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March 31, 2022

Stewart Investors annual fund reassessment summary

Stewart Investors funds have all been re-assessed through our impact methodology. Read our summary on how they performed.

Every year The Big Exchange re-assess funds for their positive impact on people and the planet. The fund manager has to prove that the fund is continuing to walk the talk. We regularly update our assessment and will award new medal ratings for every fund. Every fund re-assessment gets an update for you to find out more.

Stewart Investors fund impact assessments

We are pleased to report that all six funds from StewartInvestors on The Big Exchange have successfully completed their annual reassessments. Five of them retain silver medals whilst Stewart InvestorsWorldwide Sustainability Fund is upgraded to gold due to the high level of positive solutions it delivers.  

Stewart Investors is part of First Sentier Investors which was acquired by Mitsubishi UFJ Trust and Banking Corporation in 2019 but operates as a standalone global asset management business. 

Stewart Investors Sustainable Funds group has its own distinct investment approach, applied across all funds in this range, which is described below.  Since the launch of their first fund in 1988, sustainability has been at the heart of the investment philosophy and stock-selection process. 

Careful stewardship

The managers’ philosophy is built around careful stewardship, by which they mean responsible management with the aim of protecting investors’ capital. They believe fund management has a social purpose by encouraging a culture of long-term investment.

All members of the investment team must sign a Hippocratic Oath, pledging to uphold the principle of stewardship through their conduct and work practices. The incorporation of good ESG (Environmental, Social & Governance) principles and active engagement is central to their role. 

Sustainability drives the investment process

The team strives to invest your money where it can be used most productively for the future benefit of all. They seek companies which contribute to, and benefit from, sustainable development through the products and services they sell and their supply chains and operational practices. 

Close attention is paid to the quality of a company’s management, the business’ social usefulness, environmental impact, and responsible business practices. The team carry out their own rigorous analysis, supplemented by third-party frameworks and commissioned external research, to fully understand a company’s sustainability characteristics. 

One framework they use is Project Drawdown’s Climate Change Solutions which relates to energy, buildings, transport, industry, food, and agriculture. Others include the Human Development Pillars, an adapted Human Development Index (HDI), which identifies companies contributing to nutrition, healthcare and hygiene, water and sanitation, energy, housing, employment, finance, standard of living, education and information.

At the same time, companies with material exposure to harmful products and services, or who disregard environmental and human rights responsibilities are excluded. An external ESG research provider is used to check any involvement in harmful activities. The team also receive regular updates from controversy monitoring service RepRisk. 

Our conclusion: a focus on products and services with clear positive outcomes

The primary focus for these funds is on products and services that are contributing to sustainable development. Stewart Investors’ approach includes companies that are enabling or supporting as well as those making a direct contribution. This means that many of the companies they map to the SDGs (Sustainable DevelopmentGoals do not map to the SDGs using a revenues based methodology. That said, they clearly deliver positive social and environmental sustainability outcomes including improved healthcare; access to education, housing, and essential services; financial inclusion; sustainable transport; reduced carbon emissions; clean energy, and reducing waste, pollution, and loss of biodiversity.

Stewart Investors demonstrate leadership in collaborative engagement and advocacy. There is clear evidence of ESG concerns being addressed in their engagement with companies, although we would like to see more data on the success or failure of this activity. Overall, the funds score 3 out of 3 for positive influence.1

We are impressed with the impact justifications for all companies in their portfolios albeit some are based on enabling or supporting rather than direct contributions. There is innovative carbon reporting, however, impact data on a wider basis is lacking and we would like to see a full impact report. Despite this, the overall level of reporting is very good and the team is planning on improving reporting substantially in 2022. The funds score 2 out of 3 for transparency.1

For the silver medal funds to improve their ratings we would need to see a higher proportion of their investments in positive solutions, according to our revenues based methodology. Currently this is well below half the portfolio for the Asia/Emerging Market strategies. 

We have outlined below the investment objectives of each fund in this range. The team of 12 portfolio managers and analysts, led by David Gait, all contribute ideas to the different funds although each has a dedicated lead and co-manager. 

Stewart Investors Asia Pacific Leaders Sustainability - Silver medal

This fund aims to grow your investment over the long term (at least five years). It invests in the shares of large and mid-sized companies, typically valued above US$1bn (hence the name leaders), in the Asia Pacific region. This region offers growth potential, due to growing demand from expanding middle class populations. 

The makeup of the Stewart Investors Asia Pacific funds may look very different to the benchmark, the MSCI AC Asia Pacific ex Japan Net Index. This fund has a much higher exposure to India which accounts for 45% of the portfolio (versus 12% of the index) and a relatively low exposure to China at 7% (versus 31% for the benchmark). 2

The fund also has a significant allocation to Japan-listed companies, currently 11%, although these are likely to carry out a significant part of their activities across the Asian region. The largest sector weightings are in Information Technology which accounts for 26% of the portfolio, Healthcare at 18% and Consumer Staples at 18%.2

We estimate that 36% of the portfolio is invested in direct solutions which is significantly more than the benchmark index. The funds maps most closely to SDG 9 (Industry, Innovation & Infrastructure), SDG 3 (Good Health and Wellbeing) and SDG 12 (Responsible Consumption & Production. These represent 8%, 22% and 4% of the portfolio respectively.1

Impact stock example: Mahindra & Mahindra Ltd

This is where we take a company that the fund invests in and tell you more about what it does to show you how your money can count for more.

This is one of India's most respected and successful industrial groups, run by the 3rd generation of the founding family. It supplies agricultural machinery which supports India's sustainable development. As holder of the country's dominant tractor franchise, Mahindra is well placed to help farmers improve productivity with mechanisation. The company also provides a range of services from clean energy to IT-outsourcing, social housing development and inclusive finance (affordable financial products for rural communities).

Stewart Investors Asia Pacific Sustainability - Silver medal

This Fund aims to achieve capital growth for investors over the long term (at least five years). It invests in shares of companies in the Asia Pacific region which are positioned to benefit from and contribute to sustainable development. 

The investment process mirrors the Asia Pacific Leaders Fund, seeking companies that contribute to positive social and environmental sustainability outcomes, but has a broader remit in terms of the size of companies it will consider. Both funds are managed by David Gait and Sashi Reddy.  

Like the Asia Pacific Leaders fund it has greater exposure to India than its benchmark and a lower exposure to China. It also finds attractive opportunities in Japan. India is the largest geographic exposure, at 41% of the fund, whilst 10% is in Taiwan and 9% in Japan. The main industry exposures are Technology at 20%, Consumer Staples at 17% and Healthcare at 16%. 2

We estimate that 36% of the portfolio is invested in direct solutions which is significantly more than the benchmark index. The fund is notably aligned with SDG 9 (Industry, Innovation & Infrastructure), SDG 3 (Good Health and Wellbeing) and SDG 12 (Responsible Consumption & Production). These represent 9%, 19% and 4% of the portfolio respectively. 1

Impact stock example - CSL 

Australian firm CSL developed an influenza vaccine during the Spanish Flu pandemic, over 100 years ago, and is currently one of the largest providers of such vaccines. Today, the main business is blood plasma-derived products which treat bleeding disorders, rare and serious infections, and autoimmune diseases. CSL also manufactures a vaccine for cervical cancer and products that speed up recovery times following heart surgery, organ transplants and burns. The firm’s mission is to help people with life-threatening conditions to live full lives and it is well placed to benefit from growing demand for its products in emerging markets where access to treatment is improving.

Stewart Investors Global Emerging Markets Sustainability - Silver medal

This Fund aims to achieve capital growth over the long term (at least five years). It invests in shares of companies listed, or that undertake most of their activities, in Emerging Markets which are typically countries categorised by the World Bank as middle or low-income. 

Emerging Markets have the potential to benefit from higher growth than more developed markets as they mature over time, but this may be associated with higher risk.

The fund has most exposure to India which accounts for 35% of the portfolio followed by China at 14%, with Japan and Taiwan both at 9%. The biggest industry weightings are Technology, which represents 26% of the portfolio, Consumer Staples at 25% and Financials at 11%. 2

We estimate that 29% of the portfolio is invested in direct solutions which is significantly more than the benchmark index. The fund maps most closely to SDG 2 (Zero Hunger), SDG 3(Good Health & Wellbeing) and SDG 9 (Industry, Innovation & Infrastructure). These represent 3%, 14% and 9% of the portfolio respectively. 1

Impact stock example: Tata Consultancy Services (TCS)

TCS is a leader in global IT and business consulting, based in Mumbai. It is a large employer and investor in the Indian economy and one of the biggest employers of women in the private sector. The firm is well positioned to contribute to the efficiencies created by the digital economy. It helps improve digital infrastructure and enhance productivity for both the public and corporate sectors. Tata Group own a majority shareholding and the Tata code of ethics instils a strong sense of commitment to sustainability, community, and the ethos of the group. 

Stewart Investors Indian Subcontinent Sustainability- Silver medal

This fund aims to achieve capital growth over the long term (at least five years). The Fund invests companies based in or having significant operations in India and may invest in Pakistan, Sri Lanka, or Bangladesh. 

Whilst this area may offer attractive growth prospects as the economy develops, the narrower focus on one country means investors should expect the investment to be more volatile than funds with a broader remit. 

India currently represents 92% of the portfolio and 3% is allocated to Bangladesh. The fund is fairly concentrated with 39 holdings but is well diversified across different industries. The biggest exposures are Industrials which account for 21% of the portfolio, Financials at 18% and Consumer Discretionary at 15%. 2

We estimate that 22% of the portfolio is invested in direct solutions to the SDGs which is significantly more than the benchmark index. The funds maps most closely to SDG 1 (No Poverty), SDG 3 (Good Health & Wellbeing) and SDG 9 (Industry, Innovation & Infrastructure). These represent 3%, 14% and 4% of the portfolio respectively. 1

Impact stock example: Tube Investments of India 

Tube is an engineering company that specialises in bicycles, chains, and precision steel tubes, sold in India and internationally. The Group has strong market positions in products serving India's booming cycling industry. Rapid urbanisation, the rise of 'mega' cities, and the growing focus on healthy lifestyles have created strong sustainability tailwinds for the bicycle industry. The Murugappa founding family stand out for their stewardship record, including advancing the sustainability positioning of the businesses. The family is also dedicated to helping the vulnerable in society.

Stewart Investors Worldwide Leaders Sustainability - Silver medal

The Fund aims to achieve capital growth over the long term (at least five years). It invests predominantly in shares of large and mid-sized companies listed around the world which typically have a total stock market value of at least US$3bn. 

Companies listed in developed regions like the US and Europe tend to be larger on average and more mature. However, the Fund may also invest in emerging markets. 

The fund has 37 holdings which are well diversified across both geographies and industries. The US accounts for 39% of the portfolio, with India at 15% and Germany at 9%. The biggest sector exposures are technology which accounts for 31% of the portfolio, Healthcare 21%, and Industrials 19%. 2

We estimate that 56% of the portfolio is invested in direct solutions to the SDGs which is better than the benchmark index. The funds maps most closely to SDG 3 (Good Health & Wellbeing), SDG 9 (Industry, Innovation & Infrastructure) and SDG 16 (Peace, Justice & Strong Institutions). These represent 22%, 16% and 10% of the portfolio respectively. 1

Impact stock example: Fortinet

Fortinet is a US cybersecurity company that develops hardware and software services, including firewalls, anti-virus, intrusion prevention and security. It provides vital protections in an increasingly digital (online) world. The company was founded in 2000 by Ken and Michael Xie, who continue to advocate social responsibility to make the world a safer and more sustainable place. Fortinet serves customers across the financial services, telecoms, education, healthcare, government, and retail sectors and is set to benefit from the rollout of 5G broadband and increasing volumes of data and transactions. 

Stewart Investors Worldwide Sustainability - Gold medal

The Fund aims to achieve capital growth over the long term (at least five years). It invests in shares of listed companies, without any constraints on size, in both developed and emerging markets. The fund is not managed with reference to a specific benchmark, and it has lower exposure to the US and higher exposure to Europe than you would typically find in a global fund. 

There are 49 holdings spread across both geographies and industries. Europe & Middle East accounts for 32% of the portfolio, with North America at 30% and Emerging Markets at 10%. The biggest sector exposures are Technology which accounts for 39% of the portfolio, Healthcare 28%, and Industrials 17%. 2

We estimate that 75% of the portfolio is invested in direct solutions to the SDGs. The fund maps most closely to SDG 3 (Good Health & Wellbeing), SDG 9 (Industry, Innovation & Infrastructure) and SDG 12 (Responsible Consumption & Production). These represent 28%, 17% and 11% of the portfolio respectively.1

As with its stablemates in this range, sustainability is key to the approach but a broader investment universe means that this fund is able to deliver more in the way of positive solutions and as a result it receives a gold medal. 

Impact example:  DiaSorin 

DiaSorin is an Italian multinational biotechnology company that manufactures equipment for testing bodily fluids to detect diseases. This allows for early and accurate diagnosis and in turn improves treatment quality and likelihood of patient recovery. Sales of consumables are growing due to a larger installed base of instruments and around 10 new tests being added each year. DiaSorin supports innovation through partnerships with research centres and clinics to improve diagnostics technology. 

1 Source: TBE assessment January 2022

2 Source: Fund factsheets 28 February 2022

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. 

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). 

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