With 2022 heading towards the final quarter, we thought it was timely to revisit the investment case for global sustainable investing.
With global markets increasingly reflecting the spectre of higher inflation for longer, global economic slowdown, quantitative tightening, energy shortages in Europe and rising tensions between the US and China, we continue to believe the underlying fundamental growth drivers for sustainable investing remain more valid than ever, namely:
- The prolonged war in Ukraine has reiterated the need for energy independence and security via alternative, green sources. Our funds have 16% exposure to energy transition.
- Rising tensions between the US and China in particular has seen a fresh wave of onshoring of key strategic products such as semiconductors and processors. Our funds have 21% exposure to infrastructure.
- With inflation in the UK at approximately 10% and higher than expected globally, the need for more efficient production methods in industries such as agriculture has become more politically relevant. Our funds have 8% exposure to food productivity and safety.
- Finally, the decarbonisation of key strategic industries such as chemicals, pharmaceuticals, cars and clothes has also moved up the political agenda with oil prices having spent most of the year above $90/bbl. The funds currently have 5% invested in the circular economy theme.
Crucially, government policy such as RePower in Europe and the Inflation Reduction Act in the US have provided a clear framework for this transition.
Why Invest in Our Sustainable Funds?
In the crowded space that is sustainable global funds, we believe there are several features that differentiate Premier Miton’s global sustainable equity funds:
- Breadth – The funds are currently investing in seven themes, which includes health and wellbeing at 19% and 20% for the Global Sustainable Optimum Income Fund and Global Sustainable Growth Fund respectively. There is no overriding exposure to one particular sector. The funds are not a tech fund, a green energy fund, or a healthcare fund. In a volatile and potentially directionless market, we believe breadth is going to be key. With a beta of one (as at 30.09.2022) for the Premier Miton Global Sustainable Growth Fund, we believe the fund has the potential to perform based on stock-specific drivers rather than market direction. Active share for both funds remains above 90%, and the funds continue to hold no FAANGS and no direct Chinese or Hong Kong-listed companies.
- Disruption – We have just over 19% of the funds in small, innovative and potentially high growth companies. We believe that these companies have the potential to change and disrupt industries and have a positive impact on both fund performance and society.
- Valuation – The 12-month forward PE of the funds is 15.9x and 15.6x for the Global Sustainable Optimum Income Fund and Global Sustainable Growth Fund respectively. We believe the fund valuation reflects the breadth of opportunities we have identified to deliver growth, predominantly outside of technology, rather than taking a value approach.
- Sustainability and ESG are embedded in all stages of the investment process
- Income – The Premier Miton Global Sustainable Optimum Income fund has consistently delivered against its target 6% yield with another full year of >6% yield just completed. We believe our combined approach of sustainability, growth and income sets us apart in the market.
Source: Bloomberg as of 30.09.2022
Both Premier Miton Global Sustainable Growth and Premier Miton Global Sustainable Optimum Income funds are top quartile in the peer group rankings in the IA Global Sector and IA Global Equity Income sector respectively since manager tenure (January 2020).
Looking at year to date returns and annualised volatility against peers (those within the peer group with an AUM greater than £500mn, priced in sterling with a focus on growth), the Premier Miton Global Sustainable Growth Fund has generated the highest returns, with lower volatility than most, as shown below:
Source: FE Analytics, based on UK sterling, taken on a total return basis as at 30.09.2022. Performance is shown net of fees with income reinvested. Volatility is calculated on a weekly basis. *For full performance disclaimer please see Important Information footnote.
We believe the Premier Miton Global Sustainable funds offer structural earnings growth from a wide variety of regions, sectors, market capitalisations and themes. Our process is clear and consistent, and we are disciplined in its application. Year to date performance would support the view that our funds’ current positioning also offer an alternative to many of the established global sustainable growth funds.