The Big Exchange announces introduction of the UBAM - Positive Impact Global Equity Fund.
This article does not constitute investment advice. If you are unsure whether an investment is suitable for your circumstances, you should contact an independent financial advisor.
UBAM, the asset management arm of Swiss Bank UBP, made the decision to merge UBAM Positive Impact Equity Fund into UBAM Positive Impact Global Equity Fund, so the latter is now listed on the Big Exchange.
The global fund was launched in 2022 and was not previously available on UK retail platforms. It has been assessed by our independent partner Square Mile and receives a gold medal.
The strategy is still the one developed and implemented by the impact team, as outlined below. However, the Positive Impact Equity Fund focused on Europe and the firm now believes the broader geographical remit and investment universe of the global fund presents better opportunities to achieve the financial and non-financial objectives of the strategy.
Due to its global focus, the merged entity has the potential for greater contribution towards the Sustainable Development Goals (SDGs) through increased access to a broader range of companies. The fund aims to invest in global leaders in fields such as medical equipment; water technology; microcredit provision in emerging markets; education in Latin America; Electric Vehicles and their battery manufacturers. Furthermore, manufacturers of products for reducing greenhouse gas emissions and managing the grid are often based in China, South Korea and the US and therefore now accessible via this fund.
UBAM Positive Impact Global Equity benefits from the impact team’s proprietary IMAP scoring system, developed and emerging market specialists working together for idea generation, a partnership with the Cambridge Institute for Sustainability Leadership (CISL), and an Impact Advisory Board’s oversight.
The Impact Advisory Board, made up of external non-investment experts, verifies that that stringent sustainability criteria are embedded in the process as well as providing guidance on wider issues concerning positive impact. An Investment Committee brings together internal specialists who create and evolve UBAM’s impact process and incorporate industry best practice.
This fund aims to generate a significant measurable social or environmental impact alongside a financial return. It seeks to grow investor’s capital and generate income by investing in stock markets worldwide, including Emerging Markets. The benchmark is the MSCI AC World Index though the managers have significant discretion to deviate from its allocations.
The primary sustainable objective is “to invest in companies offering products, services and/or processes which address environmental and/or social problems" as defined by the United Nations Sustainable Development Goals (SDGs). Key SDGs include climate change mitigation, promotion of circular economy solutions, affordable healthcare and education, and the protection and restoration of biodiversity.
The UBAM team worked with the Cambridge Institute for Sustainability Leadership to translate the SDGs into six investable themes: three environmental (healthy ecosystems, climate stability, sustainable communities) and three societal (basic needs, health & wellbeing, inclusive & fair economies).
The fund managers build a concentrated portfolio of 50–60 stocks which they consider to be high quality and in which they have strong conviction. Five of the six themes are represented in the portfolio at any point in time with a maximum of 35% in any one theme. There is also a maximum deviation of 20% for each region in the benchmark.
Currently, the largest geographic exposures are to North America at 51% of the portfolio, Europe-ex UK at 24%, Pacific Basin 9%, Japan 6% and the UK 5%. The main industry exposures are Telecom, Media & Technology at 42% of the portfolio, industrials at 15%, and healthcare at 14%.1
The investable universe is determined firstly by positive inclusion. Using the 6 thematic lenses, promising candidates for investment are screened through the proprietary ‘IMAP’ scoring system. This measures the intensity of a company’s impact in relation to the proportion of research and development spending on solutions (Intentionality); the proportion of sales making a positive impact (Materiality); uniqueness and leadership in its field (Additionality); and the potential to have a significant impact on the world (Potentiality).
The selection process also relies on external ESG (Environmental, Social & Governance) scores, as well as internal analysis, with a target of at least 90% of the portfolio’s investments being ESG analysed. For investments without external ESG analysis, an in-house equivalent assessment is conducted by the Investment Manager.
A negative screen, based on the exclusion list and an ESG (Environmental, Social & Governance) profile, is then conducted. Companies directly involved in the production of conventional, nuclear and controversial weapons are excluded, as well as those directly involved in tobacco production, gambling, adult entertainment, thermal coal and unconventional oil & gas extraction. At least 20% of the investment universe is excluded based on a combination of ESG scores and sector/behavioural exclusions.
Fundamental analysis is undertaken on a company's balance sheet strength, cashflow sustainability and thus the strength of its continued commitment to ESG. All investee companies are positive contributors to one or more environmental / social objectives.
Potential investments that successfully make it through these steps are added to a Watch List from which a portfolio is derived. Position sizing is run through a model which considers the IMAP score, Quality, Growth, Valuation, and macro and liquidity factors. The investment time horizon is 3 - 5 years and ongoing engagement serves to encourage improvements in business practices.
Our assessment identified that c.69% of the fund is invested in firms whose main products and services are committed to delivering solutions to society. The fund is most aligned with SDG 3 (Good Health & Wellbeing), SDG 9 (Industry, Innovation & Infrastructure) and SDG 12 (Responsible Consumption and Production).2
Due to the solutions-based nature of this fund and the exclusionary screening, overall exposure to controversies is low. That said, a few companies have a negative impact slightly higher than might be expected but this is outweighed by their positive impact. The controversies identified are animal testing, fossil fuel production and hazardous chemicals. Compelling justification is provided for businesses transitioning to a more responsible future.
The team focus on "ESG monitoring" which utilises third party systems to actively monitor material ESG issues. This, in addition to the proprietary scoring framework, supports their direct engagements. The managers engage with all investee companies against an engagement framework and conducts site visits to many of them.
The managers collaborate with other investors via the Investment Leaders Group and the firm publishes regular industry white papers. Proxy voting is done by using Institutional Shareholder Services. The fund scores 2/3 for positive influence.
There is in-depth reporting with continual planned improvements, including an impact report, fund voting records, stock specific KPIs (Key Performance Indicators), and case studies. The approach is transparent with clear documentation on strategy. There is a summarised engagement report in the annual impact report with a full record also available. Additionally, the fund reports on the carbon intensity of the portfolio and ESG footprint per US$1m of sales. The fund scores 3/3 for impact evidence.
Overall, the quality of the process, portfolio composition and the resulting reporting give us a lot of confidence in the fund and its impact. It therefore receives a gold medal. To improve, the publication of a document justifying all holdings would further enhance the offering as would a fund level stewardship report.
Weyerhaeuser is one of the world’s leaders in sustainable forestry; it owns or controls over 12.2m acres in the U.S. and manages additional acreage under long-term licenses in Canada. Their mission is to protect the environment and make sure forests thrive on a continuous cycle of growing, harvesting and regrowing.
As well as supplying wood for houses and other essential products, their forests provide wildlife habitat and biodiversity conservation, soil and water protection, opportunities for renewable energy development, and act as carbon sinks. The firm’s most significant contribution in addressing climate change comes through removing CO2 from the atmosphere.3
Weyerhaeuser set an ambitious short-term greenhouse gas reduction target, approved by the Science-Based Targets initiative, in line with limiting warming to 1.5C. Their target includes a commitment to reduce Scope 1 and 2 GHG emissions by 42% by 2030, measured against a 2020 baseline. The firm has committed to achieving net-zero emissions by 2040, 10 years ahead of the goals of the Paris Agreement.4
References:
1 FE Analytics Fund factsheet @ 28 June 2024
2 Big Exchange Impact Assessment
3 https://www.weyerhaeuser.com/sustainability/3by30/climate-change-solutions/
Please remember that when investing, making money is not guaranteed and your capital is at risk. The value of your fund can go down as well as up. Tax treatment depends on an individual’s circumstances and may be subject to change.
This article does not constitute investment advice. If you are unsure whether an investment is suitable for your circumstances, you should contact an independent financial advisor.
The Big Exchange (TBF) Limited is a wholly owned subsidiary of The Big Exchange Limited. The Big Exchange (TBF) Limited is an Appointed Representative of Resolution Compliance Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 574048). (CaRA: 8711)
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