP SDG Confirmation ��
BUILDING THE PORTFOLIO ��
BUILDING THE PORTFOLIO 1) Defining themes Top-10 issuers Mark.Cap Sector SDG SEKISUI HOUSE LTD 692,955 Consumer Disc. 13 13 A revenue exposure & thematic approach UMICORE SA 681,335 Materials 12 12 2,468 stocks EAST JAPAN 664,724 Industrials 13 13 RAILWAY Filter in if > 50% of revenues SCHNEIDER ELECTRIC 663,293 Industrials 7 from tackling at least 1 SDG* GILEAD SCIENCES INC 654,131 Health Care 3 SUEZ SA 644,300 Utilities 6 123 stocks in 23 markets around ABB LTD 643,962 Industrials 7 the world PROCTER & GAMBLE 637,215 Consumer Staples 3 3 * Tackling SDGs = products in basic nutrition, major disease ABBVIE INC 632,311 Health Care 3 3 3 treatments, sanitation, SME Finance, Education, Alternative Energy, Energy Efficiency, Green Building, Sustainable Water PEARSON PLC 589,082 Consumer Disc. 1 1 ��
BUILDING THE PORTFOLIO Exclusion list at inception 2) Excluding Laggards An exclusionary approach 123 stocks tackling min. 1 SDG Exclude based on negative effect on other 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. ��
BUILDING THE PORTFOLIO 3) Adding High Impact Investments Company Market Cap Activity SDG An impact investing approach An impact investing approach GOOD ENERGY 41M Electricity 7 80 mid to large cap GROUP PLC equities OBTALA African Forestry RESOURCES 45M 2 2 and Agriculture LIMITED Adding micro-caps from Impact Stock micro-caps from Impact Stock Exchanges such as……….……... Exchanges such as……….……... Energy Storage, ITM POWER PLC 51M 7 Clean Fuel ACCYS Diversified Portfolio of 85 stocks Constructions & TECHNOLOGIES 57M 12 12 Materials PLC across cap size & Value-Growth across cap size & Value-Growth spectrum spectrum ASSURA PLC 969M Primary Care 3 3 ��
BUILDING THE PORTFOLIO 4) Picking Value Stocks Value Investing Approach Value Investing Approach Security weights computed as Security weights computed as follows: follows: follows: Universe of 85 stocks (steps 1, 2 & 3) 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 Revenue Exp. x Free-float Market Cap Selecting the best value stocks Market Cap of Issuer Market Cap of Issuer Market Cap of Issuer based on P/E & P/B multiples With following caps: single security, With following caps: single security, industry, emerging market exposure industry, emerging market exposure Final Portfolio of 50 value & high impact investment allocation & high impact investment allocation & high impact investment allocation stocks with a high standard impact definition ��
BUILDING THE PORTFOLIO Watchlist at inception 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 Actively managed portfolio that divests from non-responsive issuers ��
PORTFOLIO FACTS Fund Pricing Benchmark Fund Size & Entry Net Assets: $ �� M USD MSCI ACWI Sustainable Management Fee 1% Impact Index Min Investment: Incentive Fee 10% Cash position < 5% $�.� M USD Hurdle Rate 5% Range of securities: 45-50 Target: Institutional High Water-Mark Investors ��
FINANCIAL PERFORMANCE Portfolio Benchmark MSCI ACWI 18.1% 14.1% 7.9% 3-Yr Return +4% Annual Return ● 3-Yr Standard 11.3% 9.9% 7.8% compared to bench. Deviation 1.43 1.22 0.76 3-Yr Sharpe Ratio Slightly higher ● 3Y Portfolio Value VS Benchmark & MSCI ACWI volatility , � = 1.08 Portfolio ● Better Risk-Return Bench. profile than bench & MSCI ACWI MSCI ACWI ��
TARGET MARKET Foundations’ Conscious Asset Conventional Endowments Managers Asset Managers 2017 2030 TARGET 1: TARGET 2: TARGET 3: Early Adopters Majority Late Adopters ��
4. IMPACT
SDG IMPACT PORTFOLIO OUTPUTS OUTCOMES $9.6 M invested in this theme at inception ● 12 companies actively advancing this SDG ● # of interactions with issuers & response rate ● SASB Metrics Examples Fatalities associated with company’s products Fatalities associated with company’s products Recalls and market withdrawals Total injury rate Legal and regulatory fines ��
GREEN EXPOSURE Portfolio green exposure versus Global Equity Market Portfolio MSCI ACWI Δ Fossil Fuel O% 10.9% ↓100% Exposure Weighted Carbon 95 tCO2e/$M 186 tCO2e/$M ↓50% Intensity Clean Energy 9.6% 0.6% x16 Exposure ��
OVERALL IMPACT ��
APPENDICES
APPENDIX 1: Simulated portfolio at inception ��
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