Environmental investing Impact of the COVID-19 …...2020/05/19 · Bio&Geo Coal - Gen Coal CCS -...

Environmental investing – Impact of the COVID-19 pandemic

Deirdre Cooper

Co-portfolio manager

Global Environment Strategy

May 2020

2

Important information

Institutional Only

Inst

itutio

nal

All information and opinions provided are of a general nature and are not intended to address the circumstances of any particular individual or entity. We are not acting and do not purport to act in any way as an advisor or in a fiduciary capacity. No one should act upon such information or opinion without appropriate professional advice after a thorough examination of a particular situation. This is not a recommendation to buy, sell or hold any particular security.The value of this investment, and any income generated from it, can go down as well as up and will be affected by changes in interest rates, exchange rates, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which it invests. The Fund’s investment objective will not necessarily be achieved and there is no guarantee that these investments will make profits; losses may be made. This Fund may not be appropriate for investors who plan to withdraw their money within the short to medium term. Performance shown is that of the Fund and individual investor’s performance may differ as a result of initial fees, actual investment date, date of any subsequent reinvestment and any dividend withholding tax. All the information contained in this communication is believed to be reliable but may be inaccurate or incomplete. Any opinions stated are honestly held but are not guaranteed and should not be relied upon. This is not a buy, sell or hold recommendation for any particular security. It is not an invitation to make an investment nor does it constitute an offer for sale. Before making an investment, please read the Prospectus and Key Investor Information Document, which sets out the fund specific risks and is available from Ninety One SA. The portfolio may change significantly over a short period of time. The Fund is traded at the ruling price and can engage in borrowing and scrip lending and may be closed in order to be managed in accordance with the mandate. The fund may borrow up to 10% of its market value to bridge insufficient liquidity. The Fund is a sub-fund of the Investec Global Strategy Fund, which is a UCITS organised as a Société d’Investissement à Capital Variable under the law of Luxembourg. For further information on the Fund including application forms and a schedule of fees and commissions, please contact Ninety One SA. Fund prices and English language copies of the Prospectus, Report & Accounts and Articles of Incorporation and local language copies of the Key Investor Information Documents may be obtained from our website and free of charge from the following country specific contacts: Luxembourg – Investec Global Strategy Fund, 49 avenue J.F. Kennedy, L-1855 Luxembourg. In South Africa, Ninety One SA is an authorised financial services provider. The sub-funds offered for public sale in South Africa are approved under the South African Collective Investment Schemes Control Act.Investment Team: There is no assurance that the persons referenced herein will continue to be involved with investing for this Fund, or that other persons not identified herein will become involved with investing assets for the Manager or assets of the Fund at any time without notice. Investment Process: Any description or information regarding investment process or strategies is provided for illustrative purposes only, may not be fully indicative of any present or future investments and may be changed at the discretion of the manager without notice. References to specific investments, strategies or investment vehicles are for illustrative purposes only and should not be relied upon as a recommendation to purchase or sell such investments or to engage in any particular strategy. Portfolio data is expected to change and there is no assurance that the actual portfolio will remain as described herein. There is no assurance that the investments presented will be available in the future at the levels presented, with the same characteristics or be available at all. Past performance is no guarantee of future results and has no bearing upon the ability of Manager to construct the illustrative portfolio and implement its investment strategy or investment objective. In the event that specific funds are mentioned please refer to the relevant minimum disclosure document in order to obtain all the necessary information in regard to that fund. This presentation is the copyright of Ninety One and its contents may not be re-used without Ninety One’s prior permission.”

3

Global Environment Fund

Performance

Past performance is not a reliable indicator of future results, losses may be made.Source: Morningstar, dates to 30 April 2020, performance figures above are based on lump sum investment, NAV based, inclusive of all annual management fees but excluding any initial charges, gross income reinvested, in USD. Inception date of the strategy: 01 September 2018. Simulated inception date for the Fund. Highest and Lowest returns are those achieved during any rolling 12 months since inception: Feb-20 14.7% and Mar-20 -6.4% Benchmark 1: MSCI AC World Index NDR. For further information on indices please see the Important Information section

USD Global Environment Strategy GLBLENVIRON

Performance in USD

Review required.

Please review our previous comment on this slide Steve Southwood has send Mahrukh a revised version

FYI

-1.7%

4.4%

-5.0%

-0.4%

1 Year Since inceptionGlobal Environment Fund I Acc USDMSCI ACWI NR USD

ImplementationGlobal Environment philosophy and process

ResultsHigh conviction, attractively positioned portfolio

Focus on Returns and Impact

Ninety One

Impact of Covid-19 and market outlook

Past performance is not a reliable indicator of future results, losses may be made.

Market Review

Global, independent listed asset manager

5

Responsible Investing is at the core of Ninety One

Active stewards of capital with strong focus on sustainability

Begins deploying developmental capital across Africa through private equity and credit funds

Launches systematic and transparent proxy voting programme

Sets up ESG Team

2016 2017 20182014 20152009 2010 2011 20122008 2013 2019

Adopts Global Stewardship Policy

Starts integrating ESG across investment teams

Publishes commitment

to climate change action

Deploys developmental capital via infrastructure and direct real estate funds Launches Global

Environment Strategy

Launches UK Sustainable

Equity pooled vehicle

LaunchesGlobal Environmentpooled vehicle

Launches public market sustainable investing solutions

Starts integrating sustainabilityfactors across all investment strategies

Launches private market sustainable investing solutions




Ninety One



Market Review


7

Accelerated investment needed to stay within 2°C

2100 Warming projections

Forecasts are inherently limited and are not a reliable indicator of future results.Source: Climate Action Tracker Project, 2017, *UN IPCC estimates, 2016 – 2035, thttps://www.climate-kic.org/news/no-more-excuses-financing-1-5c.

Glo

bal g

reen

hous

e ga

s em

issi

ons

GtC

O2e

/Yea

r

Historical

No Action =c.~5°C rise by 2100

Current policies c. 3.4 °C

1.5 °C by 2030 needs~ $2.4 trillion p.aInvestment (2016-2035)*

“The challenges currently posed by climate change pale in significance compared with whatmight come. . . the more we invest with foresight; the less we will regret in hindsight” Mark Carney, Governor of the Bank of England

8

Impact of COVID-19 lockdown on emissions

Average concentrations of atmospheric nitrogen dioxide

Source: NASA, www.scitechdaily.com

Average over March: 2015 to 2019 March 2020

9

Three drivers of decarbonization

Long term structural trends may slow for now but will pick up pace as world emerges from crisis

Regulatory drivers

‒ European “Green Deal” delayed but commitment remains

‒ Not a priority for US currently but may be boosted in future stimulus and/or change in administration

‒ China continues to support sector and could see significant acceleration in policy

Technology drivers

‒ Increases competitive advantage for leaders as smaller players struggle to pay for R&D

Consumer behavioural change

‒ Early days but possible shift towards more sustainable consumer products

10

Large quantum of stimulus – but does this benefit energy transition?

Summary of key stimulus measures to date (% of GDP)

Source: Bloomberg. UBS, Federal Reserve websites and press releases, ECB website and press releases, BoE website and press releases, BoJ website and press releases, as at 30 April 2020

34.2% 33.1%

15.2%

4.2%3.7% (total)

13.0%

23.5%

22.1%

20.4%

0%

10%

20%

30%

40%

50%

60%

US Eurozone UK Japan China

Monetary Fiscal

11

Energy prices have fallen

Source: Bloomberg, 11 May 2020, Financial Times 12 May 2020

-60

-40

-20

0

20

40

60

80Generic 1st crude oil contract, WTI: year-to-date price

“As crude prices have plunged, renewable energy projects have been able to attract funding, suggesting that the pandemic has weakened the investment case for oil”

Bernard Looney, CEO BP

12

2°C Scenario

Global electricity generation and EVs

Forecasts are inherently limited and are not a reliable indicator of future results.Source: Ninety One and Dr Daniel Quiggin, 31 March 2019.

Generation EV Sales (LH) & Fleet Size (RH)

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

200

0

200

4

200

8

2012

2016

2020

2024

2028

2032

2036

2040

2044

2048

Supp

ly (T

HW/y

r)

Nuclear HydroSolar WindBio&Geo Coal - GenCoal CCS - Gen Gas - GenGas CCS - Gen Oil - GenBatts - Supply

-

100

200

300

400

500

600

700

-

20

40

60

80

100

120

140

200

0

200

4

200

8

2012

2016

2020

2024

2028

2032

2036

2040

2044

2048

Flee

t Siz

e (m

illion

s)

Sale

s (m

illion

s)

BEV Sales PHEV SalesBEV Fleet PHEV Fleet

+600 GW of solar and wind capacity& 100mn EVs per annum by 2050

ImplementationRecap: Global Environment philosophy and process



Ninety One



Market Review


14

Investment opportunities throughout the value chain

For further information on investment process, please see the Important Information section.

Two stage screen:

1. Companies with at least 50% of their revenue from the sectors above

2. Quantified carbon avoided

Renewable Energy

Solar Wind

Clean Power Utilities and Smart Grids / Networks

ElectrificationElectric Vehicles

BatteriesAutonomous Vehicles

Energy EfficiencyWater and Land

Efficiency

Resource Efficiency

15

Consumer Discretionary

Consumer StaplesEnergy

Industrials

Information Technology

Materials

Real Estate

Utilities

Health CareLarge Cap (>$10bn)

Mid Cap ($2bn -$10bn)

Small Cap (<$2bn)

China

EuropeUnited States

Japan

Other

Universe of Undiscovered Companies

Over 700 Companies, $6.5trl Market Cap, Quantified Carbon Avoided

Source: Ninety One, March 2020. For further information on indices and investment process, please see the Important Information section.

Market Cap# of companies

Region# of companies

Industry# of companies

MSCI ACWI universe

Carbon-avoided universe

Carbon avoided

7%

1/3

1/3 of the carbon-avoided universe is included in ACWI and it accounts for only 7% of ACWI’s weight




Ninety One



Market Review


17

United States36.9%

Europe33.3%

China15.3%

Other14.4%Clean Power

24.8%

Electric Vehicles16.1%

Water & Land Efficiency14.4%

Energy Efficiency11.3%

Wind9.4%

Solar9.2%

Autonomous Vehicles7.7%

Smart grids/networks4.7%

Cash2.3%

Large Cap (>$10bn)65.0%

Mid Cap ($2bn - $10bn)26.8%

Small Cap (<$2bn)5.9%

Cash2.3%


Diversified by sub-sector, technology and geography

This portfolio may change significantly over a short period of time.Source: Ninety One 31 March 2020. For further information investment process, please see the Important Information section.

ThematicBreakdown Region

MarketCap

Updated: monthly

18


Top 10 stock positions

Source: Ninety One, 31 March 2020.The portfolio may change significantly over a short space of time. This is not a buy, sell or hold recommendation for any particular security. For further information on specific portfolio names, please see the Important Information section.Based on a pooled vehicle within the strategy and is not available at the composite level.

Name Opportunity Description %

Renewable energy Largest owner of renewable energy in the United States and the owner of one of the lowest carbon utilities in the US, Florida Power and Light 7.9

Resource Efficiency The leading environmental services provider in North America providing waste collection, disposal and recycling to 20m customers 6.3

Renewable Energy Global leader in wind energy equipment 6.1

Resource Efficiency Electrification

A leader in the digital transformation of the energy system and energy efficiency 6.0

Electrification Leading automotive supplier developing solutions for electrification and autonomy 5.9

Electrification Global technology leader in highly engineered connectivity and sensor solutions 5.0

Resource Efficiency Operates the world’s largest pool of reusable pallets 5.0

Renewable Energy Leading global provider of solar panel systems 4.9

Renewable Energy Global leader in developing, building and operating offshore wind farms 4.7

Resource Efficiency Electrification

Leader in smart grid solutions that help utilities and customers better manage electricity, gas and water resources 4.7

Updated: monthly

19

Structural growth:

High end battery demand growth in Asia and ROW. High end clients only with large market share

Sustainable returns:

Leading battery providers/customers. Significant investment in leading technology and further integration to come. Lowest cost producer whilst offering faster service

Wuxi Lead Intelligent Equipment: Leading Chinese automated battery equipment supplier

‒ Competitive advantage: Top tier global clients such as CATL, Panasonic, Samsung. 25%+ market share. Clean b/s and asset light model

Financials:

‒ ROE (1 year): 24%

‒ ROE (5 year): 30%

‒ Revenue/share growth (1 year): 29%

‒ Revenue/share growth (5 year): 66%

‒ Gearing: Net cash

Stock example

No representation is being made that any investment will or is likely to achieve profits or losses similar to those achieved in the past, or that significant losses will be avoided. Source: Ninety One, Bloomberg, MS and Company website, 31 March 2020. This is not a buy, sell or hold recommendation for any particular security.For further information on specific portfolio names, please see the Important information section.

Updated: quarterly

Wuxi Lead Intelligent Equipment

20


Performance

Past performance is not a reliable indicator of future results, losses may be made.Source: Morningstar, dates to 30 April 2020, performance figures above are based on lump sum investment, NAV based, inclusive of all annual management fees but excluding any initial charges, gross income reinvested, in USD. Inception date of the strategy: 01 September 2018. Simulated inception date for the Fund. Highest and Lowest returns are those achieved during any rolling 12 months since inception: Feb-20 14.7% and Mar-20 -6.4% Benchmark 1: MSCI AC World Index NDR. For further information on indices please see the Important Information section

USD Global Environment Strategy GLBLENVIRON

Performance in USD

Review required.

Please review our previous comment on this slide Steve Southwood has send Mahrukh a revised version

FYI

-1.7%

4.4%

-5.0%

-0.4%

1 Year Since inceptionGlobal Environment Fund I Acc USDMSCI ACWI NR USD

21

Impact of the COVID-19 pandemic


For further information investment process, please see the Important Information section.

‒ Combines impact with returns

‒ High conviction concentrated portfolio offers significant return potential over long-term

‒ Impact is measured and reported

‒ A diversifier to traditional exposures

‒ Offers a hedge to a portfolio’s existing carbon risk

‒ Alpha stream is lowly/negatively correlated to core equity approaches

‒ Helps investors to start or continue journey to decarbonization

Thank you

Appendix

24

Attribution (since inception)* vs. MSCI All Country World

Stock attribution (top & bottom 5) Sector attribution (top & bottom 5)

Past performance is not an a reliable indicator of future results, losses may be made.Source: Ninety One, FactSet, 31 March 2020. This is not a buy, sell or hold recommendation for any particular security. The calculation methodology and a full list of the portfolio’s holdings and their contribution to overall performance over the period (subject to a reasonable time embargo for commercial reasons) are available on request.* Inception of the pooled vehicle, 25 February 2019.Gross of fees with income reinvested, in USD. Relative to the MSCI All Country World Index.For further information on indices and specific portfolio names, please see the Important Information section.


3.35

3.07

3.03

2.25

1.89

-0.82

-0.88

-1.06

-1.11

-1.35

-2.0% 0.0% 2.0% 4.0%

LONGi Green Energy Technology Co

Xinyi Solar.

Orsted

NextEra Energy

Wuxi Lead Intelligent Equipment.

Infineon Technologies

A. O. Smith Corporation

Microsoft Corporation

Acuity Brands

Aptiv PLC

6.93

3.56

2.63

2.18

1.90

-0.38

-0.62

-0.98

-1.22

-1.88

-4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0%

Utilities

Semiconductors & SemiconductorEquipment

Capital Goods

Energy

Banks

Health Care Equipment & Services

Commercial & Professional Services

Pharmaceuticals Biotechnology &Life Sciences

Automobiles & Components

Software & Services

25

Past performance is not an a reliable indicator of future results, losses may be made.Source: Ninety One, FactSet, 31 March 2020. * Inception of the pooled vehicle, 25 February 2019.Gross of fees with income reinvested, in USD. Relative to the MSCI All Country World Index.For further information on indices and specific portfolio names, please see the Important Information section.

7.41

3.89

1.29

1.29

1.15

-0.05

-0.37

-0.49

-0.70

-3.75

-5.0% 0.0% 5.0% 10.0%

China

Denmark

France

United Kingdom

Taiwan

Russia

Germany

Switzerland

Japan

United States

Attribution (since inception)* vs. MSCI All Country World

Country attribution (top & bottom 5)


26

Biography

For further information on investment team, please see the Important Information section.

Update: Monthly

Deirdre is co-portfolio manager for the Global Environment Strategy in the Natural Resources team at Ninety One. Prior to joining the team in 2018, she was a Partner, Portfolio Manager and Head of Research at Ecofin. Before joining Ecofin, Deirdre was an investment banker at Morgan Stanley where she headed their European Renewable Energy coverage effort and built an investment banking and principal investing franchise. She has long had a passion for sustainable investing and has worked on a voluntary basis in the microfinance sector both in the US and in Pakistan.

She is a member of the advisory board of Girls Who Invest, a non-profit organisation whose mission is to increase the percentage of the world’s investable capital run by women. She is also a member of the advisory board of the Shell Foundation’s Energy Company of the Future project, as well as the advisory board for Imperial College’s Centre for Climate Finance and Investment. Deirdre earned her MBA from Harvard Business School, where she was a Baker Scholar, and her BA from University College Dublin.

Deirdre CooperPortfolio ManagerJoined the firm in 2018Joined the industry in 1997

27

Important information

Institutional Only

Inst

itutio

nal

All information and opinions provided are of a general nature and are not intended to address the circumstances of any particular individual or entity. We are not acting and do not purport to act in any way as an advisor or in a fiduciary capacity. No one should act upon such information or opinion without appropriate professional advice after a thorough examination of a particular situation. This is not a recommendation to buy, sell or hold any particular security.The value of this investment, and any income generated from it, can go down as well as up and will be affected by changes in interest rates, exchange rates, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which it invests. The Fund’s investment objective will not necessarily be achieved and there is no guarantee that these investments will make profits; losses may be made. This Fund may not be appropriate for investors who plan to withdraw their money within the short to medium term. Performance shown is that of the Fund and individual investor’s performance may differ as a result of initial fees, actual investment date, date of any subsequent reinvestment and any dividend withholding tax. All the information contained in this communication is believed to be reliable but may be inaccurate or incomplete. Any opinions stated are honestly held but are not guaranteed and should not be relied upon. This is not a buy, sell or hold recommendation for any particular security. It is not an invitation to make an investment nor does it constitute an offer for sale. Before making an investment, please read the Prospectus and Key Investor Information Document, which sets out the fund specific risks and is available from Ninety One SA. The portfolio may change significantly over a short period of time. The Fund is traded at the ruling price and can engage in borrowing and scrip lending and may be closed in order to be managed in accordance with the mandate. The fund may borrow up to 10% of its market value to bridge insufficient liquidity. The Fund is a sub-fund of the Investec Global Strategy Fund, which is a UCITS organised as a Société d’Investissement à Capital Variable under the law of Luxembourg. For further information on the Fund including application forms and a schedule of fees and commissions, please contact Ninety One SA. Fund prices and English language copies of the Prospectus, Report & Accounts and Articles of Incorporation and local language copies of the Key Investor Information Documents may be obtained from our website and free of charge from the following country specific contacts: Luxembourg – Investec Global Strategy Fund, 49 avenue J.F. Kennedy, L-1855 Luxembourg. In South Africa, Ninety One SA is an authorised financial services provider. The sub-funds offered for public sale in South Africa are approved under the South African Collective Investment Schemes Control Act.Investment Team: There is no assurance that the persons referenced herein will continue to be involved with investing for this Fund, or that other persons not identified herein will become involved with investing assets for the Manager or assets of the Fund at any time without notice. Investment Process: Any description or information regarding investment process or strategies is provided for illustrative purposes only, may not be fully indicative of any present or future investments and may be changed at the discretion of the manager without notice. References to specific investments, strategies or investment vehicles are for illustrative purposes only and should not be relied upon as a recommendation to purchase or sell such investments or to engage in any particular strategy. Portfolio data is expected to change and there is no assurance that the actual portfolio will remain as described herein. There is no assurance that the investments presented will be available in the future at the levels presented, with the same characteristics or be available at all. Past performance is no guarantee of future results and has no bearing upon the ability of Manager to construct the illustrative portfolio and implement its investment strategy or investment objective. In the event that specific funds are mentioned please refer to the relevant minimum disclosure document in order to obtain all the necessary information in regard to that fund. This presentation is the copyright of Ninety One and its contents may not be re-used without Ninety One’s prior permission.”

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