Duncan Goodwin, fund manager of the Premier Miton Global Sustainable Growth and Global Sustainable Optimum Income Funds, provides an update on the year to date, how he believes the investment backdrop has progressed for sustainable investors.
Why we believe the case for investing with a sustainable mandate has strengthened as 2022 progresses.
- The war in Ukraine has shown how important energy independence is, not only from an economic perspective, but also strategically. Domestic alternative energy sources, such as wind and solar, are not only now cheaper than fossil fuels, but also more secure. Governments, particularly in Europe, may well be re-thinking how much they spend on these alternative energy sources as well as on defence. Permitting, which has historically been a bottleneck for growth, will now be faster.
- European reliance on Russian gas for power also highlights the risks around other strategically crucial products that are often imported. Soft commodities, such as corn and semiconductors most immediately spring to mind. Onshoring (or building domestic sources of supply) is already starting to happen in the semi-conductor industry with new facilities being built in countries such as Japan and the US. This will continue in our view.
- With rising inflation – energy, labour or otherwise – there will come a renewed focus on increasing efficiency. Whether that be precision agriculture to improve domestic crop yields, or building efficiency to reduce energy consumption and emissions, the drive to get more output for less resource input is only going to accelerate on an individual as well as industry and company level. We believe this objective is central to many sustainable investments.
- Finally, the need to move other industries such as chemicals, pharmaceuticals, cars and clothes away from oil and gas dependency has never been more urgent than now. Ironically, the strategic needs of a sovereign state has never been more aligned with the green agenda.
Using the Premier Miton Global Sustainable Growth Fund as an example, the chart below displays how we have positioned the fund in an attempt to exploit the developing themes mentioned above:
Relative positioning of Premier Miton Global Sustainable funds
In the crowded space that is sustainable global funds, we believe there are several features that differentiate our offering:
The funds are currently investing in seven themes, the largest of which is infrastructure at 25% of the Premier Miton Global Sustainable Growth Fund. There is no over-riding exposure to one particular sector. We are not a tech fund, a green energy fund, or a healthcare fund. In a volatile market, we believe diversification is important.
We have no exposure to Facebook (Meta), Amazon, Apple, Netflix or Google (Alphabet). Several of these names do not meet our governance criteria and we see better investment opportunities elsewhere, within technology, for example, where we are underweight, as well as in other sectors.
No China, no Russia
We have not had any exposure to Russia since January 2020 when we moved to a more sustainable investment framework. We have not had any form of Chinese exposure since September 2021, whether that is mainland China, Hong Kong or US listed Chinese American Depository Receipts (ADR’s). While there can be interesting investments in China, these companies largely fall down on our governance criteria.
Exposure to high growth disrupters
We have just over 13% of the Premier Miton Global Sustainable Growth Fund invested in innovative, small and potentially high growth companies that, if successful, we believe will really make a difference to both fund performance and society.
Sustainability and ESG embedded throughout our process
The investment process changed completely with sustainability and ESG criteria embedded in all stages.
The Premier Miton Global Sustainable Optimum Income fund has consistently delivered against its target 6% yield. We believe the fund offers a unique combination of sustainability, growth and income.