Read our introduction to a new fund manager on The Big Exchange and learn about their Global Equity Impact Solutions fund.
Regnan was originally set up to engage with companies on behalf of Australian institutional investors. It started with a mission to change the way investors and businesses think about their responsibilities to society and has a built a respected track record for pioneering analysis of ESG (environmental, social and governance) issues.
The firm later expanded into responsible investment management and now offers innovative sustainable and impact investment solutions, including this fund. Regnan is part of Pendal Group, an Australian investment manager, and takes its name from Australia’s Eucalyptus Regnans, the tallest tree in the southern hemisphere. These trees are recognised for their ability to lock up carbon. 1
In 2020 Regnan established a 4-strong London-based impact investment team which has launched the Regnan Global Equity Impact Solutions fund. The fund is distributed in the UK by J O Hambro Capital Management (JOHCM), also a subsidiary of Pendal, and its approach is outlined below.
The fund’s aim is to generate long-term outperformance by investing in the shares of mission-driven companies that provide solutions for unmet sustainability needs of society and the environment. It offers an actively managed, high conviction, and well-diversified global portfolio.
The team looks for positive impacts across eight themes: health and wellbeing, energy transition, circular economy, future mobility, food security, education, financial inclusion, and preservation of water resources.
They have designed a proprietary framework, based on the 17 UN SDGs (Sustainable Development Goals), to identify attractive opportunities and help them understand how a potential investment fits with the goals. An in-house team of experienced analysts carries out rigorous ESG (Environmental, Social & Governance) research to highlight any potential negative impacts.
Building on the Regnan heritage, strong emphasis is placed on driving impact through engagement, and this is typically achieved through meetings with directors and senior management. Regnan also advocates for ESG considerations to become mainstream by contributing to public policy debates, participating in industry bodies, and getting involved in submissions to government.
As a part of the investment process, engagement with all holdings is conducted to ensure impact is maximised. Where negative externalities (meaning something that may cause harm to others, such as pollution) are identified the team engage with companies to try to solve or mitigate the issue.
Collaborative efforts include initiatives with the Global Impact Investing Network, the Impact Investing Institute, and the Future-Fit Foundation. As a result, the fund scores 3 out of 3 for positive influence.
The team produces a quarterly impact report, which breaks the portfolio down by themes and presents a clear explanation of the managers' investment thesis, along with a few detailed company examples. We would like to see a more comprehensive report with additional case studies, information on all holdings, impact outcomes, and engagement activity progress. The managers do not yet provide justifications for every company so the fund scores 2 out of 3 for impact evidence.
Given the long-term approach and focus on measurable impacts, it is unsurprising that over 90% of the fund is invested in companies that we would classify as offering solutions to environmental and social challenges. There is also a notable lack of exposure to controversial activities. Overall, this well-articulated and extensive research process gives us confidence that genuine impact is being delivered and this warrants the award of a gold medal.
The main sector exposures of the funds are to healthcare (36% of the portfolio), industrials (25%) and information technology (13%).2 Consequently, the fund is most strongly aligned with SDG 3 (Good Health & Well-Being) which accounts for 29% of the portfolio, SDG 6 (Clean Water and Sanitation) at 12% of the portfolio, and SDG 9 (Industry, Innovation & Infrastructure) at 8%.3
Umicore specialises in clean mobility materials and recycling; its products help to power the sustainable transport of the future and give new life to scrap metals. The aim is to deliver solutions that have both a competitive edge and the highest standards of social and environmental responsibility. Umicore addresses two significant supply chain problems for electric vehicles: the sourcing of scarce metals, such as nickel and cobalt, and high-nickel cathode materials. Most of the firm’s revenues are generated from clean technologies such as emission control catalysts, materials for rechargeable batteries for electric vehicles, and recycling of scarce metals. The remainder come from products addressing specific societal needs such as improved connectivity (materials for high quality glass, displays) or reduced energy consumption (materials for use in energy-efficient lighting).
1 https://www.liquisearch.com/eucalyptus_regnans/impact_on_the_environment
2 Fund factsheet 31/12/2022
3 TBE Impact Assessment June 2022
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