Emerging markets have long been understood as geographies of uncertainty. Political turmoil, currency fluctuations, and poor governance are common themes amongst headlines about emerging markets investing.
Europe is seldom considered the most exciting place to invest. This is mainly because European index returns – a proxy for average market returns – have been modest over most time frames. But Europe offers some excellent investment opportunities for active investors willing to seek out its treasures.
We launched our first sustainable investment fund in 2005. At that time we were convinced all companies would need to adjust to operating in an increasingly carbon-constrained world, and more companies would need to develop solutions to make economies less carbon intensive. Our conviction has never waned, nor has the urgency of the carbon-reduction challenge.
With potential scenarios from the World Health Organisation predicting a possible 10 million deaths by 2050 caused by multidrug-resistant bacteria, and the abundance of chemicals and antibiotics in our food supply chains, there is cause for concern.
We often introduce ourselves to prospective clients, friends and strangers as “good old-fashioned, long-term investors”. In an environment where returns are counted by the day, there is a tendency to equate this approach with being stuck in the past
and out of touch with the future. Let’s challenge this perception.
Investing in healthcare companies seems an obvious choice for sustainable investors. After all, any company that helps cure disease, and improve health and wellbeing must be making a positive contribution to sustainable development.
Over the last decade, the role and prominence of technology companies in emerging markets has increased markedly. Emerging markets economies have proven themselves capable of producing truly world-leading tech firms. And as smartphone penetration has surged, the positive impact of technology on daily life in emerging markets has been very significant.
Even investors who get excited about investing in European equities can understand why many people don’t. A great many savers think their investment options are limited to the average market return provided by an index-tracking fund. And the average returns of European index investments look very average, over almost any time period.
While a strong culture can sustain a business, a toxic culture can break it. As sustainable investors, it’s always important to understand how the culture of companies we invest in can impact how they treat their employees and customers and, ultimately, influence the wider world.
The Strategy did well in 2020, thanks in part to the generosity of central banks globally, while the real economy tried to shake off a pandemic. However, we believe that the real opportunity for investors in the subcontinent should be in the decade ahead. We are optimistic for two reasons.
Education is not freely available to everyone - and in many parts of the world girls are the first to be excluded from it. Girls are the first to drop out of school, and the first to be failed by the system, facing the perils of early marriage, early pregnancy, and abuse. Without the choice to write their own futures, their endless potential is wasted.
‘Payable Days’ is the number of days a company takes to pay its suppliers. Investors often learn in ‘Finance 101’ courses that the longer a company takes to pay its suppliers the stronger its bargaining power is with them. Consequently, this is considered as key evidence of a strong franchise. We beg to differ.
2020 saw regulatory developments in sustainable finance reach new levels globally, but particularly in Europe. These developments, combined with a global pandemic, unprecedented wildfires, and a renewed focus on social movements like Black Lives Matter, put sustainable finance under the spotlight more than ever.
One of the key tenets of our investment philosophy has long been a focus on the cultures and people behind businesses. We believe that franchises that are successful over the long term are built on the backs of unique cultures that have the wherewithal to resist short-term pressure in favour of nurturing a sustainable business over decades, have the ability to think diversely about the opportunities ahead and the risks they might face, and the operational focus to deliver on their strategies year after year.
Stewart Investors Sustainable Funds Group invests in the shares of high quality companies that are well positioned to benefit from and contribute to the sustainable development of the countries in which they operate.
In the sequel to Lewis Carroll’s ‘Alice in Wonderland’, Alice climbs ‘Through the Looking-Glass’ and finds another fantastical world, absent of reason and where everything is reversed. This crisis of logic is all too evident when in investing in Asia Pacific.
If asked to list climate change solutions, many of us would start with renewable energy. It is obviously a key one given the use of fossil fuels for energy is the largest contributor to greenhouse gas emissions globally.
We recognise the existence of inequality and institutional racism across the world – we share the horror felt by so many as we have witnessed events that highlight the inequality, prejudice and sheer injustice faced by members of the black community the world over.
Growing investor concerns about climate and societal crises have contributed to the burgeoning demand for ‘sustainable investment’ funds that take into consideration environmental, social and governance (ESG) factors.
The COVID-19 pandemic is having a devastating personal and economic impact worldwide and there is an urgent need for governments, companies and individuals to play their part in helping to slow the spread, protect the vulnerable and minimise the human and economic toll.
The United Nations Sustainable Development Goals (SDGs) provide a clear and vital framework around which investors and the broader business community can unite to achieve a collective goal of cleaner business practices. One goal which many investors and businesses are placing emphasis on is SDG 12: Responsible Consumption and Production.
Our philosophy at Stewart Investors is to invest in ‘quality companies’ and our process for identifying them has incorporated a rigorous evaluation of ESG for over three decades. However, our analysis of ESG has never stood in isolation, and must be taken together with assessment of management, franchise and financials.
In 2019, we commissioned a research project with the University of Technology (UTS) in Sydney to compile a set of recruitment and retention policies that have been implemented across geographies, industries, and organisations and can be tied to tangible improvements in diversity outcomes. This report, entitled Improving Gender Diversity, was completed a few months ago. It lays out a list of 13 tools that have been successfully used to recruit and retain women in organisations.
As it is just over 12 months since we instigated the plastic pellet loss investor initiative, we thought we would take the opportunity to provide you with an update and summary of progress since our last update in March 2019.
This rule of thumb was coined in order to combat a common challenge facing teams trying to solve complex problems. In pursuits like investing, there is a tendency to increase the number of people providing input to the point that the team gets bloated and functions less efficiently.
Today, asset owners have an unprecedented range of options of where to invest and an even greater number of well-argued reasons for why each of these will be the most attractive home for their capital. Aggressive, untested monetary policy has helped fuel years of above-average equity returns, encouraging many of those who run these strategies to predict handsome returns for investors.
Our Hippocratic oath is something we all hold dearly and have all signed. It underpins our investment philosophy, which is based on identifying quality stewards of strong franchises with good long-term prospects.
We have often been asked how we narrow down a universe of 15,000 Asian and Emerging Markets companies to a portfolio of approximately 50. It’s a good question, particularly as now that we invest globally, giving us an investible universe of 65,000 companies, the challenge has become even starker.
We used to send letters to companies and stock exchanges extolling the virtues of single share classes, tag along-rights and ‘one share, one vote’. Today, we actively seek out companies with dual share classes. What has changed?
Why is Asia still regarded as a separate asset class by investors? At first glance, it looks like an artificial construct, made up of 15 countries with very little in common, other than crude proximity on a global map.
Sharing resources has gone on for as long as humans have been living in tribes. But without the enabling role of the internet or mobile devices it is hard work in a large complex society with a myriad of goods and services. The internet is now helping to solve this problem.
In 2010, Puma pioneered a new form of corporate reporting. The German sportswear company produced an environmental profit and loss account, which estimated the company and its supply chain to have caused €145m of environmental damage that year, relative to €202m of net profit.
The stock market and bond market have their origins in the financial revolution of the late 17th century. The stock market developed to provide funds for overseas trading companies, like the English East India Company, while the bond market funded the state, mostly raising funds for waging of war.
At first glance, there is little about the current financial system that makes sense. The more one looks, the less sense it makes. In theory the financial sector is supposed to support the long-term growth of the real economy. In practice, it has become so detached from the real world that it is more akin to a fantasy land, inhabited by a growing number of peculiar characters undertaking nonsensical tasks. Lewis Carroll’s Alice would be very much at home.
Plastic is wonderful stuff. It is lightweight, so less carbon intensive to move around. It is durable, mouldable and less energy intensive to make than aluminium or glass. It helps reduce food waste and decreases the risk of food contamination.
The below image is a sign from a packed subway line en route to the bullet train at Shinagawa Station. A sign that initially amused but then began to hold more power as a metaphor as the trip went on. In most other countries, a sign highlighting the pain that comes from getting trapped in a train door would be enough to deter passengers from trying their luck with some automatic doors.
“Dabur before self”, responded Mr Duggal, the CEO of Dabur, when we asked what he is looking for in his successor. Stewardship is central to our investment philosophy at Stewart Investors, and the importance of the quality of incoming leadership cannot be understated. The risk, however, is that we arrive at conclusions too quickly or use the wrong measuring tape.