Webinar: Investing in a better future: Through the lens of an equity investor
Endowus Insights

Leap into prosperity this CNY 💰     Get an $88 head start to growing your wealth.

Leap into prosperity this CNY 💰Get a $88 head start to growing your wealth.

Webinar: Investing in a better future: Through the lens of an equity investor

Updated
15
Jun 2022
published
25
Mar 2021
Webinar: Investing in a better future: Through the lens of an equity investor

Join Nathalie Wallace, Head of ESG Strategy and Development of Mirova US, Gavin Marriott CFA, Investment Director for Global and International Equities of Schroders, Samuel Rhee, Chief Investment Officer of Endowus, and Yulin Liu, Investment Lead of Endowus, as they dive into sustainable investing in more detail and share their insights and news on ESG investing.

0:00 Introduction

5:18 Introduction to Endowus' ESG Portfolio

10:24 Introduction to Mirova Global Sustainable Equity Fund

15:15 Introduction to Schroders Sustainable Equity Fund

24:26 Why & How Mirova is different from other ESG Funds

29:19 Why & How Schroders is different from other ESG Funds

32:15 How has the development of ESG changed over the years for the industry and your firm? Is ESG more of a future or a fad?

41:39 How do fund managers incorporate ESG metrics into investment decisions? What is your opinion on third party ESG data and metrics?

47:35 What are the limitations of passive ESG investing? Are the indexes good enough? Is there a way to do passive better?

51:30 Why sustainable and ESG investing has to be active & QnA

55:43 QnA Is there any research supporting the idea that incorporating ESG metrics in the investment strategy leads to better returns?

58:18 QnA: Does ESG investing go against certain investing principles (e.g. Diversification)?

1:02:39 Final thoughts & conclusions on the ESG investing space globally

How Mirova approaches ESG investing and ESG fund solutions (24:26)

Nathalie: Mirova's philosophy is anchored on two core beliefs which is: 1) The world's finance is key to transition to a more sustainable global economy and society & 2) Allocating capital with this in mind is a critical factor to delivering superior long-term risk adjusted returns. This is a coherent & comprehensive approach in the way of the impact of finance but also the impact on the environment and social consideration on capital.

We do this intentionally, as a fiduciary to our clients. In addition we believe sustainable investing is also about active ownership, so we have a very strong stewardship program and advocacy program where we engage with corporates. We vote along the line of understanding two key elements which is governance and disclosure of sustainability KPIs and deliverance - we want companies to deliver tangible outcomes for all stakeholders. Looking at a company's impact and input from all stakeholders is something that differentiates true sustainable investors from pure ESG integration only.

Transparency is paramount for Mirova. It is becoming a very big issue with regulators in Europe to avoid greenwashing but also in the U.S. The SEC has announced an enforcement task force to check how sustainable products are designed and what they communicate to clients to avoid greenwashing. So we build an impact reporting platform that is aligned with the most stringent European regulation.

How has the ESG space developed overtime for your firm and the industry? Do you think ESG is just a green bubble or a future standard? (32:15)

Nathalie: Climate is not a segment of the economy or a sector you need to allocate to. Climate is impacting all of consumer life, through the change of consumer behaviour, the change of companies looking to incorporate the latest technology and cheaper energy production tools, and regulation. The climate objective to getting to net zero is turning into a climate race where in order for a country to remain competitive in the 21st century, it needs to embark on the transition to sustainability.

It is not a fad. It developed from tools and methods to implement ESG integration to a better understanding of how to assess climate risk both transition and physical impact. Today, we have a better understanding on which technology and innovation will be leading our way to a low carbon economy, and gaining knowledge on how companies have an impact on society.

Gavin: I think the importance of these long-term structural trends on climate change and mitigation is one of those things you should not underestimate the power of. On a 10-year view, the market capitalisation of companies that are contributing to efforts to mitigate climate change will be a multiple of what you see today. Admittedly in the near term, maybe the market has moved a bit ahead of itself in certain areas. For example, where people have gotten particularly excited around renewable energy and hydrogen as an alternative energy source. But actually if you extend your time horizon and take a slightly longer term view, the valuation of those businesses can easily be justified, given the size and scale of the change that needs to happen.

The reality is that the world has moved at quite a slow pace in terms of the necessary transition and we're now recognising the urgency. The speed and pace of change is going to increase exponentially in the ESG space over the next few years because it has to otherwise we'll have bigger problems. I think that is a tremendous opportunity for investors.

I think the availability of data and company disclosure has increased exponentially which has changed our approach to ESG investing. Companies now have a better understanding of what investors are looking for. Being able to quantify these impacts is a really important part of the way that our business has changed. We have become much more scientific and systematic in the way we evaluate ESG and sustainability factors.

QnA: Is there any research supporting the idea that incorporating ESG metrics in the investment strategy leads to better returns? (55:43)

Nathalie: 10 years ago we had a lot of academic research and now the evidence is becoming a bit more practical in terms of long-term performance of those funds. Risk adjusted returns is about diminishing volatility, diminishing drawdowns and compounding benefits of being positioned in the right trends quarter after quarter. The idea is to really position this portfolio with low turnover and a very long-term approach. Over time we've experienced an up to down capture ratio that is pretty good given that we've taken this risk into account which lowers volatility on the downside and increases ESG opportunities on the upside.

There was a study done by MSCI which showed over a 10 year period that a company with a high ESG profile outperformed. The firm was mainly driven by their growth and actually delivered faster EPS growth.

QnA: Does ESG investing go against certain investing principles (e.g. Diversification)? (58:18)

Gavin: There is a risk that is prudent to diversification principles can be slightly undermined by pursuing a very narrow approach and I reference that in the context of these fund manager groups who perhaps use third party analysis as the primary mechanism for integrating ESG. I think the structural trends Natalie referenced earlier are going to reshape the world, they are very broad and actually span a majority of industries in the economy in many ways.

It is definitely possible to achieve a very well diversified portfolio geographically, sectorally and from an industry perspective while applying ESG principles. I don't think those risks necessarily apply except when you start to define narrower themes. For example, a focus purely on water supply and distribution, you will come up against the risk of potentially being more vulnerable and less diversified. That is not what we are doing at Schroders nor at Mirova. Our funds are very well diversified across a number of drivers.

Get a head start on financial literacy & general investing by watching our Investing 101 with Endowus 4-part series here.

<divider><divider>
Investment involves risk. Past performance is not necessarily a guide to future performance or returns. The value of investments and the income from them can go down as well as up, and you may not get the full amount you invested. Rates of exchange may cause the value of investments to go up or down. Individual stock performance does not represent the return of a fund.

Any forward-looking statements, prediction, projection or forecast on the economy, stock market, bond market or economic trends of the markets contained in this material are subject to market influences and contingent upon matters outside the control of Endow.us Pte. Ltd (“Endowus”) and therefore may not be realised in the future. Further, any opinion or estimate is made on a general basis and subject to change without notice. In presenting the information above, none of Endowus Pte. Ltd., its affiliates, directors, employees, representatives or agents have given any consideration to, nor have made any investigation of the objective, financial situation or particular need of any user, reader, any specific person or group of persons. Therefore, no representation is made as to the completeness and adequacy of the information to make an informed decision. You should carefully consider (i) whether any investment views and products/ services are appropriate in view of your investment experience, objectives, financial resources and relevant circumstances. You may also wish to seek financial advice through a financial advisor or the Endowus platform and independent legal, accounting, regulatory or tax advice, as appropriate.

Investment into collective investment schemes: Please refer to respective funds’ prospectuses for details of the funds, their related fees, charges and risk factors, The listing of units of the fund on a stock exchange does not guarantee a liquid market for the units. Before making an investment decision, you are reminded to refer to the relevant prospectus for specific risk considerations.

For Cash Smart Secure, Cash Smart Enhanced, Cash Smart Ultra: It is not a bank deposit and not capital guaranteed, and is subject to investment risks, including the possible loss of the principal amount invested. Investment products are not insured products under the provisions of the Deposit Insurance and Policy Owners Protection Schemes Act 2011 of Singapore and are not eligible for deposit insurance coverage under the Deposit Insurance Scheme. Interest rates are indicative and subject to change at any time.

Product Risk Rating: Please note that any product risk rating (the “PRR”) provided by us is an internal rating assigned based on our product risk assessment model, and is for your reference only. The PRR is subject to change from time to time. The PRR does not take into account your individual circumstances, objectives or needs and should not be regarded as advice or recommendation to purchase, hold or sell any fund or make any other investment decisions. Accordingly, you should not solely rely on the PRR in making your investment decision in the relevant Fund.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Disclaimers
+
More on this Tag
Webinar: Investing in a better future: Through the lens of an equity investor

Table of Contents