Pengana Capital Group Ltd. · ASX:PCG
Pengana Capital — FPA March 2023
25 slides from Pengana Capital's conference presentation, March 2023
Slide 1: ESG Investing: Small Companies
ESG INVESTING SMALL COMPANIES UNDERSTANDING THE CHALLENGES HARNESSING THE OPPORTUNITIES ADAM MYERS Executive Director & Responsible Investing Specialist Pengana Capital Group
Slide 2: Putting ESG to the Test
Source: Bloomberg Criticism Mounts 60 80 100 120 140 160 180 1/02/2021 PUTTING ESG TO THE TEST 1/03/2021 1/04/2021 1/05/2021 1/06/2021 1/07/2021 1/08/2021 1/09/2021 1/10/2021 1/11/2021 S&P Global Clean Energy Index 1/12/2021 1/01/2022 1/02/2022 1/03/2022 1/04/2022 1/05/2022 1/06/2022 1/07/2022 Coal
Slide 3: A Global Movement
A GLOBAL MOVEMENT Growth in Signatories - UN PRI AUM, total number of signatories and number of asset owner signatories all increased Assets under management (US$ trillion) No. of Signatories Assets under management (US$ trillion) AO AUM (US$ trillion) Number of AOs Number of Signatories *Total AUM
Slide 4: So What Are We Really Talking About
SO WHAT ARE WE REALLY TALKING ABOUT Traditional Investments Responsible Investments Philanthropy Financial Negative ESG Sustainability Impact and Impact over Impact Focus Only Screening Integration themed return aligned return Only Financial Goals Target competitive risk-adjusted Accept low risk- Ac
Slide 5: Connecting with Real World Impact
CONNECTING WITH REAL WORLD IMPACT $1M invested in the strategy during 2021 … CLEANER ENERGY ENVIRONMENTAL SERVICES HEALTH WATER MANAGEMENT Generating Recycling or recovering 65 Avoiding 209 MWh 20 tonnes People provided with healthier lives 278.5k litres of renewable energy of waste materials throug
Slide 6: Interrelated Challenges
INTERRELATED CHALLENGES Misleading Inconsistent Political and Regulatory Greenwashing Information methodologies and Challenges ratings confusion 1. EGREGIOUS 2. MISLEADING 3. SUPRISING 4. CONFUSING PENGANA CAPITAL GROUP | PAGE 6
Slide 7: 1. Egregious
1. EGREGIOUS Greenwashing: Creating a false impression or providing misleading information about responsible characteristics German police raid DWS and Deutsche Goldman Sachs to pay US$4m SEC Bank over greenwashing allegations Penalty (November 2022) (31 May 2022) DWS chief resigns (1 June 2022) Sou
Slide 8: 1. Misleading
1. MISLEADING The Statement Until now there had not been “enough money in the world to fund the transition” to renewable energy by 2050, but thanks to the Glasgow Financial Alliance for Net Zero, or Gfanz, “we have all the money needed”. Mark Carney – COP26 The Detail • No credible near-term plan •
Slide 9: 2. Confusing
2. CONFUSING Correlations between ESG scores of some of the world’s ESG ratings largest companies in 2021 0 20 40 60 80 100 S&P Moody's Refinitiv MSCI Apple Microsoft Sustainalytics 0.67 0.71 0.67 0.46 Saudi Aramco Amazon S&P 0.70 0.62 0.38 Alphabet Facebook Tencent Holdings Moody's 0.69 0.42 Tesla
Slide 10: 3. Surprising
3. SURPRISING Dow Jones Sustainability World Index Constituents Source: Dow Jones Sustainability Indices as at 19 December 2022. https://portal.csa.spglobal.com/survey/documents/DJSIComponentsWorld_2022.pdf PENGANA CAPITAL GROUP | PAGE 10
Slide 11: What Are We Missing? Information Costs
WHAT ARE WE MISSING? Imperfect information results in market inefficiencies Data isn’t Interpretation Data isn’t easily standardised understood Comparison Information Search Costs Externalities Data isn’t aren’t priced in widely reported Pricing PENGANA CAPITAL GROUP | PAGE 11
Slide 12: ESG Factors Continue to Outperform
ESG FACTORS CONTINUE TO OUTPERFORM MSCI All Country World IMI – Pure ESG Active Return Contribution 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% -1.5% -2.0% CCC B BB BBB A AA AAA 10 years trailing 5 years trailing 3 years trailing 2022 Source: MSCI, https://www.msci.com/www/quick-take/esg-ratings-financial/03657
Slide 13: Our Alpha Philosophy
OUR ALPHA PHILOSOPHY Fundamentals drive ideas, evidence drives action By focusing on three clearly defined alpha drivers, our objective is to compound capital over the long-term and deliver risk-adjusted relative outperformance of 2-4% per year by fundamentally investing in quality, dynamic growth b
Slide 14: ESG Improvers Add Incremental Value
ESG IMPROVERS ADD INCREMENTAL VALUE Total Shareholder Return 6.0% 5.0% (2020 – 2022) 4.0% 3.0% 2.0% 1.0% 0.0% Laggard to Sustained Leader to leader leader laggard Source: Goldman Sachs; Data as of 3/31/2022 PENGANA CAPITAL GROUP | PAGE 14
Slide 15: ESG Is Embedded in the Process Along with Ethical Screens
ESG IS EMBEDDED IN THE PROCESS ALONG WITH ETHICAL SCREENS PENGANA CAPITAL GROUP | PAGE 15
Slide 16: Datapoints on the Accelerating Transition
DATAPOINTS ON THE ACCELERATING TRANSITION National net zero carbon commitments Emissions GDP (PPP) Population 88% 92% 85% COUNTRY-LEVEL COVERAGE ONLY Source: https://zerotracker.net/ PENGANA CAPITAL GROUP | PAGE 16
Slide 17: Negative Externalities and Positive Impact
NEGATIVE EXTERNALITIES AND POSITIVE IMPACT Focus on companies that provide solutions Business at risk Transitioning Sustainable growth 15% 70% 15% Only companies shown in the “Sustainable growth” category are considered for WHEB’s investment strategy. Examples shown under ”Business at risk” or “Tran
Slide 18: Decarbonising Energy
DECARBONISING ENERGY Technological advancements drive improvements TPI WIND BLADES THROUGHOUT THE YEARS 2007 Blades 2014 Blades Neuschwanstein Castle 2021 Blades Statue of Liberty Big Ben Wind Turbine 151 ft | 46 m 187 ft | 57 m 213 ft | 65 m 262 ft | 80 m 305 ft | 93 m 314 ft | 96 m 574 ft | 200 m
Slide 19: Vestas Wind Systems
VESTAS WIND SYSTEMS The world needs hundreds of GW in incremental wind capacity every year Global wind generation capacity scenarios Order intake - volume and price In terawatts (TW) 6,000 1.10 1.05 Average Selling Price, €m per MW (line) 5,000 1.00 0.95 Order intake, MW (columns) 4,000 0.90 3,000 0
Slide 20: Decarbonising Transport
DECARBONISING TRANSPORT New car sales in the EU by fuel type 100% 2% 2% 2% 3% 4% 3% 6% 12% 90% 20% 5% 23% 80% 5% 47% 37% 32% 9% 70% 9% 9% 60% 28% 12% 50% 20% 16% 40% Alternative fuels Alternative fuels 30% 56% 58% Hybrid electric Hybrid electric 48% 20% 40% Plug-in Plug-in hybrid hybrid 36% 10% Batt
Slide 21: Decarbonising Construction and Buildings
DECARBONISING CONSTRUCTION AND BUILDINGS -- 30% Embodied Carbon -- 69% Operational Carbon Embodied Carbon Operational Carbon Source: European Automobile Manufacturers’ Association, “Fuel types of new passenger cars in the EU”. Accessed on 1 Feb 2023 from https://www.acea.auto/figure/fuel-types-of-ne
Slide 22: Decarbonising Food
DECARBONISING FOOD Food production is responsible for at least one-quarter of the worlds GHG emissions Greenhouse gas emissions (C02e) per kilogram of food production Beef (beef herd) 99.48 kg Lamb & Mutton 39.72 kg Beef (dairy herd) 33.30 kg Prawns (farmed) 26.87 kg Cheese 23.88 kg Pig Meat 12.31 k
Slide 23: Decarbonising Food
DECARBONISING FOOD Bovaer® cattle feed additive reduces methane emissions Source: DSM PENGANA CAPITAL GROUP | PAGE 23
Slide 24: Adviser Resources
ADVISER RESOURCES Ethical Advisers co-op ResponsibleReturns.com.au ResponsibleInvestment.org Lonsec Sustainability Score MSCI ESG Ratings Morningstar Sustainability FTSE Russell Rating Evergreen Responsible Investment Grading Index PENGANA CAPITAL GROUP | PAGE 24
Slide 25: Conclusion
CONCLUSION SMALL COMPANIES RESPONSIBLE INVESTING IS THE NEW NORMAL pengana.com / responsible-investing