| KEY FACTS
〉 Single strategy investment boutique
〉Mid-cap global equities exclusively investing in companies whose products or services have a positive impact and are a solution to a sustainability challenge
〉ESG integrated within bottom up stock selection to identify business and management quality
〉Engagement and stewardship integrated within a long-term average holding period.
〉Business certified as a B Corporation, with mission “to advance sustainability and create prosperity through positive impact investments”.
| George Latham – Managing Partner
WHEB Asset Management LLP, 7 Cavendish Square, London W1G 0PE
| What is your ESG approach key focus, priorities and beliefs briefly? (Optional: link to your company’s ESG policy or reports in the Resources section)
The firm’s single investment strategy and entire business is focused on sustainable investment and the integration of ESG issues into investment decision-making. Our multi-thematic strategy investing in companies providing ‘solutions to sustainability challenges’ was first designed and implemented during 2004 and 2005. Our corporate mission in support of this aim is to “advance sustainability and create prosperity through positive impact investments”. We seek to generate superior returns from global equities by investing in companies providing solutions to some of the most serious environmental and social challenges facing mankind over the coming decades.
| How do you integrate ESG in your value creation strategy, and what is the role of active ownership in responding to the relevant challenges?
Sustainability, positive impact and ESG are the core of our value creation strategy. The investment philosophy of the fund is built around sustainability, growth, quality and valuation. The fund is focused on nine sustainable investment themes; five environmental (cleaner energy, environmental services, resource efficiency, sustainable transport, and water management), and four social themes; (education, health, safety, and well-being). Individual stocks are selected through a ‘bottom-up’ stock-by-stock fundamental and rigorous research process.
In relation to active ownership: One notable feature of WHEB’s engagement is that the engagement is not done by a separate engagement team, but is undertaken by the investment team itself. Each member of the investment team is responsible for monitoring the performance of 12-13 companies. This includes all voting at company meetings as well as engagement with these companies. We believe that this is the best way of conducting engagement because it means that the engagement is done in the context of an holistic understanding of the business, its performance and wider commercial context. We think that this makes the engagement more credible and meaningful for management. Doing engagement this way also means that any insights that we generate through the engagement can be fed directly back into our overall view and investment conviction in the company. The investment analyst captures all of our engagement by writing up engagement notes that sit inside our investment research database. Our engagement policy is available on our website.
| How do you define what ESG-related KPIs or other relevant factors are going to affect the value of the company over the hold period?
The initial focus in constructing the investment universe is whether a company’s products or services provide solutions to sustainability challenges. We are looking to invest in companies whose products and services have a positive impact on the environment and / or society. Each portfolio holding must be under one of our nine sustainable investment themes; five environmental (cleaner energy, environmental services, resource efficiency, sustainable transport, and water management), and four social; (education, health, safety, and well-being).We have selected the nine themes because we believe they represent parts of the market that will grow more quickly than the market as a whole on account of underlying structural trends in the global economy.
In addition to this focus on the positive impact of products and services, we also believe that high quality companies are better able to capture the growth opportunities inherent in each investment theme. We believe that a company’s environmental, social and governance (ESG) profile is an important and under-appreciated indicator of quality. Our stock-level research combines ESG with traditional financial analysis at every stage of a methodical process revealing important information about a company’s growth potential and risk profile. Our analytical process covers five key areas: Market attractiveness, Competitive position, Value-chain analysis, Management quality and Growth strategy. ESG issues are factored into the assessment of each of these areas. Our focus is very much on ESG issues that we consider to be material to the company’s operations. We do not apply a standardised set of ESG criteria. Instead we consider the markets, operations and strategy of a company and focus our analysis on the ESG issues that have a material bearing on the company’s ability to create value.
We also believe that engaging with companies to challenge them on a range of ESG issues, and analysing their responses, further adds to our knowledge and understanding of a company.
| Have you committed to any climate risk-related initiatives, reporting frameworks or other industry relevant guidelines? If no, please briefly explain how you address relevant considerations.
Yes. We have committed to the Montreal Pledge which obliges WHEB to produce a carbon footprint of our investment strategy on an annual basis. We have done this for the past five years. The team at WHEB were the first in the industry to produce a carbon footprint in 2005.
We have also reported using the framework provided by the TCFD in our annual impact reports. The first TCFD report was included in our impact report in 2017 with the most recent in our impact report covering 2019.
We are also a very active member in the Institutional Investors Group on Climate Change (IIGCC) and have reported our investments in carbon reductions through their framework.
| Do you seek to discover investment opportunities associated with climate change?
Yes this is the central focus of our investment strategy. Five of the nine investment themes contained in the strategy focus on environmental issues, and all are connected with climate change. These include: Cleaner energy, Environmental services, Resource efficiency, Sustainable transport and Water management. Approximately 60% of the strategy is invested in these themes. In 2019 we estimate that the strategy’s holdings in companies in these themes helped to: avoid 320,000 tons CO2e, generate 300,000 MWh of renewable energy, recycle or recover 59,000 tons of waste, treate 4 billion litres of waste water and clean and distribute 7.5 billion litres of water.
| Do you measure your ESG-related effort impact or/and performance?
WHEB is recognized as a pioneer of impact measurement and reporting, developing the first Impact Calculator and this year the ‘Impact Engine’. We have developed unique transparency and governance for the Fund, along with comprehensive reporting and client engagement.
Being transparent and demonstrating the positive impact on society and the environment associated with an investment has a powerful potential to re-engage people with their savings, in a world where investing has become financialised and impenetrable for many. WHEB’s Impact Microsite enables intermediaries build stronger relationships with their clients. We also encourage consumers to navigate the site themselves and understand the impact associated with their money and how it is contributing towards achieving the UN’s Sustainable Development Goals, with an interactive tool that maps our holdings to specific SDGs.
The impact site also houses our annual Impact Reports, methodology documents and our Impact Calculator, which we update annually.
| What do you consider to be the key hindrances and challenges to efficient ESG-investing growth? How do you tackle them, and what are the missing preconditions for smooth implementation?
The key reason why most of the investment industry struggles to integrate ESG considerations into their investment decision making is that many investment managers’ focus is overly short term. It is only with a longer term more fundamental approach to investing that such considerations can become a meaningful consideration in stock selection and investment decision making.
| What do you suggest is the best way for asset owners to spot misleading ESG practices like ‘social-‘ and ‘green washing’?
First, look at the firm. Is the corporate culture aligned with a intentionality around ESG investing? Is this a core investment proposition, or a new product launched to ‘catch a wave’? WHEB is a single strategy investment boutique, demonstrating that we genuinely believe in our sustainable investment strategy. We are a certified B corporation, one of the toughest standards of business practice. And our business is organised around our mission “to advance sustainability and create prosperity through positive impact investments.”
We believe that transparency and good governance are critical to building investor confidence in our approach. The team and the portfolio are subjected to scrutiny by our independent investment advisory committee, who challenge every holding in the portfolio. And we publish the minutes of this meeting on our website here (as far as we are aware, no other manager does this).
Look at the holdings, we publish the full list of all our holdings on the website. It includes a short rationale by each stock. The holdings are usually a good guide as to whether the fund is managed in the way it is marketed.
There is increasingly sophisticated third-party analysis by consultants and rating agencies. In the UK 3D Investing has had a reputation for calling out some branded ESG funds with questionable holdings.
Is the investment process integrated? We tend to do our own ESG research and do not rely on third party ESG rating houses, because we think it is important and therefore not something to outsource. At WHEB we also have a single investment team, and the same analyst is looking at positive impact, ESG analysis, engagement and voting, because it is all an integrated part of the investment process.
| What are the differentiating factors of your approach that ESG-aware asset owners benefit most from?
WHEB’s experience. Our process was first designed and implemented in 2004/05. It has been challenged and evolved through different market conditions. We have learned and improved consistently through our experiences.
WHEB’s exclusive focus on positive impact as a source of long-term structural growth. The resulting portfolio is differentiated, with a focus on mid-cap global growth centred on social and environmental themes.
Our integrated approach to ESG, sustainability, impact and engagement within our investment process. Sustainability is built in as a source of returns, not bolted on.
The corporate backing. The whole business is set up to be managed around a single investment strategy, to ensure that our business philosophy is consistent with our investment philosophy.
Our experience and pioneering approach to impact reporting. We published the first impact report on a listed equity strategy in 2015 and have continued to innovate since. The impact microsite contains differentiated ways of communicating with clients, including the impact calculator and the impact engine.
WHEB Asset Management is authorised and regulated by the Financial Conduct Authority with Firm Reference Number 496413. The information presented here is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but WHEBAsset Management LLP does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. Reliance should not be placed on the views and information provided, when taking individual investment and/or strategic decisions. The price of shares in the FP WHEB Sustainability Fund may increase or decrease and you may not get back the amount originally invested. Past performance is not a guide to future returns.