Embed Size (px)
Citation preview
CLIMATE TRENDS SUSTAINABLE
Beyond Green Bonds
2
dpamfunds.com
FUNDAMENTAL EQUITY
FIXED INCOME
QUANTITATIVE EQUITY
MULTI ASSETS
SUSTAINABLE INVESTMENT
3
WHY? STRATEGY
HIGHLIGHTS
Investment Philosophy & objectives
Investment Process
Risk Management
Investment Team
Why Climate Change?
Why Beyond Green Bonds?
Why Sustainable?
Why Climate Trends Sustainable at DPAM?
4
WHY?
Why Climate Change? Why Beyond Green Bonds? Why Sustainable? Why Climate Trends Sustainable at DPAM?
Climate change is real and top of mind for both investors and policy makers for decades to come …
Climate change will disrupt a wide area of sectors impacting financial asset valuation (incl. fixed income) whilst creating opportunities
Green bonds allow investors to combine positive environment benefits
without sacrificing returns
Climate change is a global phenomenon and requires action from both governments and companies
WHY CLIMATE CHANGE?
5
STRATEGY HIGHLIGHTS
WHY?
A timely transition towards a low-carbon economy will require substantial investments … in both climate challengers and enablers in addition to green bonds
Opening the investment universe beyond green bonds allows for more diversification resulting in an unbiased and robust bond portfolio that can serve as a building block for all EUR investors
Our proprietary investment universe EMERALD forms the basis of a research-driven investment process that unites a focus on climate change with broader sustainability criteria, fundamental research and active portfolio management
WHY BEYOND GREEN BONDS?
6
STRATEGY HIGHLIGHTS
WHY?
7
WHY BEYOND GREEN BONDS - Green bonds alone will not do the trick -
Source: Bloomberg, New Climate Economy, MSCI, Unicredit, DPAM, 11.2019
STRATEGY HIGHLIGHTS
WHY?
8
WHY BEYOND GREEN BONDS - What about the typical risk/return relationship -
STRATEGY HIGHLIGHTS
WHY?
9
WHY BEYOND GREEN BONDS - Some meaningful compositional differences vs. Aggregate Index -
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
EUR Green Bond Index (*) Global Green Bond Index(*)
BB EUR Aggregate Index BB Global Aggregate Index
Treasury Industrial Financial Utility Government-Related Securitized
Source: Ishares, Bloomberg, DPAM, 30.09.2019
STRATEGY HIGHLIGHTS
WHY?
10
WHY BEYOND GREEN BONDS - There are only a few country issuers (for the time being) -
STRATEGY HIGHLIGHTS
WHY?
11
WHY BEYOND GREEN BONDS - Taking it one step further -
Source: Ishares, Bloomberg, DPAM, 15.11.2019 The size of the donuts represent the 1M Value-at-Risk from the different investment universes (95% confidence interval). Bloomberg Barclays Point Global Risk Model
is used for all calculations
STRATEGY HIGHLIGHTS
WHY?
12
WHY BEYOND GREEN BONDS - Green bonds alone will not do the trick -
Source: DPAM, Bloomberg, Ishares, , DPAM, 15.11.2019
Update 15 Nov 2019EUR Green Bond Index
(*)
Global Green Bond
Index (*)
BB EUR Aggregate
Index
BB Global
Aggregate Index
General
Nr. issues 232 433 5515 24623
Market Value (EUR) 212.71 bln 330 bln 11.87 trn 59.19 trn
Average Rating A+ A+ A+ AA-
% EUR 100% 66% 100% 24%
Risk & Return
YTW 0.26% 0.90% 0.17% 1.43%
OAS 0.65% 0.67% 0.62% 0.42%
Duration 8.85 7.72 7.27 7.24
1M VaR (95% - Vol/Tail Risk) 2.43% 2.46% 2.03% 3.37%
Yield Curve 99.67% 70.98% 97.63% 24.32%
Spread -0.12% -2.52% 2.37% -3.08%
> Swaps -0.74% -0.16% -0.35% -0.27%
> Spread Gov -0.08% -1.18% 3.01% -1.45%
> Spread Credit & EMG 0.70% -1.18% -0.30% -1.36%
FX - 31.17% - 79.18%
Expected Volatiltiy 5.24% 5.31% 4.40% 7.36%
Expected Shortfall 3.13% 3.19% 2.63% 4.55%
* Green Bond Indices are "risk proxied" by Ishares ETF
STRATEGY HIGHLIGHTS
WHY?
A greater focus on environmental, social and governance factors benefits the whole society
In the long run, implementing sound ESG management can have its say in the future credit ratings
ESG integration improves the construction of risk-return profiles for the identification of investment opportunities
ESG aware issuers are better positioned to avoid financial risks
WHY SUSTAINABLE?
13
STRATEGY HIGHLIGHTS
WHY?
WHY CLIMATE TRENDS SUSTAINABLE AT DPAM ?
Actively managed aggregate fund WITH DYNAMIC RISK APPROACH
SUSTAINABILITY APPROACH based on a combination of screenings, analysis and engagement
UNIQUE COMBINATION Thematic, sustainable & all-season fixed income portfolio
DPAM is a PIONEER IN SUSTAINABLE INVESTING since 2002. Active ownership and ESG across asset classes and themes
PERFORMANCE-DRIVEN, centralized asset management in Brussels
UNITING RESEARCH & SUSTAINABILITY The added value relies on the interaction between Credit, ESG and PM teams
EXPERIENCED MANAGEMENT TEAM supported by in-house Buy Side Research Team
SUSTAINABLE INVESTOR
ACTIVE ASSET MANAGER
RESEARCH DRIVEN
DPAM is an independent active asset manager part of a family owned GROUP WITH ITS ORIGINS IN 1871
CLIENT-DRIVEN, creating long-term partnerships with our customers with an international network of 8 local offices across Europe
14
STRATEGY HIGHLIGHTS
WHY?
A SOLID SUSTAINABLE TRACK RECORD
15
SIGNATORY OF UN-PRI SINCE 2011
Highest rating A+ for our expertise
OVER A 17 YEAR TRACK RECORD
in sustainable investing
PIONEER IN SUSTAINABLE SOVEREIGN DEBT
over EUR 2.5 bn invested
EUR 6.6 bn IN SUSTAINABLE STRATEGIES,
across various asset classes
All sustainable funds accredited with the
INDEPENDENT LUXFLAG ESG LABEL
EXERCISE OUR VOTING RIGHTS IN 465 COMPANIES
in Europe and North America
ACTIVELY ENGAGED IN DIALOGUE WITH + 75
COMPANIES regarding corporate
governance practices
Supporter of TCFD RECOMMENDATIONS and
SIGNATORY OF THE CLIMATE ACTION 100+
STRATEGY HIGHLIGHTS
WHY?
16
STRATEGY HIGHLIGHTS Investment philosophy Investment objectives Investment process Risk management Investment team
CLIMATE CHANGE FOCUS
RESEARCH DRIVEN
ACTIVE
SUSTAINABLE RISK DIVERSIFICATION
Conviction Aggregate
Flexible
ESG Screening +
Climate Assessment
Relative VaR approach
(1%)
Leverage on in-house expertise ESG, credit &
macro
Green Bonds Green Challengers
Green Enablers
INVESTMENT PHILOPSOPHY
17
STRATEGY HIGHLIGHTS
WHY?
18
CLIMATE CHANGE FOCUS
STRATEGY HIGHLIGHTS
WHY?
INVESTMENT OBJECTIVES
Channel investments towards issuers who are committed to tackle climate change Outperform Bloomberg Barclays EUR Aggregate Total Return Index over a 3y rolling period
19
STRATEGY HIGHLIGHTS
WHY?
CLIMATE ASSESSMENT
PORTFOLIO CONSTRUCTION
(GENERAL) ESG SCREENING
INVESTMENT PROCESS
CREDIT & MACRO
ANALYSIS
20
STRATEGY HIGHLIGHTS
WHY?
21
CLIMATE ASSESSMENT
STRATEGY HIGHLIGHTS
WHY?
22
USE OF PROCEEDS PROJECT EVALUATION MGMT OF PROCEEDS REPORTING
Bonds should finance projects with environmental benefits in one of the eligible sectors
Second Party Opinion OR Climate Bonds Label OR Green Bond Rating
IN LINE WITH THE OVERALL STRATEGY
Disclosure of environmental objectives, evaluation process and eligibility criteria of financed projects
Availability of a ring-fencing process for the bond’s proceeds, ideally confirmed by an independent party
Annual disclosure on the funded green projects with a brief description and the expected impact
- In line with the Green Bond Principles -
GREEN BOND ASSESSMENT
1 2 3 4
GREEN BONDS
CLIMATE ENABLERS
CLIMATE CHALLENGERS
STRATEGY HIGHLIGHTS
WHY?
23
USE OF PROCEEDS PROJECT EVALUATION MGMT OF PROCEEDS REPORTING
Norwegian energy efficient residential buildings
Clearly set criteria based on building code requirements and cooperation with a specialised consultant
Lower ESG risk due to residential nature
Committee responsibility (steering and review)
Verified by EY
Portfolio approach ensures ring-fencing
Annual commitment to report, including verified impact reporting (energy consumption and savings, reduced GHG emissions)
- In line with the Green Bond Principles -
GREEN BOND ASSESSMENT - EXAMPLE
1 2 3 4
GREEN BONDS
CLIMATE ENABLERS
CLIMATE CHALLENGERS
Second Party Opinion OR Climate Bonds Label OR Green Bond Rating (Sustainalytics)
STRATEGY HIGHLIGHTS
WHY?
24
USE OF PROCEEDS PROJECT EVALUATION MGMT OF PROCEEDS REPORTING
Wind energy and energy-efficient buildings
Clearly set categories
Only investments in the 15% most energy-efficient buildings of a city
Internal Green Bond Committee (steering and review)
Portfolio approach ensuring ring-fencing
Third-party verification commitment
Annual reporting commitment including impact metrics (energy savings and reduced CO2 emissions)
- In line with the Green Bond Principles -
GREEN BOND ASSESSMENT - EXAMPLE
1 2 3 4
GREEN BONDS
CLIMATE ENABLERS
CLIMATE CHALLENGERS
Second Party Opinion OR Climate Bonds Label OR Green Bond Rating
STRATEGY HIGHLIGHTS
WHY?
25
- Companies that are in line with a low carbon economy transition -
CLIMATE CHALLENGERS - COMPANIES
ENERGY TRANSPORATION MATERIALS AGRICULTURE, FOOD AND
FOREST PRODUCTS
Oil & gas + electric utilities Air Freight, Maritime and Rail Transportation, Automobiles and
Components, etc.
Metals & Mining, Chemicals, Construction Materials, Capital
Goods, Real Estate
Beverages, Agriculture, Packaged Foods and Meats, Paper and Forest Products
IS THE ISSUER PART OF THE KEY TRANSITION SECTORS?
IS THE ISSUER COMMITTED, PREPARED AND WELL-POSITIONED FOR THE ENERGY TRANSITION?
GOVERNANCE STRATEGY RISK MANAGEMENT METRICS & TARGETS
Management commitment to tackle climate change?
Business model aligned with the transition?
Climate-related risks properly managed?
Emissions reduction targets set?
TCFD aligned, carbon risk assessment
CLIMATE CHALLENGERS
CLIMATE ENABLERS
GREEN BONDS
STRATEGY HIGHLIGHTS
WHY?
26
- Companies that are in line with a low carbon economy transition -
CLIMATE CHALLENGERS - EXAMPLE
CLIMATE CHALLENGERS
CLIMATE ENABLERS
GREEN BONDS
ENERGY TRANSPORATION MATERIALS AGRICULTURE, FOOD AND
FOREST PRODUCTS
electric utilities
IS THE ISSUER PART OF THE KEY TRANSITION SECTORS?
IS THE ISSUER COMMITTED, PREPARED AND WELL-POSITIONED FOR THE ENERGY TRANSITION?
GOVERNANCE STRATEGY RISK MANAGEMENT METRICS & TARGETS
Management acknowledgment
TCFD supporter
Aligned with decarbonisation trend (divestment of oil & gas fields in 2017, phase-out coal by 2023)
TPI level 4 (management quality)
Steep decline CO2-intensity Low carbon risk of own
operations, low- medium resource use risk, no involvement in carbon-related controversies.
Quantitative, time-framed targets (SBT)
Increased share of renewables: 17% in 2006, 64% in 2017 and > 95 % in 2023 (target)
STRATEGY HIGHLIGHTS
WHY?
27
- Countries that are in line with a low carbon economy transition -
CLIMATE CHALLENGERS - COUNTRIES
IS THE ISSUER COMMITTED, PREPARED AND WELL-POSITIONED FOR THE ENERGY TRANSITION?
IS THE ISSUER MAKING PROGRESS TOWARDS A LOW-CARBON ECONOMY?
TARGETS FOSSIL FUEL/CLIMATE CHANGE
POLICIES OVERALL PERCEPTION OF
COMMITMENT
Targets set? Ambitious NDCs? Sufficient policies/plans/programs in place to reduce fossil fuel exposure?
Societal/regulatory/international scrutiny of climate change action? Overall positioning?
CLIMATE CHALLENGERS
CLIMATE ENABLERS
GREEN BONDS
SHARE OF RENEWABLE ENERGY GHG EMISSIONS REDUCTION
Significant evolution of renewable capacity and share of renewables in total energy mix?
Significant progress towards targets and pledges?
STRATEGY HIGHLIGHTS
WHY?
28
- Companies that have revenues coming from green sources -
CLIMATE ENABLERS
CLIMATE ENABLERS
GREEN BONDS
CLIMATE CHALLENGERS
SUSTAINABLE STRATEGY SOLUTIONS
Is the issuer a pure player with a clear sustainable strategy? Does the issuer offer products and/or services which facilitate the energy transition (with focus on the key TCFD sectors)?
Do these products represent a significant share of the revenue generation?
IS THE ISSUER A CLIMATE TRANSITION ENABLER?
STRATEGY HIGHLIGHTS
WHY?
29
- Companies that have revenues coming from green sources -
CLIMATE ENABLERS - EXAMPLE
CLIMATE ENABLERS
GREEN BONDS
CLIMATE CHALLENGERS
Royal DSM is a global science-based company active in Nutrition, Health and Sustainable Living. DSM delivers innovative solutions for human nutrition, animal nutrition, personal care and aroma, medical devices, green products and applications, and new mobility and connectivity.
DSM Clean Cow, a feed additive will be able to reduce cows’ methane emissions up to 30%.
Anti-oxidants, feed additives and smart packaging can slow down oxidation, extend shelf life and reduce waste.
20% of wild catch is used to produce fatty fish oil, of which 75% is fed back to farmed fish. Veramaris will produce natural Omega 3, enabling sustainable growth in the fish industry.
Stevia leaves contain a very low concentration of interesting tasteful molecules. Fermented stevia is more scalable, lower-cost, eliminates land use and provides a wider range of applications.
Carpet is one of the 5 biggest contributors to landfill. DSM’s Niaga carpets are fully recyclable, use 90% less energy, eliminate water use and volatile organic compounds and are easier to install and clean.
Solar panels: anti-reflective coatings can increase power gains and endurance backsheets can ensure lossless conductivity.
Paint and coatings: plant-based and waterborne resins provide an alternative to solvent-based paints, reducing volatile organic compound emissions by up to 50%
STRATEGY HIGHLIGHTS
WHY?
30
STRATEGY HIGHLIGHTS
WHY?
31
(GENERAL) ESG SCREENING
OUR SUSTAINABLE SCREENING
Based on 4 pillars
Controversies & Exclusions
Exclusion of armament, tobacco, pornography and gambling sectors
Exclusion of the most controversial companies (quantitative and qualitative criteria)
Exclusion non-compliant companies with the 10 principles of the UN global Compact
Normative ESG screening
ESG performance is included in the fundamental analysis.
Active voting policy and engagement
Qualitative ESG screening
Best in class approach: exclusion of the 10% WORST ESG scoring companies as compared to other companies in the benchmark within the same sector
Quantitative screening
COMPANIES
COUNTRIES
Exclusion of authoritarian non-democratic countries
Exclusion of the 10% countries with the lowest ESG score (internal model)
STRATEGY HIGHLIGHTS
WHY?
32
CREDIT & MACRO ANALYSIS
Fundamental analysis
Financial risk
Internal Financial Model
Free cash flows Credit metrics Off-Balance sheet figures Debt Maturity Profile Liquidity and financial flexibility Volatility of earnings Projections
Country/Macro risk Industry risk
Competitive position: Market position Diversification (business & geographical) Operating efficiency Management, risk appetite, track record Ownership/governance
Profitability / Peers comparison Regulation
Business risk
Valuation with regard to expectations and peers
Relative value
Capital structure
Subordination (Structural / Contractual) Covenants
Documentation High Yield bonds Corporate Subordinated financial debt (Tier 1 / LT2 )
Bond’s structural risk
STRATEGY HIGHLIGHTS
WHY?
33
TOP DOWN ASSESSMENT
MACRO- ECONOMIC ANALYSIS
GEO- POLITICAL ANALYSIS
MONETARY POLICY
ANALYSIS
INFLATION OUTLOOK ANALYSIS
VOLATILITY & SENTIMENT
ANALYSIS CREDIT & MACRO ANALYSIS
€ €
STRATEGY HIGHLIGHTS
WHY?
34
PORTFOLIO CONSTRUCTION
CONTINUOUS RISK/RETURN ASSESSMENT Interaction expertise/convictions with comprehensive risk model
Relative VaR approach
Max +1% vs. Bloomberg Barclays EUR Aggregate
1 month 95% confidence
Credit analysis PORTFOLIO
Issuer, sector, rating, allocation
Top-down assessment
Macro, risk regime
Climate focus
ESG screening + climate assessment
RISK MODEL
STRATEGY HIGHLIGHTS
WHY?
35
INVESTMENT CONSTRAINTS
Minimum issue size: € 250 million or equivalent in local currency
Maximum investment: the fund can buy maximum 5% of the issue size.
Rating: minimum 75% of the portfolio is invested in fixed
income securities with an investment grade rating (measured
on a net exposure basis).
Duration flexibility of 2.5 years around Bloomberg Barclays EUR aggregate
Maximum 25% can be invested in emerging market countries
Cash & term deposits: maximum 10%.
Use of derivatives: allowed
Currency hedging and management can be applied at the fund
manager’s discretion. There will be no more than 25% non-
EUR net currency exposure
PORTFOLIO CONSTRUCTION
STRATEGY HIGHLIGHTS
WHY?
36
- Risk management at all levels -
INVESTMENT PROCESS| RISK CONTROL
2ND LEVEL
PORTFOLIO & ORDER MANAGEMENT SYSTEMS OPERATIONS
3RD LEVEL
RISK, LEGAL & COMPLIANCE
4TH LEVEL
AUDIT
1ST LEVEL
PORTFOLIO MANAGEMENT
Ad-hoc control
Independent control
Permanent control
Permanent control
STRATEGY HIGHLIGHTS
WHY?
Years of Experience
Fund Manager 14
2007 DPAM: Fixed Income Fund Manager
2007 Degroof FMC: Quantitative Analyst
Education University of Ghent: Master in Banking & Finance University of Leuven: Postgraduate Taxation EHSAL Management School: Master in Commercial Sciences ICMA Fixed Income Certificate Chartered Alternative Investment Analyst
2006 Accenture: Financial Services Analyst
37
RONALD VAN STEENWEGHEN
STRATEGY HIGHLIGHTS
WHY?
Years of Experience
Fund Manager 13
2011 DPAM (previously DFMC): Fixed Income Fund Manager
2007 BNY Mellon: Market Controller Corporate Actions
Education International Capital Markets Association (ICMA) : Fixed Income Certificate (FIC) Louvain School of Management (IAG-LSM) (Belgium): Master in Management Sciences
2005 Eurochambers: Financial Assistant - European Aid Program AL-Invest III
38
ANAHI MACHADO TIRONI
STRATEGY HIGHLIGHTS
WHY?
Years of Experience
39
OPHÉLIE MORTIER Responsible Investment Strategist 15
2016 DPAM: Responsible Investment Strategist
2012 PIAM: Responsible Investment Coordinator
2009 PIAM: Fixed Income Macro-coordinator
2002 Pragma Consulting: Consultant Institutional Portfolio Managers
2005 Petercam: Institutional Sales and Account Manager
Education ICHEC Brussels(Belgium): Master in Commercial and Financial Sciences
STRATEGY HIGHLIGHTS
WHY?
HEAD OFFICE Belgium
LOCAL OFFICES
40
/showcase/ degroof-petercam-am/
Mainzer Landstrasse 50, 60325 Frankfurt am Main +49 69 27 40 15 295
Rue Eugène Ruppert 12, L - 2453 Luxembourg +352 45 18 581
DE LU
Rue de Lisbonne 44, F-75008 Paris +33 1 73 44 56 66
FR
Place de l’Université 8 , 1205 Geneva +41 22 929 72 23
Corso Europa 15, 20122 Milano +39 02 12412 4673
CH IT
Paseo de la Castellana 141, Planta 19, 28046 Madrid +34 91 5720 366
De Entree 238 A, 1101 EE Amsterdam +31 2 05 73 54 05
ES NL
+32 2 287 91 11
/degroofpetercam
degroofpetercam.com dpamfunds.com
Rue Guimard 18, 1040 Brussels Belgium
Dpam @degroofpetercam.com
publications.dpamfunds.com
Present documents do not constitute investment advice nor do they form part of an offer or solicitation for the purchase of shares, bonds or mutual funds, or an invitation to buy or sell the products or instruments referred to herein. Applications to invest in any fund referred to in these documents can only validly be made on the basis of the Key Investor Information Document (KIID), the prospectus and the latest available annual and semi-annual reports. These documents can be obtained free of charge at Degroof Petercam Asset Management sa, the financial service provider or on the website www.dpamfunds.com. All opinions and financial estimates herein reflect a situation at the date of issuance of the documents and are subject to change without notice. Indeed, past performances are not necessarily a guide to future performances and may not be repeated. Degroof Petercam Asset Management sa (“DPAM”) whose registered seat is established Rue Guimard, 18, 1040 Brussels and who is the author of the present document, has made its best efforts in the preparation of this document and is acting in the best interests of its clients, without carrying any obligation to achieve any result or performance whatsoever. The information is based on sources which DPAM believes are reliable. However, DPAM does not guarantee that the information is accurate and complete. Present documents may not be duplicated, in whole or in part, or distributed to other persons without prior written consent of DPAM. These documents may not be distributed to private investors and their use is exclusively restricted to institutional investors. For investors in Switzerland, the prospectus, the articles of incorporation of the fund, the latest activity reports and the key information documents are available free of charge at Bank Degroof Petercam (Switzerland) Ltd, 8 Place de l’Université, 1205 Geneva, Representative Agent and Paying Agent. It is reminded that past performances are not necessarily a guide to future performances and may not be repeated. Performance does not include commissions or fees charged on subscription or redemptions’ units.
The information contained in this mail and attachments (hereafter the ‘documents’) is provided for pure information purposes only.
DISCLAIMER
41
