Pros: This fund offers a multi-thematic investment approach where you can invest in companies working towards a variety of the SDGs. The fund impresses with high returns and a strong leadership team. Their impact calculator also provides clear impact reporting which evidences the benefits of your investment.
Cons: I can identify stock selections that are justified on tentative terms which makes me second guess how strictly they integrate ESG principles. The multi-thematic approach also spreads impacts across many different aims rather than achieving concentrated impacts.
Overall: WHEB Sustainability fund has truly impressed me as a fund. This fund is based around the complimentary relationship between financial returns and positive impact giving you the win-win of impact investing. Where this fund stands out to me is in their impact reporting. Although I have identified drawbacks of some stock selections which could put off some investors who want tighter ESG frameworks, the impact calculations outperform other funds on positive impacts. The quarterly report, portfolio holding document and impact report also provide swathes of information about what the fund is achieving for sustainability giving you peace of mind you are truly investing in an impact fund.
WHEB Sustainability Fund contains £180 million in assets spread across 46 holdings as of December 2020. The fund invests exclusively in companies providing solutions to sustainability challenges. The fund is a multi-thematic, global listed equity fund with a mid-cap and unconstrained investment strategy. The global nature of equity holdings and mid-cap approach exposes the fund to volatility landing it with a risk profile of 5/7.
Top 10 Holdings: Company | Holdings (%) | Industry | Sustainalytics ESG Score |
Keyence Corp | 3.2 | Technology Hardware | 13.7 (Low risk) |
MSA Safety Inc | 2.9 | Healthcare | No Data |
Daifuku Ltd | 2.9 | Commercial Services | 31.0 (High risk) |
Ansys Inc | 2.9 | Software & Services | 14.9 (Low risk) |
Cerner Corp | 2.9 | Healthcare | 19.9 (Low risk) |
Orpea SA | 2.9 | Healthcare | 25.0 (Medium risk) |
Linde Plc | 2.9 | Chemicals | 10.0 (Low risk) |
Icon Plc | 2.9 | Healthcare | No Data |
Danaher Corp | 2.8 | Healthcare | 32.7 (High risk) |
Royal DSM | 2.8 | Environmental Services | No Data |
The top 10 holdings have an overall weighted ESG score of 20.86, Identifying a medium ESG risk level just above low risk threshold of 20. Identifying outliers, Daifuku and Danaher Corp are suppliers of material handling systems and laboratory equipment respectively. Daifuku high ESG risk would be justified under the companies ‘energy efficiency’ gains and Danaher as a ‘healthcare’ provider. Yet, neither really create the positive impact you would want as an investor, especially with the job loss implications of Daifuku’s role in warehouse automation. This puts doubts on how strictly the allocations match up to ESG principles, however, overall the ESG scores point to a well-constructed portfolio.
Moreover, the fund also has an impact calculator which is generated by analysing the end users of the products and services produced by companies in the fund. The one-year benefits of investing £10 million in the fund are 8,000 MWh of renewables generated, 8,500 tonnes of CO2 emissions avoided, and 1,540 tonnes of waste material recycled or recovered. Although these numbers are abstract, when compared to Impax Environmental Markets (a market leader in ESG impact funds), this fund beats it in every category with between two and five times the impacts of the Impax fund.
The fund describes itself as a multi-thematic impact fund. This means that as an investor you will be investing in companies in a wide variety of sectors. As of December 2020 these themes are clean energy (7%), health & well-being (32%), industry, innovation & infrastructure (18%), responsible consumption & production (8%), water & sanitation (7%) and education (3%). Negative ESG screening is also used in the instance when a company goes over WHEB’s sustainability threshold. This follows the companies mantra of ‘growth at the right price’ whereby even if a firm has high growth prospects, they will not compromise their priority for positive impacts.
WHEB also states that companies must derive at least half of their revenue from a ‘positive impact’. This positive impact, however, is not transparently or easily defined by the company. Positive impacts given include renewable energy production, water treatment and other undeniably positive outputs but others regarding healthcare and energy efficiency are lacking clarity. It must be said that quantifying and defining all these benefits is very difficult and WHEB makes a very impressive attempt but there is more to be done in this space.
The fund is managed by Ted Franks. He joined WHEB in 2009 and launched the Sustainability Fund in June of that year. He has extensive experience in renewables, waste, and healthcare sectors. It looks like he has built a career in banking around sustainability-related sectors so seems well-placed for such a fund and to get the most impact out of your money. To top it off, the fund won the best ESG Impact Fund in the ESG Investing Awards 2021 clearly showing commitment above other asset managers when it comes to impact investing.
WHEB Asset Managers also have many of the characteristics you would want from an ethical asset manager. Their mission statement is 'to advance sustainability and create prosperity through positive impact investments’. To back this up they have received a rating of A+ in all categories from the PRI. They are also a certified B Corporation which means their corporate purpose is to be for the benefit of all stakeholders, not just shareholders. The only caveat to this positivity is they are owned by Pengana Capital Group which are much less transparent about their sustainability and own many other asset managers who will inevitably invest in fossil fuels and other unethical investments.