Pengana WHEB Sustainable Impact Fund

We live in a rapidly changing world. Successful thematic investing is about understanding these changes and investing in those parts of the market that benefit from them, while avoiding those that suffer.

WHEB have identified four ‘mega-trends’ that are exerting a powerful influence over the development of the global economy:

WHEB believe that these trends will persist for decades and are creating real market opportunities for companies providing solutions to mitigate or ease the challenges that these forces create. WHEB also believe that companies which create positive social and/or environmental impacts, through their products and services and the manner in which they conduct their business, will ultimately enjoy structurally growing markets and will see resilient profitability.

WHEB have selected nine investment themes which are used to focus their attention on companies that provide solutions to the sustainability challenges posed by these mega-trends and therefore have the potential to significantly grow their earnings.

The Fund’s investment team builds and maintains a universe of potential investment opportunities which have been classified as companies providing solutions to sustainability challenges and categorised within WHEB’s nine sustainable investment themes – five of these are environmental (cleaner energy, environmental services, resource efficiency, sustainable transport and water management) and four are social (education, health, safety and well-being). To qualify for WHEB’s universe, companies need to have a market capitalisation of at least US$200m, and at least one third of profits or revenues directly exposed to WHEB’s themes. This universe was first established in 2005, is reviewed on an ongoing basis and has since evolved to include more than 1,000 companies.

From WHEB’s universe, the investment team conduct an in-depth review of new candidates for inclusion in the portfolio. Candidate companies are selected using quantitative screens to evaluate quality, or following thematic research carried out by the team. Potential investments are then evaluated using a systematic approach by building a profile on each company which includes an evaluation of its financial characteristics and quality, integrated with an assessment of the ESG opportunities and threats to the business. This forms a basis on which to evaluate the investment case for each portfolio candidate.

Position sizes are usually between 0.5% and 2.5% of the portfolio, and all members of the investment team are involved in the monitoring and analysis of the total portfolio. The expected holding period is between 3 and 6 years. The investment process has a disciplined approach to valuation. Positions are usually sold if they are no longer considered to be attractively valued, or if corporate quality or the growth opportunity has changed materially.

The expected outcome of the investment process is a portfolio which is exposed to structurally growing markets, through companies which have positive social and environmental impacts underpinning this growth. It will have materially different exposures when compared with broad global equity indices, and is expected to be biased to mid-cap and higher quality companies.

Sustainability & Positive Screening: The Fund invests in a diversified global portfolio of companies with activities identified by WHEB as providing solutions to the challenges of sustainability via nine sustainable investment themes – five of these are environmental (cleaner energy, environmental services, resource efficiency, sustainable transport and water management) and four are social (education, health, safety and well-being).

Impact Investing: WHEB produces an Annual Impact Report which measures, calculates and reports on the extent of positive social and environmental impact from investing in the strategy.

ESG Integration: WHEB’s approach to ESG issues in their investment process is to consider these issues at all stages of analysis and as an integral part of an assessment of the quality of the business overall.