Premier Miton’s Chief Investment Officer
In this edition of Sustainable Times, Neil Birrell, Chief Investment Officer and manager of the Diversified fund range, explains why one of the sustainable growth themes in the Premier Miton Diversified Sustainable Growth Fund has been expanded and a new one introduced.
Sustainable thematic investing
For information purposes only. The views and opinions expressed here are those of the author at the time of writing and can change; they may not represent the views of Premier Miton and should not be taken as statements of fact, nor should they be relied upon for making investment decisions.
We believe that taking a thematic approach, particularly in a global growth context, provides several structural and repeatable benefits for a long-term investor. These themes are applied across the corporate bond, equities, property company and, where possible, alternative investment allocations.
The principles for defining a theme have not changed, for each we need to see:
- A demonstrable and sustainable positive impact from the industry.
- A clear linkage to at least one of the United Nations Sustainable Development Goals (SDG’s).
- A sufficiently large universe of securities in which to invest.
We review the themes, with scope to add, remove or redefine themes annually. The world is changing rapidly as the needs and demands of society and the environment develop and we want to be able to reflect those changes and the investment opportunities they produce.
Economic & social mobility
We are updating and expanding the Education theme, which invested in companies that seek to enable greater access to secondary and tertiary education through online learning and education technology.
It is being expanded to become, Economic & social mobility.
Pressures on the cost of living around the world driven by inflation and the associated erosion of real wages, in our view, only increases the importance of those companies looking to address economic and social inequalities.
We believe the online education industry in more developed markets, such as the US and the UK, took important strides forward as companies such as Pearson look to increase the availability of online courses and deepen their relationships with both education providers and students.
Whilst we consider access to education remains core to addressing global poverty, we will now look beyond our previous universe of opportunities. The fairer provision of employment opportunities and vocational training are now also covered in this theme; these aid the reduction of inequalities within society.
An example of what can now also be included within this expanded theme would be; lower cost funeral services and planning, which allows for lower personal and financial stress at a very difficult time in people’s lives. The cost of funerals from providers such as US company Service Corp, has been falling over the last five years, with lower cost options being added to their portfolio of services. This enables greater access to a dignified funeral service.
This new theme is being added, making it the ninth in total for the fund. It includes companies that can secure digital networks and infrastructure.
Events such as COVID and the war in Ukraine have highlighted both the importance of the digital economy and the threats to a safe and sustainable system, allowing it to operate and grow. Digital resilience encompasses all aspects of enabling safe and secure systems, both at home and in work, including cyber security and accessible digital infrastructure for all. The number of specialist service and hardware providers is increasing to meet this growing need.
Palo Alto Networks is a large US cyber-security company. We have been monitoring the cyber-security sector for some time, with rising geopolitical tensions and an increase in cyber-attacks highlighting the seriousness with which companies, and individuals, must take online security. Upon completion of our initial research, we deemed valuations within the sector to be too high and decided to wait for a more attractive investment entry point, the ensuing selloff in technology stocks provided such an opportunity.
Investing outside the themes
As this is a multi asset fund it is not always possible for all investments to be part of the sustainable themes. Where this is the case, appropriate criteria are considered to ensure the investment is in the spirit of a sustainable investing fund.
These include government bonds where we assess a country’s approach to factors including democracy, civil liberties and corruption. We use independent, recognised measures of these; the Corruption Perceptions Index and the Freedom in the World annual global report on political rights and civil liberties, published by Freedom House and set minimum standards.
We are adding an assessment of a country’s approach to climate consideration to our investment process and will be using the ND-GAIN Country Index. It summarises a country’s vulnerability to climate change and other global challenges, in combination with its readiness to improve resilience. It aims to help governments, businesses and communities better prioritize investments for a more efficient response to the immediate global challenges ahead. The index is produced by the University of Notre Dame.
Markets; 2023 and beyond
The prospects for the global economy and financial markets continue to be uncertain and we remain cautious in our outlook. After three very difficult years, there is room for optimism, however, as peak inflation and interest rates are in sight, we continue to believe there is an alignment between a long term thematic sustainable investment approach and long term financial returns.