An introduction to SMaRT Food

Transcription

1 An introduction to SMaRT Food Geneva Forum for Sustainable Investment Michael Landymore

2 2 Impax Asset Management A long-standing BNPP Investment Partner KEY MESSAGES ASSETS UNDER MANAGEMENT AND ADVICE Dedicated to environmental markets since 1998 Global institutional client base Established sector thought leaders 28m Sustainable Property 424m Renewable Energy 423m Infrastructure Renewable Energy Infrastructure 4.5bn AUM 1 4bn Listed Equities Offices in London, Hong Kong, New York, and Portland OR 30 experienced investment team members WINNER OF NUMEROUS AWARDS 2015 UNPRI assessment: A+ Policies, Processes, Practices, and Governance 1 Assets under advice represent 3% of total AUM as at 31 March 2016.

3 3 Investment strategies Global All cap Strategy AuM Strategy launched BNPP IP Fund Fund AuM Specialists Universe: 1100 companies Universe Size: $1.7 T market cap P Small-Mid 1,458m Mar 2002 Parvest Environmental Opportunities 156m Leaders Universe: 1500 companies Universe Size: $4.1 T market cap P P 820m Mar 2008 Parvest Global Environment 351m Water Universe: 260 companies Universe Size: $0.8 T market cap P P 1,648m Jan 2009 BNP Paribas Aqua BNP Paribas L1 Equity World Aqua Parvest Aqua 1,080m 125m Food Universe: 300 companies Universe Size: $2.0 T market cap P P 84m April 2015 Parvest SMaRT Food 81m Specialists Leaders Water strategies have received Source: Impax Asset Management, as at 31 March Investors should ensure that they are fully informed about the sub-funds, classes and sub-classes of shares that are authorized to be marketed in their country of residence and the constraints applicable in each of these countries. The investments in the above funds are subject to market fluctuations and the risks inherent in investments in securities. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay.

4 4 Investment opportunity Investing in companies that are addressing environmental issues created by ever increasing global demand for food

5 5 We favour companies active in: Reducing and recycling waste Water management Anticipating Regulatory change Reducing CO 2 emissions Using fewer and better inputs Reducing land erosion Anticipating changing consumer demands

6 6 INVESTMENT TEAM AND PROCESS

7 7 Experienced, multidisciplinary investment team Average industry experience: 18 years; sector: 11 years Portfolio Construction Team Chief Executive Investment Risk and Process Michael Landymore Co-PM Bruce Jenkyn-Jones Co-PM Agne Rackauskaite Ian Simm Simon Higgo Supported by Portfolio Managers and Analysts Sustainability & ESG Hubert Aarts Jon Forster David Li 1 Kirsteen Morrison David Winborne Trading Lisa Beauvilain Justin Winter Oscar Yang 1 Sid Jha Fotis Chatzimichalakis Dean Palin 1 Based in Hong Kong. Source: Impax as at March 2016

8 8 Robust and structured screening and selection FOOD UNIVERSE 20% revenue >1000 companies IDENTIFY SOLUTION PROVIDERS Companies across the food value chain that are addressing the environmental & sustainability issues created by ever increasing global demand for food. ANALYSE SUSTAINABILITY RISKS Sustainability Framework identifies solution providers that have: 1 Sustainable Activities WHAT the company does 2 Sustainable Processes HOW the company does it AVOID CONTROVERSIES Sustainability Framework excludes or limits companies with exposure to controversial industries/products following a precautionary principle. INVESTABLE UNIVERSE c300 companies

9 9 Food sustainability framework - introduction Our Sustainability Framework identifies food companies that have 1 : Sustainable business activities WHAT the company does Sustainable business processes HOW the company does it We seek investment in environmental solution providers and sustainability leaders within the food sector 2 Minimised food waste Sustainable logistics Sustainable Food Resource efficiency Materials recycling Energy efficiency Water solutions Anticipating consumer demand Food safety Efficient machinery Reduced CO 2 emissions Healthy and natural foods 1 The Sustainability Framework is underpinned by a detailed Sustainability in Food policy document that describes which business activities and processes we seek in sustainable food companies and which ones we would exclude. We have also created an Activity Database which is reviewed every 6 months detailing the % of revenue from business activities of concern and those that we seek. 2 Some smaller companies may not yet have developed strong sustainability policies and processes, we can accept it, if a company has credible intentions of developing these over time, but it must be active within a Sustainable Food Opportunity area and it must have a complete lack of previous ESG-problems and controversies

10 10 Risks and opportunities in food investment EMERGING RISKS AND TRENDS Drought, flooding, climate change FOOD SECTORS AT RISK (EXCLUDED OR LIMITED) Palm oil, first generation biofuels, F&A commodity traders SUSTAINABLE FOOD SECTORS BENEFITED Sustainable growers & inputs, efficient irrigation and machinery, sustainable logistics, sustainable food producers / retailers Severe pollution, environmental degradation Inorganic fertilisers, GMOs, palm oil Sustainable growers & inputs, efficient irrigation and machinery, sustainable logistics, sustainable food producers / retailers Resource scarcity, food waste Inorganic fertilisers, first generation biofuels Sustainable growers & inputs, efficient machinery, logistics, food safety, sustainable packaging Tightening regulation (fat/sugar taxes, chemicals regulation, food safety standards) Evolving consumer demands Junk food, fizzy drinks, toxic food chemicals, first generation biofuels, inorganic fertilisers Junk food, fizzy drinks, GMOs, toxic food chemicals, artificial substances Healthy, natural foods/retailers, food safety, nontoxic foods/packaging, sustainable food companies Organic, natural, healthy foods/retailers, non-toxic, non-artificial foods/packaging, food safety and traceability, sustainable, responsible food companies

11 11 THE INVESTMENT UNIVERSE

12 12 Investing across the value chain Growers & inputs Technology & logistics Basic foods & ingredients Food safety Sustainable packaging Value added foods Distributors

13 13 Stock examples Eurofins Food Safety, France International group of laboratories, providing food testing and support services. Cranswick Value Added Foods, UK Leading producer of premium natural and organic meat, poultry and non-meat foods. + + Tests for toxins in food. Works to prevent excess use of nonallowed chemicals and minimise food waste Operations have a recycling focus. Developing an Environmental Management System (EMS) Leader in food safety testing + + Action plan to reduce carbon footprint by 30% and water use by 20% by 2020 Zero GMO policy for animal feeds Leader in high quality meats

14 14 Stock examples Whole Foods Market Distributors, US Supermarket chain specialising in organic, natural and responsibly sourced food. Stores in the US, Canada, and the UK. + + Renewable energy in refrigeration systems, and energy efficient processes Focused on foods with nutritional and ecologic value Leader in organic and natural food retailing TOMRA Sustainable Packaging, Norway Develops, manufactures, and markets machines used to recycle beverage containers. Active in Europe and North and South America. + + Through its reverse vending machines TOMRA captures and recycles 35bn containers annually. This is equivalent to 2m car CO² emissions per year. Committed to reduce its GHG emissions by 25% over next two years. Leader in reverse vending machines

15 15 High conviction strategy Concentrated long only global portfolio of stocks Diversified portfolio with lower beta and resilient earnings profile Focus on companies with strong, consistent ROIC¹ or potential for higher returns Low turnover: 20-40% p.a. expected ¹Return On Invested Capital

16 16 Why SMaRT Food? Long-term drivers Unique sustainability approach Experienced investment team Investing in companies addressing environmental issues created by growing global demand for food. Framework identifies food companies that have sustainable activities and processes whilst excluding those with major controversies. Lead portfolio manager, Michael Landymore, has 35 years experience of the food and beverage industry.

17 17 APPENDIX

18 18 SMaRT Food Team Michael Landymore Senior Portfolio Manager Bruce Jenkyn-Jones Co-Head of Listed Equities Lisa Beauvilain Head of Sustainability & ESG Agne Rackauskaite Research Analyst Michael is focused on industry analysis, stock screening, company analysis and portfolio construction. Michael brings with him 35 years' experience advising investors and companies in the food and beverage industry. He was part of the highly rated food equity analysts team at Investec Securities/Henderson Crosthwaite, subsequently with Rabobank corporate finance, and most recently the manager of the Léman Focus Global Food & Agriculture Fund at Helvetica Wealth Management Partners in Geneva. Michael has a degree in Economics from King's College, Cambridge, and is a Chartered Fellow of the Chartered Securities and Investments Institute, London. Bruce is a Managing Director and Co- Head of Listed Equities along with Hubert Aarts. Together they are responsible for the development of the investment process, research and team. Bruce has an active role in the day to day management of all Impax listed equity portfolios and serves as co-portfolio Manager for our Specialists, Leaders, and Water strategies. Bruce joined Impax in 1999 where he worked initially on venture capital investments before developing the listed equity business. Before joining Impax, Bruce worked as a utilities analyst at Bankers Trust and as an environmental consultant for Environmental Resources Management (ERM). Bruce has an MBA from IESE (Barcelona), an MSc in Environmental Technology from Imperial College and a degree in Chemistry from Oxford. Lisa joined Impax in 2010 and is responsible for environmental policy and legislation investment research and non-financial or Environment, Social and Governance (ESG) analysis. She started working in the financial industry in 1999 and previously worked as Executive Director in the Investment Management Division of Goldman Sachs International. Lisa has also worked as an independent consultant focusing on environmental policy research and analysis. She is a Trustee at the International Institute of Environment and Development ("IIED"). Lisa has an MSc in Environment and Development from the London School of Economics and an MSc in Finance from the Hanken School of Economics in Finland. Agne joined Impax after graduating from the University of Warwick with a BSc in Economics. Agne focuses on researching the investment universe for all listed equity strategies and providing support to the portfolio management process for the Food and Agriculture strategy. During this time, Agne also completed work experience for The Bank of New York Mellon and AMP Capital Investors.

19 19 ESG research: a risk management tool IMPAX S INTEGRATED ESG PROCESS IMPAX ESG RATING SYSTEM Category Action Excellent Investable Proprietary company level ESG 1 research Incorporate into company 10-steps analysis Continuous monitoring engagement Good Average Investable Investable Fair Position size capped Excluded Not investable GOVERNANCE PARAMETERS: driven by country-level rules and codes Board structure Independence, diversity, relevance of backgrounds/experience, tenures Shareholders rights Share structure, voting rights, take-over defences Remuneration Performance alignment to remuneration Ownership structure Dominant owners, complex ownership structures Internal controls Disclosure transparency, connected transactions, accounting & proxy practices ENVIRONMENTAL/SOCIAL PARAMETERS: materiality defined at sector-level Environmental policies, processes and disclosures Management and reporting of emissions, water, energy, waste, and other metrics Social policies, processes and disclosures Management of issues such as labor, safety, health, and community relations Source: Impax as at 31 March For illustrative purposes only. 1 Environmental Social and Governance

20 20 Food sustainability framework Exclusions and risk management Exclusions based on activity WHAT : Exclusions of companies with poor processes HOW : Full exclusion: Producers and developers of GMOs Food & Agri commodities traders Producers of first generation biofuels Producers of inorganic fertilisers Producers of palm oil Limited at 5% of revenue: Tobacco Alcoholic beverages Production of aspartame and artificial sweeteners Production of Bisphenol A (BPA) Production of artificial food colourings or dyes Limited at 20% of revenue: Highly processed and low nutrition foods ( junk food ) Carbonated soft drinks and sodas Land management and local communities Bio-diversity and land use Labour management and health & safety Supply chain management (responsible sourcing) Animal welfare Product safety and marketing practices Chemical safety management Toxic emissions and waste Water management Carbon emissions Companies with major controversies within these areas will be excluded from the Sustainable Universe, following the Precautionary Principle In the full Sustainability Framework all these activities and risks are described and the policies and processes required are detailed.

21 21 STRATEGY CHARACTERISTICS

22 22 Parvest SMaRT Food (as at 31/03/2016) TOP 10 HOLDINGS Stock Sub-sector Country % Darling Ingredients Inc. Food Safety United States 3.7 Royal DSM NV Basic Foods & Ingredients Netherlands 3.5 TOMRA Systems ASA Technology & Logistics Norway 3.4 GNC Holdings, Inc. Distributors United States 3.3 Sonoco Products Company Sustainable Packaging United States 3.2 Tiger Brands Limited Value Added Foods South Africa 3.2 United Natural Foods, Inc. Distributors United States 3.2 Leroy Seafood Group Growers & Inputs Norway 3.2 Jeronimo Martins Distributors Portugal 3.1 Whole Foods Market Distributors United States 3.1 Total allocation to top 10 holdings 32.9 CHARACTERISTICS Portfolio Universe MSCI ACWI Market Cap - Wgt Average ( bn) Source: FactSet, data as at 31 March 2016.

23 23 Fund snapshot (as at 31/03/2016) GEOGRAPHIC EXPOSURE 1 COMPANY SIZE Asia Pacific 6% Cash 5% < 1bn 6% Cash 5% ROW 3% Europe 49% North America 37% 1bn - 5bn 51% Wgt. Average Market cap: 13.5bn > 5bn 38% SECTOR EXPOSURE FORWARD 12 MONTHS PRICE TO EARNINGS RATIO Basic Foods & Ingredients 6% Cash 5% >20x 19% Cash 5% Distributors 19% Food Safety 11% Value Added Food 14% Technology & Logistics 17% Wgt. Average P/E Ratio: 15.6x <15x-20x 39% <15x 37% Growers & Inputs 11% Sustainable Packaging 17% Source: FactSet, data as at 31 March Geographic allocation by country of listing, MSCI classification

24 24 Characteristics Legal Form Legal Name ISIN SRRI Subfund of the Parvest UCITS / SICAV Parvest SMaRT Food Cap: LU Dis: LU Instit: LU The higher the risk, the longer the recommended investment horizon Domicile Registered Luxembourg Inception Date 2015/04/15 Benchmark Classification Minimum Investment Horizon Base Currency Risk Class (1-7) 6 Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Irlande, Italy, Jersey, Liechtenstein, Luxembourg, Netherlands, Norway, Portugal, Slovakia, Spain, Sweden, Switzerland, United Kingdom MSCI AC World (NR) Equities Worldwide All caps 5 years minimum Euro Management Fees Classic: 1.75% Institutional: 0.70% Subscription Fee Classic: 3% Institutional: 0% Redemption Fee Ongoing Charges Management Company Delegated Management Company Classic:0% Institutional:0% Classic:2.23% Institutional:1.06% BNP Paribas Investment Partners, Luxembourg Impax Asset Management Ltd.

25 25 Risk factors Investments are subject to market fluctuations and other risks inherent to investing in securities. The value of investments and the income they generate may rise or fall and it is possible that investors may not recover their initial investment. The higher the risk, the longer the recommended investment horizon. The risks associated with investments in equities include significant fluctuations in prices, mainly attributable to negative news about the issuer or the market. The funds may be exposed to other risks defined below: Exposure to emerging markets : Investing in emerging markets may be subject to markets drops that are more severe than on the more established international markets. Liquidity risk: this risk arises from the difficulty of selling a stock at fair value within a reasonable amount of time due to a lack of buyers.

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