Sustainable Times – Premier Miton Diversified Sustainable Growth Fund

Neil Birrell

Premier Miton’s Chief Investment Officer

In this, the second edition of Sustainable Times, we will take a look at a group of companies that are a key part of the equity portfolio and our drive to find companies that have the potential to have a positive impact on society and the environment.

The disrupters

Most of our sustainable equity investments are in companies that are well established, market leaders in their respective industries. We combine this with investments in companies that have the potential to disrupt established markets or create new markets to resolve un-met societal and environmental needs. We are looking for companies that could potentially become the next generation of market leaders. We call this group; the disrupters.

Companies within this group are often smaller in size, newer to public markets and less well known to investors. However, their ambition is often large and the potential impact on society sizeable. Their products and services often relate to resolving some of the larger, more difficult challenges facing society. Carbon capture, micro lending in developing economies, fuel cells and quantum computing are some such industries represented within this group. This is a truly global group from both developed and developing countries.

What we look for in a disrupter

Our process remains the same when analysing this group and we do not compromise on risk tolerance regarding ESG factors, particularly on governance. In addition to our existing process, we assess three further criteria before making an investment decision for this group.

Large addressable market. The companies in this group are often smaller in size. However, the markets they operate in need to be large. Fuel cells, sustainable fashion and renewable fuels would all be examples of large global markets, that are being addressed by relatively new companies. We do not expect the companies to remain small if they are successful, as they grow themselves and their markets expand.

Third party, industry validation. Many of these companies are developing new technologies or production techniques. This can entail greater investment risk and uncertainty as well as greater opportunity. We look for third party validation of the business and the investment case. A joint venture agreement or a strategic shareholding from an established participant in the market or a potential cornerstone customer can provide this validation.

For example, Darling Ingredients, a company turning food waste into sustainable products and renewable energy, have a 50:50 joint venture with Valero, a global leader in the field of oil refining. This initiative provides engineering and operating expertise when building renewable fuels manufacturing capacity. Similarly, fashion company H&M’s shareholding in Renewcell, a developer of fully recycled textile materials, provides some comfort there is a large market for their product when a substantial and well-known buyer of the material owns a stake in the business.

Management of company equity. Finally, we never forget we are investing for financial return, not to provide funding for interesting science projects. We engage with management teams to ensure they are managing the equity in the company in the interests of third-party shareholders, like ourselves, and not just for themselves.

This alignment of interests is essential at these early stages of a company’s life. While we are prepared to invest in companies that are not necessarily profitable today, we need to see a clear path to profitability in the future

Anaergia – fuel from landfill

A recent addition to the portfolio is Anaergia, a Canadian listed company that is relatively new to the public markets having listed in June 2021 and now has a market capitalisation of CAD 600m*. With the founder having built and then sold his water treatment business, his next venture is tackling climate change. The company is in the business of reducing emissions associated with waste that often ends up in landfill. Essentially the company collects solid waste destined for landfill, separates the organic material and converts it to products such as renewable natural gas *Source: Bloomberg as at 01.11.2022.

With 15%** of all US methane emissions coming from untreated waste in landfill, the scope for emissions reduction is significant. In addition to the commercial benefits given current high natural gas prices, we also see strong regulatory support particularly in US with the Inflation Reduction Act offering a tax credit of up to 30% in the US against the costs of the projects. **Source: U.S. Environmental Protection Agency (EPA) 2019.

With new filtration plants coming onstream over the next 12 months, we believe the market will not have long to wait to better understand the return potential of these projects, as well as the positive impact on society and the environment.

Anaergia is a good example of a disrupter company. These disrupters not only offer the potential for growth, but also the potential for game changing technology to tackle some of the most pressing challenges facing us today and tomorrow.

To find out more about Anaergia and their work creating from landfill please click and watch this video, where Duncan Goodwin, manager of the Premier Miton Global Sustainable Equity fund, interviews founder and CEO, Dr Andrew Benedek.

The Premier Miton Diversified Sustainable Growth Fund equity portfolio

The allocation to equities is core to the fund’s asset allocation. It is worth noting that the investment team and process applied is the same as that for the Premier Miton Global Sustainable Growth Fund and the Premier Miton Global Sustainable Optimum Income Fund.


The equity portfolios for these three funds have a very high degree of commonality, with the disrupters playing an important part.

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Risks

The value of investments may fluctuate which will cause fund prices to fall as well as rise and investors may not get back the original amount invested.

The Premier Miton Diversified Sustainable Growth Fund, Premier Miton Global Sustainable Growth Fund and the Premier Miton Global Sustainable Optimum Income Fund may experience high volatility due to the composition of the portfolio or the portfolio management techniques used.

Reference to any particular stock does not constitute a recommendation to buy or sell the stock.

Funds that follow a sustainable investment approach exclude companies which do not meet their sustainability criteria from the investment universe and therefore can carry a higher risk than funds with a more diversified portfolio.

Future forecasts are not reliable indictors of future returns.

IMPORTANT INFORMATION:

For Investment Professionals only. No other persons should rely on any information contained in this document.

Whilst every effort has been made to ensure the accuracy of the information contained within this document, we regret that we cannot accept responsibility for any omissions or errors. The information given and opinions expressed are subject to change and should not be interpreted as investment advice.

All data is sourced to Premier Miton unless otherwise stated. Persons who do not have professional experience in matters relating to investments should not rely on the content of this document.

For your protection, calls may be monitored and recorded for training and quality assurance purposes.

A free, English language copy of the fund’s full prospectus, the Key Investor Information Document and Supplementary Information Document are available on the Premier Miton website, or you can request copies by calling us on 01483 306090.

Financial Promotion is issued by Premier Miton Investors. Premier Portfolio Managers Limited is registered in England no. 01235867. Premier Fund Managers Limited is registered in England no. 02274227. Both companies are authorised and regulated by the Financial Conduct Authority and are members of the ‘Premier Miton Investors’ marketing group and subsidiaries of Premier Miton Group plc (registered in England no. 06306664). Registered office: Eastgate Court, High Street, Guildford, Surrey GU1 3DE

008039/081122

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This section of the website and the content it contains is for retail clients only and by persons who are resident in the United Kingdom [who are not US persons]. Professional advisers should refer to the Professional Advisers site.

The content of the pages of this website is for your general information only. It, and the products and services described within it, are subject to change without notice. We shall not be liable to you, or any third party, for any amendment, modification, suspension or discontinuance of any product or service described on our website. Neither we, nor any third parties, provide any warranty or guarantee as to the accuracy, timeliness, performance, completeness or appropriateness of the information and materials made available on this website.

You acknowledge that such information may contain inaccuracies or errors and we expressly exclude liability for any such inaccuracies or errors to the fullest extent permitted by law. Your use of any information or materials is entirely at your own risk, for which we shall not be liable.

The information contained on this website does not constitute an offer or solicitation to sell or purchase shares in the funds or portfolios or to provide you with other products or services. Any application or investment must only be made on the basis of the relevant documentation of the investment, such as, for example, terms and conditions. The information on this website does not constitute any investment, tax, legal or other advice. Persons who do not have professional experience in matters relating to investments should always consult with an independent financial adviser before making an investment decision. Any opinion expressed on individual funds, services or products represent the views of the individual at the time of preparation and should not be interpreted as a personal recommendation to buy or sell or otherwise trade all or any of the investments that may be referred to.

Website terms of use: Please ensure you have read and accept the full 'website terms of use' before continuing.

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Disclaimer

This section of the website and the content it contains is for professional financial advisers only and should not be relied upon, or circulated to, retail clients. Retail clients should refer to the Private Investor's site.

The content of the pages of this website is for your general information and use only. It, and the products and services described within it, are subject to change without notice. We shall not be liable to you, or any third party, for any amendment, modification, suspension or discontinuance of any product or service described on our website. Neither we, nor any third parties, provide any warranty or guarantee as to the accuracy, timeliness, performance, completeness or appropriateness of the information and materials made available on this website.

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The information contained on this website does not constitute an offer or solicitation to sell shares in the funds or portfolio or to provide you with other products or services. Any application or investment must only be made on the basis of the relevant documentation of the investment, such as, for example, terms and conditions. The information on this website does not constitute any investment, tax, legal or other advice. Persons who do not have professional experience in matters relating to investments should always consult with an independent financial adviser before making an investment decision. Any opinion expressed on individual funds, services or products, represent the views of the individual at the time of preparation and should not be interpreted as a personal recommendation to buy or sell or otherwise trade all or any of the investments that may be referred to.

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