Pengana Capital launches calculator for environmental, social impacts

The Pengana WHEB Sustainable Impact Fund has launched an innovative new calculator that will measure and report on its social and environmental impact and will allow investors to see the positive impact of their investment dollars.

The Pengana WHEB Sustainable Impact Fund was launched in August 2017 and the fund is available on three platforms – OneVue, Hub24 and Powerwrap and the minimum investment is $10,000. The Responsible Investment Association Australasia (RIAA) has certified the Pengana WHEB Sustainable Impact fund as a responsible investor.

The fund “only invests in companies that create a positive social or environmental impact or produce goods and services that address the challenges of sustainability,” and is managed by WHEB Asset Management in the UK. WHEB has identified critical environmental and social challenges facing the global population over the next few decades and invest in a range of companies which provide solutions to these challenges. The calculator notes the positive impacts of individual investments – for example, a $10,000 investment  generates 7 MWh or renewable energy, avoids 9 tonnes of CO2 emissions, treats 114,300 litres of waste water, equivalent to the annual total production of one Australian household, and provides 176,000 litres of drinking water.

Adam Myers, executive director of Pengana Capital Group, gave the following responses to Audacious Investing on the launch of the Impact Calculator and what they hope investors will learn from using it:

Audacious Investing: What is the Impact Calculator and why was it launched?

Adam:  WHEB have a simple mission statement: advance sustainability and create prosperity through positive impact investments. Sustainability and the positive relationship between financial returns and positive impact is central to everything that WHEB do, and is the reason many investors are attracted to the strategy.

The Impact Calculator is derived from the annual Impact Report and the extensive work that WHEB do to connect their investors with their investments in the fund and the actual impact that they are having on the planet through their investments. The calculator provides a simple and tangible way for investors to visualise the impact that their investment can make, through an online tool.

Audacious Investing: How and why should investors access it?

Adam:  Accessing the calculator provides investors with an indication of the positive impact associated with their investment in the Fund. WHEB are leaders in the field of impact reporting however the measurement of the positive impact of products and services is still very new. This calculator will be updated on an annual basis and each year it will be extended to reflect the impact that can be calculated from the availability of more data and progress with regard to calculation methods.

Audacious Investing: What is the calculation method?

Adam: WHEB invests in companies that benefit from, and enable the shift to a more sustainable economy. But the classification of these companies is quite complex and WHEB has designed a 4 tier approach to deal with this classification:

Tier 1 – Companies that sell products or services that self-evidently meet this definition, for example companies that sell wind turbines or efficient lighting systems

Tier 2 – Companies that sell components for products that have a positive impact

Tier 3 – Companies provide the enabling tools or infrastructure that in turn support the development and deployment of products and services that have a positive impact

Tier 4 – Companies which provide maintenance or monitoring services to support this low carbon infrastructure or technology

The fund invests in all these types of businesses and each has to be measured and mapped differently. The following table from the 2016 Impact report gives examples of the tiers:

At the moment WHEB are only mapping environmental impact and approximately 60% of the fund is invested in environmental themes. Of these companies 43% report data they have been able to use or data that can be easily aggregated into final impact data. For a further 35% they have had to use industry-level data to estimate the impact that the company had had over the year. The remaining 22% do not report data or it is not currently possible to quantify the positive impact of the business.

The level of impact is associated with the level of ownership

Audacious Investing: How is it different to other ESG products available in the market?

Adam: We believe that the investment strategy has several competitive advantages which differentiate it from its competitors:

  1. Experience and length of track record – The WHEB Listed Equity Strategy has been employed by the FP WHEB Sustainability Fund since 30 April 2012. Senior members of WHEB previously ran the Henderson ‘Industries of the Future’ and ‘Global Care’ funds, the former of which employed what is now embodied in the WHEB Listed Equity Strategy. Therefore, the track record can be traced back to 1 January 2006.
  2. Sustainability is ‘built in’ to our investment strategy as a source of investment return, rather than ‘bolted-on’ as a modification of another investment approach as is the case for many competing products. As a result, the Fund provides a natural answer to a wide range of client motivations including traditional ethical exclusions, divesting from fossil fuels, ESG investing, ’stewardship’, impact Investing, positive solutions and sustainability themes.
  3. WHEB have a holistic approach to sustainability, considering both social and environmental themes. This means we have a more complete view of the long term challenges and opportunities a company faces, and the resulting portfolio is broadly based and diversified. Many other ‘thematic’ funds are much more narrowly based.
  4. WHEB only invest in companies which fit the definition of providing a ‘solution to a sustainability challenge’ and we are disciplined (and transparent) about applying this definition. We are therefore less likely to suffer the charge of ‘greenwash’ from our ultimate clients, which can stem from more ESG based approaches which can paint a confusing picture when picking the ’best in class’ companies across all sectors (including controversial sectors like the oil and gas sector).
  5. WHEB consider how a company addresses ESG risks and opportunities as an integrated part of our investment analysis, and believe that this gives us a competitive edge in identifying high quality investment opportunities. Many other investors who consider ESG, do so separately from their investment analysis as a screen or an overlay. In our view this approach is more likely to operate as a constraint on the fund manager and less likely to deliver investment insights.

6.WHEB are longer term investors, with a current average holding period of around 5 years.  This compares with c6 months for the average mutual fund in the US and the UK.  These two contrasting figures point to fundamentally different investment approaches.  The problem for many fund managers is that they portray themselves as being fundamental investors, but much of their analysis is rendered irrelevant as they behave as short-term traders.

  1. WHEB are structured as a partnership and certified as a B Corporation WHEB are enabled (and incentivised) to make longer term business decisions, and focus on the interests of our clients, in a way that many of our competition do not. Investment Management Companies which are listed on stock exchanges or that are divisions of larger financial institutions are typically subject to much shorter term targets and decision making, which generally places the interests of the shareholder ahead of those of clients.

8. As part of point 7 above, WHEB have a unique focus on transparency and governance, which gives clients confidence that they will remain consistent in style, philosophy and the promise made to investors.  The Investment Advisory Committee meets 3 times annually to challenge the team, and the minutes of this meeting are published.  No competitors do this.

  1. WHEB were the first impact strategy on the Global Impact Investing Network (GIIN) database.

10. WHEB were the first listed equity strategy to publish an impact report on the fund and are widely considered to be a leading proponent of impact investing in listed equities.