NN Sustainable Equity

Transcription

1 NN Equity Distinctive quality stock picking Guido Veul, CFA Client Portfolio Manager Equities March

2 NN Investment Partners EUR 187 bln* (USD 204 bln*) in Assets under Management Manages assets for Institutions including SWF and Pension Funds Retail Investors Insurance businesses NN Group (Proprietary) 1,100+ employees in 16 countries provide clients access to domestic, regional and global investment solutions Asset manager of NN Group. Our investment history dates back to 1845 through our strong roots in insurance and banking Main regional investment centres * As per end December

3 Responsible Investing at NN IP Long heritage in sustainability NN Group NN IP AuM development for NN IP SRI strategies *AUM 4.5Bn 4000 Launch of Business Principles (1999) Signatory to the investor CDP (2003) NN (L) European Equity Initiation of independent Advisory Board (2000) Launch of NN Equity fund (2000) Business Principles II Signatory to Eurosif European SRI Transparency Code Chances for children program Launch of European Equity mandate Providing of advice & tailor made RI client solutions ESG integration at NN IP NN signatory to the UNPSI Launch of Fixed income Mandate NN (L) Global Equity Launch of NN Europe Equity Fund First Novethic Label for European Equity Fund Luxflag label for Global and European sustainable Equity Funds Membership Green Bond Principles Initiation of SRI initiative & dedicated SRI team (1999) Launch of Global Voting Policy Defence Policy Launch of Fixed Income Fund NN IP signatory to the UNPRI Defence Policy II Business Principles III Launch of NN Credit Fund Launch of Global Equity Mandate First Novethic Label for Global Equity Fund NN IP partnership with ECCE (Maastricht University) Launch of EM loans partnership with FMO 500 * As per end December 2015 More Information can be found on: and on group.com/in society.htm 3

4 Responsible Investing at NN IP Four pillar approach Active ownership: voting and engagement 1 2 Integrating ESG factors in our bottom up investment process Defence Policy, exclusions, societal values and criteria 3 4 Specialised SRI strategies & tailormade RI solutions 4

5 Reference SRI strategies and tailor made RI solutions We offer specialised ESG strategies in both Equities and Fixed Income EUR 4.5Bn AUM in sustainable strategies We offer tailor made responsible investment solutions We provide responsible investment advice to our clients Equity Global & European Equities EUR 2.4Bn Fixed Income Euro Credit & Financials EUR 2.1Bn NN (L) European Equity NN (L) Global Equity 5

6 Equity Philosophy Quality the key differentiator Our philosophy centers around quality. We believe that quality companies and portfolios provide superior risk return characteristics. Quality manifests itself in multiple ways in our strategy: quality: Screening on intrinsic corporate values & intangible assets Best in Class and exclusionary ESG criteria in our investment philosophy and methodology Financial quality: Corporate financial screening Our proprietary and bespoke ranking tool to select high quality portfolio constituents, based on an attractive combination of valuation, operations (corporate returns) and momentum Our search for undervalued long term sector winners and turn around opportunities through the high quality bottom up fundamental analysis of our sector specialists Portfolio quality: portfolio management tools to create high quality portfolio characteristics Quality stock picking is our main source of alpha and risk budget usage 6

7 Equity Process Research Screening & Analysis ESG screening Best in Class Exclusions Independent external data Preferred portfolio candidates Fundamental analysis Analyst input ESG integration Price targets, Upside Investment Cases Alpha pool Quant screening Consistency, discipline Corporate financial/investment metrics Valuation, operations, momentum Large opportunity set thanks to extensive resources and coverage 7

8 ESG Integration in Equity Research ESG integration by mainstream analysts Multiple data providers: Sustainalytics, GMI (MSCI), Bloomberg and others Data on absolute & relative scores, controversies as well as flags Research focus on material aspects for the investment case 8

9 So when is something Material? Mining, Energy Safety Standards, Labour Issues & Environment Consumer Social Violations, Labour Issues, Food Safety Industrials Bribery, Governance, Energy Efficiency Health Care Product Liability, Bribery 9

10 Investment Approach & Process Research In Portfolio Source: Sustainalytics High ESG quality: no controversies of importance and Outperformer among global peers Quant score: attractive valuation versus peers and higher quality Buy recommendation of sector analyst based on, consistent margins via strong brand equity, R&D industry leadership and attractive valuation Conclusion: ESG, positioning and financials attractive versus peers in Industrials sector Source: Company data 10

11 Investment Approach & Process Research Not In Portfolio Emissions scandal leads to category 5 controversy Low ESG quality: Volkswagen used to be a sector leader in environment and social segments. However, a weak Governance score was persistent through time Quant score: value trap with low quality and low momentum Underperform: recommendation because large mass market producer in competitive industry with low margins Conclusion: unattractive versus peers in the Automobile and Components sector Source: Sustainalytics The rating for Environmental Impact of Products was downgraded to Category 5 in connection with the Volkswagen emission cheating scandal and violation of US Clean Air Act in September ( ) Business risks to the company stemming from the controversy are severe. Sustainalytics 11

12 ESG research Partnership with ECCE ECCE is one of the world s leading research institutes on sustainable finance and responsible investing linked to the University of Maastricht We have entered into a multi year partnership to: Generate new insights into how various ESG factors influence investment returns Sponsor academic research that is relevant to our investment processes New insights Relation of ESG factors and Alpha generation has evolved over time Importance of combined level and momentum analysis 12

13 Responsible Investing Lessons from the past and latest insights ESG Integra on Exclusions/Best in Class policies Major exclusions seriously alter risk return metrics Simple best in class ESG score overlay not a good plan, full of many unintended portfolio characteristics Topline ESG scores and Alpha: no stable relationship Governance impact universal, E&S impact more diffuse Opportunities in combining ESG level and momentum scores Successful ESG Integration is focused on materiality Links corporate and financial processes Links perception withreality 13

14 NN IP Additional information: 14

15 Disclaimer This document, publication or website has been prepared solely for information purposes. The contents are based upon sources of information believed to be reliable. No guarantee, warranty or representation expressed or implied is given by NN Investment Partners Luxembourg S. A. as to the accuracy, adequacy or completeness of the information made available. It does not constitute an offer or a solicitation to buy or sell any investment referred to herein nor to participate in any trading strategy. The information presented is subject to change without notice. Neither NN Investment Partners nor any of its officers, directors or employees accepts any liability or responsibility in respect of the information or any recommendations expressed. This material is not intended for any specific investor and does not take into account particular investment objectives, financial situations or needs. The value of securities and of any income stream may go down as well as up and is not guaranteed. Actual results, performance or events may differ materially from those presented. This can be due to many reasons, among which (i) the general economic conditions in NN Investment Partners core markets; (ii) the overall performance of financial markets, including emerging markets; (iii) the level of interest rates and changes in these levels; (iv) currency exchange rates; (v) general competitive factors; (vi) changes in laws and regulations and (vii) changes in the policies of governments and/or regulatory authorities. Investors should be aware that any products or securities that are mentioned here have their own particular terms and conditions. Past performance is not necessarily a guide to future performance. All rights are reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means (mechanical, photocopying, recording or otherwise) without the prior permission of the copyright holder. 15

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