Pengana WHEB Sustainable Impact (HHA0007AU) Report & Performance

The Fund delivered positive returns in July of +1.4%.

Sustainable Transport and Environmental Services were the strongest themes during the month due to holdings in JB Hunt and Smurfit Kappa, respectively. The prospect of an inflecting freight cycle buoyed specialist intermodal shipper JB Hunt. Cardboard packaging maker Smurfit Kappa rose in anticipation of an improvement in demand as consumer confidence slowly rebuilds.

The Wellbeing theme also performed well driven by the position in HelloFresh. The company reported results with much healthier profits than the market expected.

On the other side of the ledger there were negative contributions from the Safety and Cleaner Energy themes.

Within Safety, MSA Safety performed poorly due to fears of weak demand. Just after the month end, excellent results from the company rebutted this pessimism.

Within Cleaner Energy, SolarEdge and Enphase underperformed. SolarEdge shares were weak due to concerns that high inventory levels in the channel and lower US demand would lead to compressed earnings growth for the duration of the year. Enphase released guidance that disappointed as higher interest rates are dampening demand for residential solar.

This was partially offset by the outperformance of First Solar, also in the theme, which released a strong set of results for Q2 23 and announced a large, long-term contract as well as another new US manufacturing facility.

It is now nearly six years since Sir David Attenborough and the BBC debuted Blue Planet 2. The series was the catalyst for a worldwide campaign to reduce the amount of plastic waste entering natural ecosystems and particularly the world’s oceans. With a Blue Planet 3 series now in the offing, Seb Beloe considers how much progress has been made in reducing plastic pollution.

WHEB are pleased to announce the launch of their ninth annual Impact Report. We believe it represents yet another step forward in terms of quality and insight and hope that readers will find it useful. We invite you to visit our impact microsite to view the report and calculate the impact associated with your investment in the Fund.

We are delighted that the Fund was, for a second consecutive year, awarded New Zealand-based Mindful Money’s award for Best Overseas Ethical Fund. The judges were impressed by the framework for stewardship and avoiding harmful investments, including cases where a lack of progress has resulted in divestment. The fund was described as setting a high standard for reporting on the positive impact from companies in the portfolio, along with excellent communication to financial advisers and clients.

During the month, the Fund was re-certified by the Responsible Investment Association Australasia (RIAA).

The Fund fell in April as key sustainability sectors including semiconductors, manufacturing, and automotive underperformed; and many of the larger cap growth stocks which do not meet our thematic criteria remained resilient in the face of higher interest rates.

In a society riddled with low self-esteem and mental health issues, Claire Jervis discusses whether Novo Nordisk’s diabetes and weight loss drug, which has become a TikTok sensation and branded a miracle weight loss drug, can or should be considered positive impact.

Following a strong start to the year in January, global equities ended February with a further 2.0% gain despite investors worrying that interest rates may remain higher for longer than previously thought. The Fund returned 1.4% over the same period.

While investing in water can be an excellent way to make a genuine positive environmental impact, Ty Lee (Associate Fund Manager) explains, in this month’s commentary, how investors need to be cautious and focus on investing in companies that contribute directly to improving water quality and water management.

We are delighted that the FP WHEB Sustainability Fund, which investment strategy the Pengana WHEB Sustainable Impact Fund implements, recently won the award for Best ESG Global Equity Fund from MainStreet Partners, a London-based ESG Advisory and Portfolio Analytics firm. The awards recognise a select number of funds and asset managers that have excelled within the universe of 5,800 Funds, managed by over 300 Asset Managers.

At WHEB, we’re big fans of battery electric vehicles (BEVs). Approximately 8% of the strategy is invested in companies with exposure to BEVs and their value chains. We have also recently launched a scheme internally enabling the WHEB team to have easier and cheaper access via a BEV leasing scheme. But outside our organisation, some people remain unconvinced. In this month’s commentary, Head of Research Seb Beloe explains our position.

Global stock markets rebounded in October. As in recent periods, macroeconomic concerns such as inflation and interest rate expectations played a big role in market movements. There has been a subtle shift in the narrative as fears of recession have increased. Although a recession will put downward pressure on company earnings, it would also support less aggressive interest rate increases (seen as positive for stocks).

On the other hand, from a fundamental perspective, a recession will put downward pressure on company earnings. Because of this balancing act between economic data and earnings risk, markets continued to be volatile despite the overall upward move.

Our Fund returned 6.9% versus the MSCI World which returned 7.8%. Stronger performance in the Sustainable Transport theme was offset by the returns of our Resource Efficiency and Health themes.

August was a month of two halves for Global Equity markets. At the beginning of the month, investors were upbeat following a better-than-expected earnings season. This soon gave way to broader macro concerns, with equity markets selling off sharply in the latter stages of the month.

Since Richard Nixon led the world by signing the US’ Clean Air Act at the end of 1970 with bipartisan support, there have been many false dawns in the delivery of meaningful Federal policy on climate change. The consequence has been that the United States earned a reputation as a climate laggard. In this month’s commentary, Seb Beloe discusses the significance of the US’ recently passed Inflation Reduction Act with both spending provisions and tax breaks and aimed at lowering greenhouse gas (GHG) emissions and health care costs.

We are pleased to announce that Pengana has been named a Responsible Investment Leader by the Responsible Investment Association Australasia in its landmark annual Responsible Investment Benchmark Report launched this month. This recognises our commitment to responsible investing and attributes as an investment manager.

August was a month of two halves for Global Equity markets. At the beginning of the month, investors were upbeat following a better-than-expected earnings season. This soon gave way to broader macro concerns, however. The turn in sentiment followed comments from the US Federal Reserve. The Fed stated they would “use our tools forcefully” and inflict “some pain”. As the month finished, the MSCI World had declined -2.5%.

The Fund underperformed the index returning -5.9% reversing a large portion of July’s outperformance. Strength in Water Management was offset by Resource Efficiency, Environmental Services, and Well-being.