After recently rolling out nine ESG-focused funds, investment managers at a European firm and KBI Global Investors discuss strategies that include a raft of US-based companies.
Around the world, wealth management houses have been rolling out
ESG/sustainability-themed funds to tap into perceived client
demand for these portfolios – and this news service recently
spoke to examples from Europe on how they”re putting ideas into
action.
Senan O’Sullivan, equity portfolio manager, and Ronan Callan, ESG
investment analyst, at Mediolanum
International Funds (MIFL), have highlighted what they say
are the benefits of their MBB Future Sustainable Nutrition Fund.
Separately, this news service also spoke to Ireland-based KBI
Global Investors, which co-manages the MBB Energy Transition
Fund and the MBB Circular Economy Strategy.
The MBB Future Sustainable Nutrition Fund, which comes under
Article 9 of the EU’s Sustainable Finance Disclosure
Regulation (SFDR), is co-managed by Black Rock and Pictet, who
bring different views on how to approach the sustainable
nutrition theme. It aims to provide investors with exposure
to the sustainable nutrition theme and the evolution of a
new food system which addresses the unsustainable health, climate
and waste problems of the current worldwide food production
system.
MIFL noted that food systems account for over one third of
global greenhouse gas emissions, with 45 per cent of food
produced lost or wasted. Yet in 2020, between 720 and 811
million people faced hunger, rising from 2014. With the world
population set to hit 10 billion by 2050 and the food system
accounting for 30 per cent of emissions, MIFL said precision
agriculture which optimizes crop productivity is a key tool
for achieving this. It will enable farmers,
for instance, to target their fertilizer application more
precisely. Adopting this technology is expected to
accelerate in the future.
A top holding is US-based agriculture machinery producer John
Deere which has revealed two new technologies recently,
ExacShot and an electric excavator. ExactShot uses a sensor to
register when each individual seed is in the process of going
into the soil and allows farmers to reduce the amount of starter
fertilizer needed during planning by more than 60 per cent. The
electric excavator, powered by a Kreisel battery,
reduces jobsite noise, enhances machine reliability,
and produces zero emissions.
Holdings also include Dutch multinational DSM, which specializes
in nutritional and speciality food ingredients, producing
supplements to reduce methane emissions from livestock to combat
climate change. They also include California-based Beyond Meat, a
firm that produces plant-based burgers, O’Sullivan and Callan
told this news service. Other holdings are Berlin-based Hello
Fresh, a mealkit provider in the US, Australia, Canada, New
Zealand and Europe. UK food delivery firm Just Eat is also
included in the portfolio. The Kerry Group, an Irish-based food
company, is another top holding. Forty-five per cent of the fund
is focused on firms in the US, 36 per cent in Europe and 10 per
cent in the UK, they added.
Although O’Sullivan and Callan are positive about the long-term
prospects of the fund and the stocks that it invests in, the fund
has struggled recently mainly due to the effects of a difficult
economic environment, they said.
This news service has carried a number of articles about how
wealth managers are paying more attention to food production and
its demands. Population pressures, wars, supply chain
disruptions and the impact of new technologies have shaken up the
space. See more here and
here.
MBB Circular Economy Strategy
Ireland-based KBI Global Investors co-manages the MBB Energy
Transition Fund and the MBB Circular Economy Strategy, which
focuses on reducing, reusing and recycling products for as long
as possible. Martin Conroy, senior portfolio manager at KBI
Global Investors, talked about how “circular economy strategy”,
which was launched in early 2022, also comes under Article 9 of
the EU’s Sustainable Finance Disclosure Regulation (SFDR). It is
a global portfolio of 30 to 60 stocks, open to European and US
investors.
“The market is still defining the circular economy and what’s
eligible for a fund. We focus on bringing solution providers to
the table to help advance the circular economy,” Conroy
said in an exclusive interview. “The fund invests in firms
that specialize in sustainable packing, getting away from single
use plastics and which are recyclable. We have paper-based and
aluminium based packaging, such as aluminium cans.”
Food waste is one of the biggest contributors to global
greenhouse gas emissions, and so eliminating and reducing food
waste is key for the circular economy, he said.
“We do have exposure to food waste, with 8 to 9 per cent of our
portfolio agriculture and food exposed…we look at firms
that provide ingredients that extend longevity of food and also
that do food storage, as crops are often lost due to a lack of
storage, especially in emerging markets. We invest in firms that
have advanced storage techniques,” he said.
Holdings include Irish-based food company the Kerry Group, which
provides preservative type food ingredients. Canadian firm Ag
Growth International is another holding that provides advanced
food storage products and services to emerging markets, and
Trimble which has technological products to advance precision
agriculture. The top holding is Veolia Environment, a provider of
water, waste and energy management solutions.
Conroy also invests in renewables, notably semiconductors, which
play a key role in reducing the consumption of energy. Holdings
include NXP Semiconductors, as well as solar firm Sunrun, a US
solar installer, and Andritz, a supplier of equipment for
hydropower.
The fund’s biggest exposure is in the industrial sector, with
almost half from waste management companies and recycling
companies. This is followed by renewables, sustainable packaging
and agriculture/food efficiency. The majority of firms – 63 per
cent – are based in North America, and 31 per cent in Europe.
“The fund had a very good year in 2022, outperforming the
index, but 2023 has been more difficult, partly as renewables,
mainly within the solar space, did not perform so well,” he said.
Conroy, however, thinkst this is a short-term dynamic; he is
positive about the solar space in the medium to long-term. See
other articles about KBI GI here.
MIFL is a management company approved by the Central Bank of
Ireland to manage UCITS or undertakings for the collective
investment in transferable securities, which are investment funds
regulated at EU level, and non UCITS funds.
