Pictet Asset Management: How to Invest Using the Planetary Boundary Framework?

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Pixabay CC0 Public DomainAdolfo Felix. Adolfo Felix

In recent years, environmental or “green” investing has attracted investor interest. However, quantifying the impact of a portfolio’s investments on the environment remains a persistent challenge. One solution to this problem is the Planetary Boundaries framework developed by a team of eminent scientists at the Stockholm Resilience Center (SRC). In a recent talk moderated by Matthew Miskin, Co-Chief Investment Strategist at John Hancock Investment Management, Dr. Sarah Cornell, Associate Professor at the SRC, explained what the key components of this framework are and how it can help investors better understand the environmental cost of economic activity. Meanwhile, Dr. Steve Freedman, Sustainability and Research Manager on Thematic equities at Pictet Asset Management, and Gabriel Micheli, Senior Investment Manager, explored effective ways to use sustainable and impact investing strategies as a tool to enhance returns.

According to Freedman, the best way to avoid falling into the greenwashing trap is to really understand environmental science and ensure that the best thinking within this science is reflected in how an investment portfolio is constructed and managed. Because there are still many shades of gray within sustainable, responsible and impact investing, and there is no consensus on whether all investing that the sustainable label has deserves to be called that.

Prior to the launch of the Global Environmental Opportunities strategy in 2014 in Europe, Pictet Asset Management conducted a huge debate to assess the available frameworks for sustainable investing with an in-depth analysis of their robustness and integrity. When choosing a framework, it was also necessary that it could be applied in practice, so the fund manager opted for the Planetary Boundaries framework developed by the SRC.

Environmental damage

In Sarah Cornell’s view, there is a need to understand the resilience of all social-ecological systems, at all scales, from the household to the whole planet, and to propose ways to navigate the complex processes of change that the planet is undergoing.

The global environment is changing. Climate change and biodiversity loss are in the news almost daily. Even without going into the scientific details, people have come to realize that, year after year, global warming is intensifying with a pattern of degradation, damage, and destruction of life on Earth, caused directly and indirectly through collective human activity.

The list of environmental damages is extensive, but damage to climate and biodiversity stand out because in a sense these two aspects are what define this planet. In a warmer and more turbulent climate the operating environment for businesses will be much less predictable in the future than it has been in the past. It is living nature that sets the Earth apart from other planets; the loss of that nature makes the world less resilient to climate change and other potential climate-related changes that affect large-scale use of land, water and natural resources such as forests.

At large scales, these changes lead to multiple stresses and vulnerabilities on the Earth’s ecosystems. Regenerative and productive landscapes are needed because there are increasing calls to move away from fossil fuels and these landscapes are needed to buffer the impact on society of resource scarcity and problems of inefficiencies in their distribution.

Humans collectively are changing the chemistry of life, even at its most basic level, such as the nutrients that support growth: nitrogen and phosphorus are changing, more than doubling their natural rate of fixation. These global changes in the fundamental biochemistry of life are not being translated into environmental agendas, nor are they being considered as global problems in the nutrients that sustain life.

A particular concern at this time is the transition from a fossil fuel economy to a bio-based economy. Because this is creating an urgent need to understand the role of society in these perhaps quite archaic global flows of nitrogen and phosphorus and other essential elements to and the wonderful human ingenuity and illogical capacity also introduces problems, in particular, new chemicals, substances of very high concern, we might call them, this kind of pollution creates planetary pressures as well.

The Planetary Boundaries framework

Developed a decade ago, the Planetary Boundaries framework covers nine dimensions that point to the set of critical issues for environmental sustainability. Originally, it was a scientific agenda for strategic work on issues such as climate, biodiversity, natural resource use, waste and pollution. Between 2008 and 2009, a group of experts in international global climate change research programs met to try to develop a strategy for international research and collaboration, but the true genesis is the collective effort of more than 50 years of international collaborative science.

The scientific community brings together observations such as satellite data, global modeling and, in addition, a careful compilation of ecological changes within the framework of geological changes in Earth’s history. This information along with data models and other sources of evidence have given the scientific community the current understanding of the dynamics and magnitude of global environmental change.

Each of the nine dimensions of the framework alerts to one of the global biophysical processes and how societal changes are shifting the fundamental behavior of the planet away from the relatively stable climatic and ecological conditions that have prevailed over the past 10,000 years.

The Planetary Boundaries framework takes a very long-term, large-scale view of the human enterprise. For each dimension, the magnitude of change away from the long-term baseline of stability is characterized by a quantified boundary that marks the safe operating space, in which civilization, large-scale settlement, long-distance trade, agriculture, and everything else that has happened in the last 10,000 years takes place. Now, this long-term, large-scale approach really means that the metrics of the frame of reference are those that define the control variables of the Earth system, global quantifications, rather than the more familiar local quantifications of damage to the environment or human health.

For Sarah Cornell, it is important to take a macro perspective because it provides a precautionary approach. From the stability of the Holocene, the world is entering a new geological era with very unpredictable conditions, which more and more scientists are calling the Anthropocene, because of human influence on a global scale on the functioning of the planet. In the last decade, part of the warnings outlined within the framework have been taken up by government authorities, especially in Europe, to some extent by the United Nations and through the Sustainable Development Goals have been adopted by companies and industrial groups.

Companies and in particular funding sources are increasingly in the spotlight of global sustainability action. Both the Paris Agreement for climate change and the 2030 agenda for global sustainability explicitly emphasize that market actors must work together with states and citizens if the goals set for sustainability are to be achieved. Translating scientific metrics into business-relevant metrics requires significant simplifications and sharply defined assumptions.

Companies need a transparent basis for decision making. This is a really important issue when it comes to quantification, because a number without its history, without a qualification in a complex system such as the social and ecological systems of a planet, introduces risks when the prospect is unprecedented and highly unpredictable change. That is why there needs to be more and more dialogue between science, business sustainability and investment prospects that mobilize energy and innovation.

Their application in the investment process

For his part, Gabriel Micheli defended the role played by Pictet Asset Management in managing investments according to the Planetary Boundaries framework. Within this framework, the asset manager set up a relatively complex system in which each company was assigned a score on each of the nine planetary boundaries to see if the company operates within the boundaries of the safe operating space and if it actually has a positive impact on those boundaries.

Pictet Asset Management created specific metrics that analyzed the life cycle of a product or service, from the sourcing of raw materials to the use of the product and the waste generated once it is discarded, with a perspective that evaluates from the origin to the end of the life of a product or service that allows us to know its true impact. 

With this process, the asset management company has identified a universe of 400 companies that are within a safe operating space and that also have a positive contribution in at least one of the aspects of the reference framework: for example, renewable energies, companies in the energy efficiency sector, production of electric vehicles, implementation of industrial automation processes.

On the other hand, there is also sustainable agriculture and forestry. Regenerative agriculture is quite polluting in the biodiversity dimension, while forestry is being used to create carbon-storing products with renewable material. Likewise, waste management and recycling, as well as water supply control, which use technologies that will create very relevant business opportunities.

Another segment to consider is the dematerialized economy. It is mostly composed of software companies that help make everything more efficient through simulations that can be applied in the construction process of a building or in the production process of a reactor or an automobile. These are very interesting companies with high barriers to entry and very good cash flows. 

Pictet Asset Management also looks at pollution control at the end of the production chain. Filters and machinery are still needed to measure pollution, so they see a lot of business opportunities in this sector.

The common characteristic of these segments is that they are experiencing higher growth than the rest of the world economy. In the last decade and especially in the last two or three years, there is a greater awareness among the population that has caused a change in consumer preferences and has pushed for changes in regulation, as examples China, the United States and Europe have driven investment in green technologies.

As Gabriel Micheli explained, the COVID-19 crisis has accelerated this trend. Governments felt the need to stimulate the economy and about a third of the stimulus will be dedicated to boosting renewable energies, electric vehicles and more sustainable buildings. Currently, the universe created using the Planetary Boundary framework clearly outperforms the bulk of the market at 5% per year over time and they expect this growth to continue over time.

In their view, the beauty of the Planetary Boundary benchmark is that it includes some relevant and well-known companies, but also includes companies that have a positive impact on the environment in other segments of the economy that often go unrecognized by market participants. These companies are well positioned to continue to outperform the market.

Robeco Announces Interim Targets for 2025 and 2030 on Its Road To Net Zero Emissions by 2050

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Pixabay CC0 Public Domain. Sostenibilidad

Robeco has announced its interim targets and strategy to reach net zero emissions by 2050. Specifically, it aims to decarbonize its investments 30% by 2025 and 50% by 2030. This encompasses all emissions associated with business travel, electricity, heating and other business activities.

The company’s roadmap to net zero emissions by 2050 is called “Navigating the climate transition” and will be updated at least every five years. Its goal is to accelerate the transition by investing in companies it believes will thrive in it and by engaging with those that do not move “fast enough”.

This means Robeco will step up its active ownership activities through voting and engagement with the top 200 emitters in its investment universe and focus on engaging on climate change with 55 companies that are responsible for 20% of portfolio emissions. Additionally, it will intensify its dialogues with sovereign bond issuers and together with other investors, call for climate action by countries as governments play a vital role in the transition towards net zero.

“Our vision is that safeguarding economic, environmental and social assets is a prerequisite for a healthy economy and the generation of attractive returns in the future. Working in partnership with our clients, Robeco aspires to take a leading role in contributing to a net zero economy, create better and long-term risk-adjusted returns, and look after the world we live in. The low-carbon transition is not only a moral imperative, but also the prime investment opportunity of our generation”, said Victor Verberk, CIO Fixed Income and Sustainability.

Lastly, Lucian Peppelenbos, Climate Strategist at Robeco, pointed out that the biggest risk of climate change is inaction. “Our role as investors is to finance the transition and to use our leverage as shareholders and bondholders to accelerate it. A net zero economy can only be achieved if we all work together and everyone plays their part: investors, trade and industry, governments, and consumers. So let us take every opportunity to act now”, he concluded.

StepStone: “CPRIM provides convenient, efficient and transparent access to private markets for small institutional investors and high net worth individuals”

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Shannon Bolton, Managing Director at StepStone, and Neil Menard, President of Distribution at Conversus.
Foto cedida. StepStone: "CPRIM provides convenient, efficient and transparent access to private markets for small institutional investors and high net worth individuals"

Private markets have historically produced attractive returns relative to their public market counterparts. However, retail investors, and especially high net worth individuals (HNWIs), currently maintain a small exposure to this potential source of return compared with large institutional investors. StepStone Group, a global private markets investment company, launched Conversus, its private wealth platform in 2019 with the hope of converting the advantages enjoyed by large institutions into opportunities for small institutional investors and HNWIs.

Funds Society had the opportunity to chat with Shannon Bolton, a managing director at StepStone, and Neil Menard, president of distribution at Conversus, about the end-to-end solution that CPRIM offers to retail investors to access the same high-quality global investments in private markets as major institutions.

Specifically, Bolton and Menard presented CPRIM as a multi-strategy private markets fund that provides global and diversified access to a wide spectrum of asset classes—private equity, real assets (real estate and infrastructure) and private debt—in a single investment. CPRIM takes advantage of StepStone’s deep institutional relationships and investment experience in these markets.  As of June 30, 2021, StepStone oversaw $465 billion of private markets allocations, including $90 billion of assets under management. Its clients include some of the world’s largest public and private defined benefit and defined contribution pension funds, sovereign wealth funds and insurance companies.

Minimum investment of $50,000, monthly Net Asset Value and potential for quarterly liquidity

“If you think about the conditions that worry HNWIs about conventional private-equity funds—10-year lockups, unpredictable capital calls, ‘black box’ investment strategies—investors don’t really know what they’re buying,” Neil explains at the beginning of the interview. “We [at StepStone] have been able to eliminate all of this with CPRIM. We have been able to offer significant diversification within the private markets in an investor-friendly structure.”

Created in October 2020, during the coronavirus pandemic, CPRIM stands out as an open-architecture investment strategy. The fund invests in deals and with managers that StepStone identifies as the best in private markets.

In addition to its open architecture investment strategy and the ability to access quarterly liquidity as core building blocks, Bolton points to three features that differentiate CPRIM from other semi-liquid private market investment vehicles: CPRIM only invests in private markets deals, and the fund does not invest in ETFs or publicly traded stocks so the true underlying exposure is only to the private markets. The fund also holds a low cash position, 5–10% target of the portfolio; and the fund structure is fee efficient. There is no performance fee, and the management fee is only 1.4%, which is quite low for a fund that invests in private markets and gives investors the ability to redeem quarterly.

“The fund allows access to private markets to investors who either do not have the standard minimum five million dollars of investment needed to access conventional private equity funds or to those investors who are not comfortable with the lack of liquidity in those markets,” she adds.

Symbiosis between StepStone and Conversus

CPRIM is managed consistently with other separately managed accounts held by StepStone, Menard explains. “The big concern among many investors is that the deals that go into retail funds are the ones that the big investment institutions did not want. Since we launched the fund last October, we have made approximately 56 investments [in CPRIM] as of August 1, 2021. Each one of these was conducted alongside one or more of StepStone’s institutional clients,” says Menard.

The profitable symbiosis between StepStone and CPRIM comes through the size of its team and the first-hand information they have thanks to extensive research and engagement with investment firms; in context, StepStone holds an average of 4,000 meetings annually with general partners. The information harvested feeds a proprietary database called SPI (StepStone Private Markets Intelligence), explains Bolton, which is a fundamental tool to track the activities of underlying GPs. “As of June 30, 2021, SPI contains information on more than 66,000 private companies, 38,000 funds and 14,000 general partners,” explains Bolton.

Highly diversified portfolio with monthly NAVs and potential for quarterly liquidity

The multi-strategy fund that characterizes CPRIM aims to build a portfolio “as diversified as possible,” says Bolton. In the long run, the strategic asset allocation aims to devote 40–60% to private equity, as well as 25–40% to real assets and, finally, a small portion to private debt. “The more diversified the fund, the more it will behave like a model where we can predict cash flow. That is what we want to do.”

How do you launch such a fund for retail investors? How do you manage to minimize the J-curve? “The obvious way is to invest in late-stage secondary portfolios so that you can put the money to work right away, or through direct co-investments. StepStone has a very robust pipeline in both secondary transactions and co-investments. Over time, we will start adding primary fund investments to the portfolio. This will happen when the portfolio starts to generate enough cash to meet capital calls without generating cash drag, which we don’t think will happen for three or four years,” says Menard.

The current composition of the portfolio shows an abundance of private equity investments, at more than 70% of the portfolio, and an allocation of around 20% to real estate and infrastructure. More than 80% of these investments were made through secondary transactions and about 20% through co-investments, according to the fund’s managers.

“We do not focus on a particular sector or industry, as there are always good opportunities in all sectors. We believe we can give investors a very diversified private markets portfolio that has the ability to provide liquidity to investors quarterly,” summarizes Bolton.

“CPRIM provides convenient, efficient and transparent access to private markets, through a semi-liquid structure, for small institutional investors and individuals,” Menard concludes.

Allianz GI Joins the One Planet Asset Managers Initiative

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Pixabay CC0 Public Domain. Allianz GI se une a la iniciativa One Planet Asset Managers

Recognizing the role investors play as a catalyst to finance the transition towards a low carbon economy, Allianz Global Investors has announced that it is joining the One Planet Asset Managers (OPAM) initiative.

This project was launched in 2019 to support the members of the One Planet Sovereign Wealth Funds (OPSWF) in their implementation of the OPSWF Framework. The OPSWF Network comprises 43 of the world’s largest institutional investors with over 36 trillion dollars in assets under management and ownership.

By joining OPAM, Allianz GI commits to actively collaborate within the OPSWF Framework and to engage with other key actors, including standard setters, regulators and the broader industry to further the Framework’s objectives. The goal is to accelerate the understanding and integration of the implications of climate-related risks and opportunities within long-term investment portfolios through sharing of investment practices and expertise with the members of the OPSWF and publication of relevant research.

“Partnering with clients to tackle the most pressing sustainability issues and create a better future for all is at the heart of what we do. We are proud to be the first German investor to be joining the OPAM. We are committed to advance the understanding of the implications of climate-related risks and opportunities within long-term investment portfolios through the sharing of investment practices”, commented Tobias Pross, CEO.

In this sense, he pointed out that Allianz GI looks forward to contributing to the work of the One Planet Initiatives given their experience in climate finance through their “investment process, strong stewardship policy, and investment solutions that contribute positively to the alignment of an asset owner’s portfolio to a low carbon economy”.

This new commitment comes as, recognizing the urgency to tackle climate change, the firm is accelerating its sustainability drive. In fact, they announced earlier this year their commitment to supporting the climate transition via exclusions in coal production and coal-based energy production. Besides, Allianz GI is a member of the Net Zero Asset Managers initiative and supports the goal of net zero greenhouse gas emissions by 2050 or sooner. It is also an original member of the EC’s Technical Expert Group (TEG) on Sustainable Finance and co-founded the Climate Finance Leadership Initiative. 

Allfunds and Consensys Will Apply Allfunds Blockchain Technology Beyond the Fund Industry

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Pixabay CC0 Public Domain. Allfunds y ConsenSys colaboran para aplicar la tecnología de Allfunds Blockchain más allá del sector de los fondos de inversión

The Allfunds-ConsenSys partnership reaches a new milestone: ConsenSys will commercialize Quorum Subscription with Allfunds Privacy, a new commercial offering that makes it possible for enterprises to leverage the innovative privacy features developed for the Allfunds Blockchain platform.

In February 2021, both firms announced a partnership to combine ConsenSys Quorum with the power of the Allfunds Funds Industry Platform in order to radically streamline the global fund distribution industry by enabling instant, reliable, secure communication among industry actors. This new launch opens the possibility to apply the privacy enhancements beyond the original Allfunds Blockchain Fund Industry use case.

In a press release, Allfunds and Consensys have revealed that selected consulting firms, as well as technology and blockchain companies have been testing alpha versions of the solution to understand the possibilities opened up by this new privacy approach, that contributes to the continued development of the Enterprise Ethereum ecosystem.

Quorum Subscription with Allfunds Privacy is a new commercial private transaction management solution that further expands the permissioning and privacy features of the Quorum suite and provides a new privacy model. It is based on patented technology created by Allfunds Blockchain, that is from now on maintained and commercially supported by ConsenSys.

Allfunds Blockchain, the dedicated software company focused on developing solutions not only for Allfunds and its clients but for the entire fund Industry, has built a “holistic and trailblazing” blockchain platform using its patented technology to transform technologically the fund industry. The firms point out that Quorum Subscription with Allfunds Privacy solves “major concerns” about data governance in blockchain ecosystems. Allfunds Blockchain is already collaborating with main industry players around the world to be fully prepared for a non-paper-driven industry.

“We are very proud about this new milestone. The most important thing in a blockchain initiative is clearly the technology, and having a leading firm as ConsenSys commercializing our technology beyond the Fund Industry is the best example to demonstrate how robust is our value proposition. Helping to solve the main data governance challenges in blockchain networks with this new privacy approach, contributes without doubt to the continued development of the Enterprise Ethereum ecosystem”, said Rubén Nieto, Managing Director of Allfunds Blockchain.

Lastly, Madeline Murray, Product Lead at Consensys Quorum, stated that their partnership with Allfunds will further facilitate global blockchain adoption for the fund’s industry and “enrich the ecosystem” with technical innovations suitable for advanced privacy use cases. “Privacy is a core element of the ConsenSys Quorum stack and collaborating with industry stakeholders will help produce the most sophisticated blockchain architecture for our partners”, she added.

Impact Investing Market Accelerates its Expansion

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Pixabay CC0 Public Domain. NN IP

The 715 billion dollar impact-investing market is poised for rapid expansion driven by surging investor demand, government green-growth initiatives and supportive regulation, according to a recent analysis by NN Investment Partners (NN IP).

While impact investing is still a niche compared with the broader 35.3 trillion dollar sustainable-investment market, momentum has built since the adoption of the UN SDGs and the signing of the Paris Climate Agreement in 2015. However, the asset manager points out that investors need to be wary of ‘impact washing’ as the sector grows.

“From a fundamental point of view, looking at the type the companies our impact funds invest in, the outlook has never been better. There can always be cyclical headwinds, but structurally there’s tremendous growth”, says Ivo Luiten, Lead Portfolio Manager Impact Equity at NN IP, who believes there are three sectors to watch: healthcare, technology and ‘green’ industrials. 

Healthcare

The US spends about 18% of gross domestic product (nearly 4 trillion dollars a year) on healthcare. Companies that can help reduce that bill are in demand: for example, innovative high-tech medical devices can improve patient outcomes and cut treatment costs; the life-sciences segment (firms that develop and manufacture pharmaceuticals, biotechnology-based medicines and a range of other products) is also growing fast because of the increasing focus on the prevention of disease. 

The firm admits that picking winners in the drug-development space can be tough, but it highlights that many suppliers to this market, such as clinical research organisations and life-science equipment manufacturers, offer “interesting investment opportunities”.

Technology

Another sector turbo-charged by the pandemic in NN IP’s view is information technology, with digitalization accelerating around the world: “Software producers have high operating leverage and rapid revenue growth, alongside strong competitive advantages such as pricing power and a loyal customer base. They tend to have a high percentage of subscription revenues”.

Companies that service physical infrastructure also present “substantial opportunities” as governments roll out plans to spend as much as 10 trillion dollars to upgrade or replace decaying and obsolete facilities and systems, and green development plans bring long-term spending on new types of infrastructure.

The analysis points out that the cybersecurity sector is also expanding rapidly, as companies race to protect themselves against the sort of high-profile breaches that have accelerated in recent years. The shift to remote working and transition to the cloud are changing the way companies protect their digital assets, with an ongoing transition to a multi-location approach capable of covering employees who work from home. NN IP believes that this challenge requires new solutions such as the zero-trust or perimeterless security model predicated on the concept that devices shouldn’t be trusted by default, even within a corporate network

“The skyrocketing popularity of digital payment apps and decentralized finance will also create plenty of investment opportunities. Agile, disruptive payment processors are on course to create so-called closed-loop payment and loan networks (payment ecosystems that circumvent the traditional banking system and enable users to get loans that wouldn’t be possible through standard channels)”, they add.

‘Green’ industrials

The urgency behind efforts to tackle climate change is intensifying in the run-up to 2030, the target date for the UN’s 17 Sustainable Development Goals. Companies building solutions to reduce emissions and speed the transition to sustainable energy are “particularly well placed” to benefit from ongoing global policy and regulatory changes, such as China’s drive to decrease pollution and the EU’s waste and recycling initiatives. “The industrials sector is a good place to look for firms that are helping companies and consumers to shrink their carbon footprint”, the asset manager says.

In its opinion, innovative companies are also contributing to the drive for a more circular economy, which involves extending the lifecycle of products, reducing waste and reusing materials wherever possible to create further value. 

“Companies tackling the proliferation of plastics are a key area of opportunity, with new technologies such as chemical recycling being developed to complement traditional mechanical methods. Firms that are helping lower emissions and develop recycling solutions in heavy-emitting industries such as steel and cement are also making strides”, Luiten comments. In this sense, hydrogen power and carbon capture and storage are in their early stages, “but remain sectors to watch”.

Aware of impact washing

NN IP notes that impact washing (misleading marketing claims about a company’s actions or a financial product’s real-world impact) is something “to be aware of”. The related issue of how to measure impact also looms large, and more robust key performance indicators, as well as a standardized reporting framework, will be essential to addressing this issue.

According to Luiten, while these challenges remain, they also create opportunities for asset managers and banks to boost transparency on how they measure the real-world impact of their investments. “True impact funds that seize this opportunity will set themselves apart as the market develops over the next five years”, he concludes.

AXA IM Partners with XP To Launch Clean Economy Strategy in Brazil

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CC-BY-SA-2.0, FlickrAmazonia, Brasil. ,,

Brazilians have increasingly started to invest internationally. In this context, AXA Investment Managers and XP Investments have partnered to bring strategies focusing on technological disruption and sustainable investments. Their collaboration started in 2020 to launch feeder funds in Brazil and today it has grown to exceed 1 billion reals in assets.

“The strategy is at the forefront of where technological innovation and the need for a more sustainable world meet, and it will provide investors in Brazil access to a vast and diverse set of innovative business opportunities that aim to help reduce greenhouse gas emissions from the most polluting and harmful industries”, pointed out AXA IM in a press release.

In this sense, it has identified four key areas that represent the most attractive investment opportunities within the Clean Economy strategy: Low Carbon Transport, Smart Energy, Agriculture & Food and Natural Resources Preservation. “These sectors have the potential for long-term profitability and growth, while making a positive impact on the environment”, they said.

The asset manager believes that its focus on technological disruption was key to bring to Brazil a strategy focusing on companies that allowed our lives to continue during the lockdowns, including companies in fintech, the cloud, remote working, streaming, video games, artificial intelligence, etc. “Investors in Brazil have also become captivated by sustainable and socially responsible investing. We believe we are in front of a multi-decade growth opportunity in areas such as low-carbon transportation, renewable energy, and smart grids. Electric and Hydrogen fuel-cell battery technologies are very exciting. Other areas include Agri-tech, and the development of healthier and organic foods, recycling, and water preservation”, AXA IM commented.

The firm has currently more than $1 trillion in assets under management. Founded in 1997 in Paris, it has grown into a global powerhouse in asset management, with a presence in more than 20 countries and major investment centers in the US, UK, France, and Hong Kong.

Colchester Global Investors’ Funds Now Available to BNY Mellon Pershing

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Colchester has announced in a press release that its three flagship Irish UCITS funds (Colchester Global Bond Fund, Colchester Global Real Return Bond Fund and Colchester Local Markets Bond Fund) are now being offered to BNY Mellon Pershing’s clients.

The funds will be available to their introducing broker-dealers and registered investment advisors using BNY Mellon Pershing’s NetX360® platform upon the execution of an agreement with Colchester Global Investors’ Fund.

“We’re very pleased with bringing our core strategies to the Latin American and US offshore markets where we have had immense support to make this listing possible. The simplicity of our investment process and the exclusive focus on global sovereign bonds and currencies have resonated with investors in a heavily fixed income biased region”, said Global Head of Marketing and Client Services, Paul Allen.

In his view, their global sovereign bond strategies have experienced strong interest from advisers who are seeking both value and a defensive fixed income alternative for their client portfolios. “With our long track record of displaying negative correlation to risk assets including credit, we are sought out as the anchor in portfolios,” Allen explained.

He revealed that investors have also welcomed their expertise in local currency emerging markets to complement their “aggressive fixed income exposure” through the Colchester Local Markets Bond Fund USD Unhedged Accumulation Class – I Share class (ISIN IE00BQZJ1775), which has received a 5-Star Morningstar RatingTM as of 31/8/20211.

“Nuestro punto de diferencia es que solo invertimos en bonos soberanos físicos en nuestros fondos principales, lo que garantiza la liquidez en todos los mercados y una simplicidad que los clientes pueden comprender. En Colchester, nos enorgullecemos de nuestra alineación con nuestros clientes como inversores a largo plazo en lugar de realizar apuestas a corto plazo “, concluyó Allen.

Los fondos estarán disponibles de inmediato a través de varios acuerdos existentes con corredores de bolsa orientados a la gestión de patrimonios, asesores de inversión registrados (RIA) e instituciones.

Euromoney Recognizes Santander as the World’s Best Bank for Financial Inclusion

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Wikimedia CommonsAna Botín, presidenta de Banco Santander durante la celebración de The Global Summit 2015.. Ana Botin

Euromoney has recognized Santander as the world’s best bank for financial inclusion in its “Global Awards for Excellence 2021”, highlighting the group’s efforts to make financial services more accessible.

The magazine has distinguished the company’s efforts to financially empower individuals and entrepreneurs through a range of programs in Latin America, Europe and the US, as well as the work Santander has done more broadly to help people, especially the elderly, adopting digital channels through the pandemic.

“In the last three years we have financially empowered 6 million people, with the goal to empower 10 million by 2025. The impact can be life changing: from supporting entrepreneurs in setting up new businesses through our micro finance programs, to helping individuals who want to build confidence in using digital banking. This is critical to creating inclusive, sustainable growth, and I am delighted that Euromoney has recognized the efforts and innovations of our teams across the world”, said Ana Botín, Santander Group executive chairman.

Different initiatives 

In a press release, the bank has informed that its initiative Santander Finance for All seeks to support financial inclusion to help people get access to the financial system, offer them finance to set up and grow micro-businesses, and enhance their resilience through financial education. The strategy “targets the unbanked and underserved”; individuals and SMEs who face difficulties obtaining credit; have limited financial understanding; or are in financial distress. 

One of those initiatives is Superdigital, Santander’s flagship 100% digital platform for making payments in Brazil, Mexico, and Chile. It leverages the rapid growth in smartphone adoption and improved network coverage in Latin America to increase financial inclusion in the region. The platform is expanding its services to reach five million active customers by 2023 across seven markets in Latin America.

Besides, Santander has specific microfinance programs to provide financing for micro entrepreneurs. Although named differently (Tuiio in México, Prospera in Brazil, Uruguay and Colombia, and Surgir in Perú), all have same goal: to support microentrepreneurs set up and grow microbusinesses with credit and other products such as microinsurance Thanks to these initiatives, Santander has supported 1.2 million micro-entrepreneurs in Latin America, out of which 70% were women.

The magazine has also recognized that, during the pandemic, the bank has been especially vigilant in supporting elderly or vulnerable customers and ensuring they can access financial services, contacting them proactively to help build confidence in using digital banking services. It also produced simple step-by-step videos and guides for online and mobile banking.

In August, Santander was also recognised as the most innovative bank for its financial inclusion initiatives by The Banker, a Financial Times magazine.

Financial Innovation of the Year

Santander has also won the Financial Innovation of the Year award for its role as joint lead manager advising European Investment Bank in the first-ever digital bond on a public blockchain multi-leader led. It was a 100 million euros and 2-year maturity bond, placed with key market institutional investors.

The transaction used Ethereum, a public blockchain protocol, and it was a milestone for Santander’s CIB Digital Solutions Group (DSG). Santander CIB created the unit at the beginning of 2021 to partner with global coverage and product teams to provide comprehensive support in the digital acceleration of customer’s business. It also produces added-value digital products and financing structures to help Santander’s clients in the digital acceleration of their business.

Euromoney magazine has been a leading publication in international finance for 50 years. Its Awards for Excellence were established in 1992 and are the global benchmark for the banking industry.

Four Questions about Identifying Strong Companies

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Pixabay CC0 Public DomainCompañías fuertes y con capacidad para crecer con el paso del tiempo. . Fibra

Nobody wants to invest in questionable, weak, unethical or incompetent companies. And investing in the right company for financial success is the holy grail we’re all searching for. This clearly isn’t easy, and nobody is perfect. If they were, they would be the only investment option in town. Thornburg IM has asked four of its equity portfolio managers (Brian McMahon, Miguel Oleaga, Lei Wang and Josh Rubin) what their criteria are for identifying strong companies from the relevant universe for their respective strategies, what impact the COVID- 19 pandemic has had and how ESG considerations are relevant to determining whether a company is strong.

Can you describe your research process?

Miguel Oleaga: Our process involves narrowing the universe of stocks by looking for what we believe are strong companies, which drive idea generation. We perform deep fundamental research on those names, ultimately generating a short list of investable ideas and then investigating those ideas thoroughly. The Global Opportunities portfolios utilize an intrinsic value framework that seeks to understand if a business is likely to create value over the long-term, with less of an emphasis on near-term valuation metrics. Often market commentators and investors attempt to assess valuations and opportunities simply on near-term statistical metrics, such as a P/E or a P/B multiple. In our view, these can be useful datapoints but do not paint the complete picture of whether a business is fairly valued. To be able to thoroughly analyze and determine intrinsic value, we need to know what we own and therefore limit our holdings to about 30–40 stocks.

Josh Rubin: A key consideration for our emerging markets investment strategies is really honing in on the strong businesses, not just high profit margins, but a really strong management team, strong corporate governance, strong operational policies, strong market positions and the other types of components that lead companies to win market share or outgrow their industry competitors.

Lei (“Rocky”) Wang: We think in the next phase of the recovery the outperformance of higher beta value names may give way to companies which can demonstrate earnings growth and may therefore favor bottom-up stock selection and a more balanced core approach to portfolio construction, both of which we have practiced successfully for more than two decades.

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What adaptations to the process have you made as result of the COVID-19 pandemic and the resulting changes in the environment?

Miguel Oleaga: We haven’t made any changes to our process. We believe a well-thought-out and executed philosophy and process should withstand the tests of time. I do think COVID has changed the investment landscape. For example, the recent increase in retail participation in equity markets means more investors competing in the market, which, ultimately, should make the markets more efficient with periods of excessive price moves. However, increased market efficiency also means simple strategies that utilize valuation multiples or other metrics that can be easily accessed via online trading platforms or financial websites will create little to no excess returns on average. In fact, greater retail participation will mean that achieving excess returns consistently makes having a well-thought-out investment philosophy and rigorous process even more critical to add value over time.

Rocky Wang: We haven’t changed our process, but where we focus has shifted. For example, the inflation narrative and sentiment are getting hot these days, which trigger sometimes erratic rate movements. But we focus on fundamentals rather than headlines, so we are always trying to see the reality vs. perception.

Commodity prices are definitely in the news these days as they have been shooting up. Is that due to the shortage of the commodity production itself, or just a paucity of qualified drivers who can deliver the commodity from point A to B? Is it transitory or structural in nature? We care about the depth of the details like that and how to construct a portfolio which will sail through this noisy patch.

Brian McMahon: Our process of finding investments that offer both resilience and growth over time has remained consistent. If you look at our top holdings, you’ll see that we have both. We’re not loaded up with companies that have plus and minus 20 percent revenues, based on the cycle, but we do have companies that have tended to grow their revenue, cash flow and dividends over time. And that’s what the Income Builder portfolios are all about.

It’s a yield-starved world out there. So, we think that dividend payers are especially important and especially timely right now when some of the safest bonds and longer duration bonds look a little iffy.

How do ESG considerations help determine whether a company is “strong” or not?

Miguel Oleaga: ESG considerations provide investors with a toolkit for assessing whether a business is creating value for all its stakeholders, from employees to its community to shareholders. ESG also provides insight into analyzing a business’s go-forward prospects—a lens on whether that company is competing in expanding or contracting markets due to evolving environmental or regulatory considerations, for example.

Governance is another important set of issues where poor practice can lead to substantial corporate risk such as expensive legal actions and negative publicity. In our opinion, these insights about where risks lie are crucial in determining what the business is worth and providing effective stewardship of the investment.

Josh Rubin: Particularly in emerging markets where transparency might be lower or the regulatory oversight regime might not be as strong or as advanced as we see in developed markets, we do think that consideration of ESG characteristics are very important for every investment.

We are not using a negative overlay investment strategy—not avoiding, for example, carbon-producing or alcohol beverage companies, but we look at each of the relevant industry risk factors of ESG to be sure we are mitigating risk in our portfolios, particularly in an emerging markets context, which can mean higher volatility, abrupt shifts from value to growth and vice versa, a heavy retail component and less sophisticated investors.

Rocky Wang: We use ESG analysis to find what we believe are financially sustainable businesses. At the end of the day, active managers identify mispricings in the market to create a diversified portfolio that will outperform. ESG analysis is a powerful tool to help accomplish that goal.

Understanding the stage in a company’s lifecycle is important for both traditional fundamental and material ESG analysis. Emerging franchises often race to grow employee headcount, assets and processes to support early life hyper growth. As a company begins to mature it can leverage these resources to more fully capture profits from the competitive advantages it has established. But it can also take a deeper examination of its impact on society and work to align its business with benefits for the communities in which it operates.

 

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