The Ecosystem of ESG investing Nanuk New World Fund Investing in - - PowerPoint PPT Presentation

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The Ecosystem of ESG investing Nanuk New World Fund Investing in - - PowerPoint PPT Presentation

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The Ecosystem of ESG investing Nanuk New World Fund Investing in the Industries of a Sustainable Future March 2020 Firm Objectives Early Validation 600 MSCI All Country World Total Return Index (AUD) 500 FTSE Environmental Opportunities

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The Ecosystem of ESG investing

Nanuk New World Fund Investing in the Industries of a Sustainable Future

March 2020

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Firm Objectives – Early Validation

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Sources: Nanuk, Bloomberg, FTSE Russell, $A, annualised returns. The New World “Strategy” performance constitutes the following: (1) Nanuk New World Fund net return since launch on 2 Nov 2015 , (2) New World Fund Model return since 3 March 2015 net of estimated fees and expenses of 2.5% p.a. and (3) performance series based on the long book of the Nanuk Global Alpha Fund less an annualized expense ratio of 2.9% from 31 Jul 2012 to 13 March 2015 . Past performance is not an indicator of future performance.

100 200 300 400 500 600 Sep-1999 Sep-2000 Sep-2001 Sep-2002 Sep-2003 Sep-2004 Sep-2005 Sep-2006 Sep-2007 Sep-2008 Sep-2009 Sep-2010 Sep-2011 Sep-2012 Sep-2013 Sep-2014 Sep-2015 Sep-2016 Sep-2017 Sep-2018 Sep-2019 MSCI All Country World Total Return Index (AUD) FTSE Environmental Opportunities All-Share Total Return Index (AUD) NANUK New World Strategy (AUD)

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ESG & Responsible Investment Strategies

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Ethical ESG Engagement Sustainably Themed Impact

Investment aligned with values Reduced exposure to ESG risks Improving corporate behavior Favour investments related to improving E&S sustainability Measurable positive E & S

  • utcomes

Typically negative screening Typically favours companies with high ESG Ratings Involves direct engagement with companies Increasing focused on UN Sustainable Development Goals Unlisted investment (in some cases philanthropic in nature)

Better Companies Better World

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Nanuk Outcome = ESG Strategies + Sustainability

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Mastercard JPMorgan Microsoft Prysmian Waste Connections Tesla

Specialty Finance US Bank Software Electrical & Fibre Optic Cables Waste Managm’t Electric Vehicles

Traditional Sustainalytics ESG Assessment

86 82 98 51 38 25

Sustainable Platform SDG based Sustainability Assessment

21% 37% 44% 94% 90% 93%

Better Companies Better World

Total SDG Contribution ESG Rating (/100)

Source: Sustainalytics & Sustainable Platform January 2020

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SLIDE 5

Nanuk’s Focus

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CLEAN ENERGY WATER ENERGY EFFICIENCY ADVANCED & SUSTAINABLE MATERIALS FOOD INDUSTRIAL EFFICIENCY WASTE/RECYCLING POLLUTION CONTROL HEALTHCARE TECHNOLOGY

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The Sustainability Revolution

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Agricultural Revolution Industrial Revolution Digital Revolution Sustainability Revolution

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Drivers of the Sustainability Revolution ?

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Population Continues to Grow

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Source: Our World In Data

Global Population – last 12,000 years

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CO2 Levels Have Risen With Economic Growth

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Global Carbon Dioxide Concentration (ppm)

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Extreme Weather Events on the Rise?

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Drivers of the Sustainability Revolution - Wellington

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Source: choices.climatecentral .org Feb 2020

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Drivers of the Sustainability Revolution - Christchurch

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Source: choices.climatecentral .org Feb 2020

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Drivers of the Sustainability Revolution - Auckland

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Source: choices.climatecentral .org Feb 2020

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Waste

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2 billion tonnes of solid waste per year

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Water

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3 trillion cubic metres of waste water

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Key Drivers Underpin The Global Transformation

16 Sustainable Technologies Growth, Complexity, Inefficiency, Disruption

Environmental & Resource Constraints Economic Development Population Growth & Demographics Government Policy New Technologies Advanced Manufacturing Falling Technology Costs

Multiple influences are driving the transition to more sustainable technologies, products and services

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Disruptive Trends Driving Sustainability Revolution

Sustainability related disruptive industry trends are widespread and growing

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Electric Vehicles Energy Storage Autonomous Driving Advanced Manufacturing Collaborative Robots Renewable Energy Industrial Internet of Things Advanced Materials

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The Thesis - Economics of Sustainable Technologies

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Solar modules Wind Energy Lithium Batteries Power Inverters LED Lighting Sensors Data Network Equipment GPS Location Chips Industrial Lasers

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Evidence – Cost of Renewables and Storage

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10 – 15 years

What Is The Second Wave?

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Long term targets Policy Support Initial growth phase Industry develop- ment The Point of No Return LT growth

THE FIRST WAVE THE FIRST WAVE (Efficiency, Renewables, Electric Vehicles) THE SECOND WAVE 1990s TODAY TODAY

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Where are the Major Sources of These Issues?

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Electricity and Heat Production 25% Agriculture, Forestry, Land Use 24% Buildings 6% Transport 14% Industry 21% Other Energy 10%

Direct Greenhouse Gas Emissions by Sector

Source: UN IPCC, 2014

Sectors impacted by First Wave

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Electricity

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25% of Global Emissions Particulate and Air Pollution Heavy Water Usage

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The Industry Has Scaled and Costs Have Fallen

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Levelised Cost of Energy ($/MWh, 2019) – United States

Source: Bloomberg New Energy Finance

Wind and solar now the cheapest sources of new bulk electricity generation Renewables + storage competitive today and getting cheaper

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Transport

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Major Contributor to Emissions and Pollution

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Transport Emissions

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Road - Cars 40% Road - Trucks 34% Ships 11% Planes 11% Trains 5%

Transport Sector GHG Emissions by Mode Road Transport

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Electric soon cheaper than ICE Vehicles

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https://eciu.net/netzerotracker

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Industry

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Cement, Steel, Plastics c15% of Emissions

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Economics of Hydrogen Production

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Source: Bloomberg New Energy Finance

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Agriculture

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1/4 of Global Emissions from Agriculture Land Degradation Land Pollution Water Pollution Water Overuse

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Agricultural and Land Use Emissions

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Land clearing, Land use change, forestry 46% Ruminent enteric fermentation 19% Ruminent waste 7% Fertilisers 11% Energy Use (fuel) 9% Rice Production 5% Manure management 4%

Sources of Agricultural and LULUCF GHG Emissions

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Solutions – Controlled Environment Agriculture

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One Third Of Food Produced Is Wasted

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Distribution of Food Loss by Region and Stage of Supply Chain (percent of kilocalories lost or wasted)

Source: WRI analysis based on FAO 2011

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Water Usage

33 Agricultural 70% Industrial 22% Household 6% Drinking 2%

Global Fresh Water Usage

5000 10000 15000 20000 Beef Nuts Mutton Pork Chicken Eggs Cereal Milk Fruits Vegetable

Water Footprint per kg of Food

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Buildings

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Plastics

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>80% Discarded or Incinerated

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Plastic Waste Infiltrating Food Supply

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Packaging is the Major Source of Plastic Waste

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Packaging 47% Other Sector 14% Textiles 13% Consumer and Institutional Products 12% Transportation 6% Building and Construction 4% Electrical / Electronic 4% Industrial Machinery 0%

Plastic Waste by Sector (2015) Total 302 million tonnes

Source: Geyer et al. (2017) Source: www.resourcelab.dk

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The Second Wave – Likely Winners

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  • Solar, Wind, Energy Storage
  • Smart Grid Technologies (Demand Response)
  • Electrification of Heat
  • Hydrogen (Power to Gas)
  • Sustainable Materials / Textiles
  • Recycling
  • Controlled Environment Agriculture (CEA)
  • Plant based protein
  • Waste Management / Processing Technology
  • Electric Vehicles
  • Rail Transport
  • Big Data and AI
  • Advanced Manufacturing
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The Second Wave – Likely Losers

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  • Fossil Fuels – Coal, Oil and Natural Gas
  • Centralised Electricity networks
  • Petrochemicals and Plastics
  • Traditional ‘Portland’ Cement
  • Blast Furnace Steel Production
  • Air Transport
  • Crop Based Biofuels
  • Agricultural Chemicals
  • Beef / Lamb
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Investment Approach

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Good Quality Companies Benefiting from Industry Trends Priced to Provide Good Returns Financial Quality, Governance Growth, Earnings Improvement Valuation

Examples of Nanuk New World Fund stock holdings as at 30 January 2020

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Stock holdings – SunRun

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Source: FactSet

Financial Metrics (Consensus) Market Cap (USDb) 1.9 Net Debt (USDb) 2.7 ROE (NTM) 5% PB (NTM) 1.6 Dividend Yield 0.0%

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Stock Holdings – SIG Combibloc

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Financial Metrics (Consensus) Market Cap (USDb) 5.1 Net Debt (USDb) 1.4 ROE (NTM) 12% PE (NTM) 19.3 EV/EBIT (NTM) 15.9 Dividend Yield 2.8%

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Stock holdings – Intuitive Surgical

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Source: FactSet

Financial Metrics (Consensus) Market Cap (USDb) 61.3 Net Cash (USDb) 4.0 ROE (NTM) 19% PE (NTM) 41.7 EV/EBIT (NTM) 31.8 Dividend Yield 0.0%

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Stock holdings – Copart

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Source: FactSet

Financial Metrics (Consensus) Market Cap (USDb) 23.9 Net Cash (USDb) 0.1 ROE (NTM) 25% PE (NTM) 34.8 EV/EBIT (NTM) 25.1 Dividend Yield 0.0%

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Stock holdings – Waste Management

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Source: FactSet

Financial Metrics (Consensus) Market Cap (USDb) 52.5 Net Debt (USDb) 10.5 ROE (NTM) 25% PE (NTM) 26.0 EV/EBIT (NTM) 20.4 Dividend Yield 1.8%

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ESG Exclusions Framework

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Exceptions to the exclusion criteria may be made in circumstances where a relevant business is discontinued or marked for sale. As at 30 Jun 2019.

Sector Exclusion Criteria Identified Exclusions Climate Change, Fossil Fuels & Environment Revenue and Norms Based 917

Coal & Coal-Based Energy Mining, Exploration & Extraction >0% 239 Coal Fired Generation >10% Services & Equipment Supply >30% Oil & Gas Exploration, Extraction, Production & Refining >0% 628 Services & Equipment Supply >30% Oil-fired Generation >5% Gas Generation >30% and Gas > Renewable Generation Uranium Mining and Refining >0% 13 Nuclear Generation Nuclear Generation >10% and Nuclear > Renewable Generation 13 Severe Environmental Damage Norms-Based Criteria, case by case 24

Weapons Revenue Based 169

Cluster Munitions & Anti-personnel Landmines Production & Manufacturing >0% 8 Nuclear Weapons Production & Manufacturing >0% 16 Military Contracting & Equipment Services & Equipment Supply >10% 123 Weapons & Small Arms Production & Manufacturing >0% 22

Ethical Values and Human Rights Revenue and Norms Based 714

Adult Entertainment Production, Manufacturing, Sales & Distribution >0% 5 Alcohol Production & Manufacturing >0% 271 Correctional Facilities Ownership, Management, Operation & Service Provision >0% 2 Gambling Ownership, Management & Operation >0% 211 Gross Corruption Norms-Based Criteria, case by case 3 Tobacco Production & Manufacturing >0% 179 Serious Violation of Human Rights & Ethical Norms Norms-Based Criteria, High-Risk Countries / Areas, case by case 43

1,800

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Sector Weight Examples

Renewable Energy / Infrastructure 12.4% Industrial Efficiency / Robotics and Automation 11.5% IoT / Big Data / AI 11.4% Waste Management & Recycling 10.2% Building Energy Efficiency / Sustainable Buildings 8.7% Rail Transport 7.6% Healthcare Equipment 5.9% Information Services 5.9% Water Treatment / Infrastructure 5.5% Food / Nutrition / Aquaculture 5.1% Sustainable Materials / Packaging 4.9%

Nanuk New World Fund Sector Exposures

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Fund Performance – to 31 Jan 2020

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Sources: Factset, SQM, Nanuk, Fund Performance: Notes (1) Inception date November 2, 2015 (2) Benchmark = FTSE EOAS TR $A (3) MSCI ACWI TR $A. Past performance is not an indicator

  • f future performance

Nanuk New World Fund (AUD, %) 1 mth YTD 1 yr 2 yr (pa) 3 yr (pa) Since Fund Inception 1 (pa) New World Fund Return (%) 5.2 5.2 31.5 14.1 18.4 15.3 FTSE EOAS Benchmark Return 2 (%) 4.4 4.4 32.8 14.3 17.8 14.2 Value Added (%) 0.8 0.8 (1.3) (0.2) 0.6 1.1 MSCI ACWI Return 3 (%) 3.8 3.8 26.4 14.0 15.8 11.2 Value Added (%) 1.4 1.4 5.1 0.2 2.7 4.1

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Summary

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The ‘Sustainability revolution’ is still on track, though macro issues will have varying impact on underlying industries. Nanuk offers

  • access to a well diversified portfolio of companies that are not

available in Australia & NZ and different to traditional global equity funds

  • suitable investment solution for those seeking socially responsible

manner

  • a track record of strong performance
  • independent research, ‘Recommended’ by Lonsec
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SLIDE 50

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The world is changing. Don’t get stranded.

Nanuk Asset Management Pty Ltd Level 23, Australia Square 264 George Street Sydney NSW 2000 Australia Tel +61 2 9258 1600 Fax +61 2 9258 1699

Dan Powell Head of Distribution Tel +61 2 9258 1612 Mob +61 419 914 212 Email dan.powell@nanukasset.com

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Disclaimer

This presentation is prepared by Nanuk Asset Management Pty Ltd (‘Nanuk’) (AFS Licence no. 432119) for wholesale clients only. The information contained in this presentation is of a general nature only, does not take into account the objectives, financial situation or needs of any particular person and is not to be taken into account as containing any personal investment advice or recommendation. Before making an investment decision, you should consider whether the investment is appropriate in light of those matters. While this presentation has been prepared with all reasonable care, no responsibility or liability is accepted for any errors, omissions or misstatements however

  • caused. No warranty is provided as to the accuracy, reliability and completeness of the information in this presentation and you rely on this information at your own risk. Any

prospective yields or forecasts referred to in this presentation constitute estimates which have been calculated by Nanuk’s investment team based on Nanuk’s investment processes and research. To the extent permitted by law, all liability to any person relying on the information contained in this presentation is disclaimed in respect of any loss

  • r damage (including consequential loss or damage) however caused, which may be suffered or arise directly or indirectly in respect of such information. Any past performance

information in the presentation is not a reliable indicator of future performance. This presentation should not be construed as an offer to sell or the solicitation of an offer to buy any financial services or financial products. This document is confidential, is intended only for the person to whom it has been delivered and under no circumstance may a copy be shown, copied, transmitted or otherwise given to any person other than the authorised recipient. Performance results are shown for illustration and discussion purposes only. EQT Responsible Entity Services Limited (‘EQT’) (ABN 94 101 103 011) AFSL 223271 is the Responsible Entity for the Nanuk New World Fund. This publication has been prepared to provide you with general information only. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance

  • n this information. We do not express any view about the accuracy or completeness of information that is not prepared by us and no liability is accepted for any errors it

may contain. Past performance should not be taken as an indicator of future performance. In preparing this information, we did not take into account the investment

  • bjectives, financial situation or particular needs of any particular person. You should obtain a copy of the product disclosure statement before making a decision about

whether to invest in this product. Cover image: NASA Earth Observatory image by Robert Simmon, using Suomi NPP VIIRS data provided courtesy of Chris Elvidge (NOAA National Geophysical Data Center). Suomi NPP is the result of a partnership between NASA, NOAA, and the Department of Defense.

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