Investing in the green transition
As the world pivots towards a carbon neutral future, the environmental thematic is set to become the defining structural growth story of the next two decades.
Global fund manager TT International and its Australian distribution partner Copia Investment Partners are helping Australian investors tap into every aspect of the transition with the TT Global Environmental Impact Fund, an Australian registered managed investment scheme that invests in TT Environmental Solutions Fund (the Portfolio), a sub-fund of TT International Funds Public Limited Company (UCITs).
Many ‘responsible investment’ and ESG managers define themselves by what they don’t invest in. UK-based TT International takes a different approach with the Portfolio: it only invests in companies that are part of the solution to climate change and ecosystem destruction. TT also has a direct positive impact by donating one-third of its management fees to carefully selected environmental charities. By taking both approaches, TT International implements true-to-label climate change solutions that investors can be confident are making a genuine environmental impact.
High bar for inclusion
To be selected for the Portfolio, all companies must produce products or services that tackle an environmental problem. The Portfolio aims to have at least 80% of invested capital in companies where environmental solutions account for over 50% of revenues or profits.
TT’s investment process is based on rigorous fundamental stock selection within a top-down framework that evaluates the most interesting environmental trends from a regulatory, technological and consumer preference perspective.
The first and most important part of the process is the application of a proprietary 5-step environmental filter to assess whether companies are legitimately providing environmental solutions – and therefore whether they qualify for inclusion in the fund.
This means that instead of simply applying a process of negative screening to ensure companies have no exposure to ‘problem’ industries, TT takes a more positive approach, focusing on companies actively committed to solving environmental problems.
An independent Research Advisory Board works with TT’s experienced 10-person investment team and provides an additional layer of scrutiny and insight with regard to portfolio investment decisions. The board consists of four leading environmental policymakers and experts such as Dr Ma Jun, a key green policy adviser in China and co-chair of the G20 Green Finance Study Group.
Long-term sustainability = long-term growth
TT International believes that environmental equities as an asset class will generate material outperformance for many years to come, given the growing recognition of the global challenges posed by climate change and ecosystem destruction.
TT International believes this presents investors with a compelling opportunity because the market is yet to appreciate the scale of the green transition required, given that it will impact a huge number of areas globally, including energy generation, travel, building, diet, agriculture and clothing.
And while there are sectors of the environmental equity market where valuations are stretched, such as electric vehicles and renewables, it is still early days for many environmental technologies including solar, hydrogen and carbon capture – all of which have a long growth runway ahead of them.
Biodiversity loss: a broader approach
Further differentiating itself from many of its competitors that have a narrow focus on carbon and other greenhouse gases, TT International considers broader environmental damage, with a particular emphasis on biodiversity loss and ecosystem destruction.
TT believes that responsible investors have a vital role to play in helping to mitigate the world’s increasing biodiversity crisis. By channelling capital towards companies that are helping to solve the crisis (and away from companies that are complicit in it) investors can help to lower the cost of capital for certain companies and increase it for others.
Putting this into practice, TT International’s investments in responsible consumption and the circular economy aim to address issues such as waste and the excessive use of raw materials, which are contributing to ecosystem destruction and biodiversity loss.
High active share portfolio
The Portfolio typically holds between 30 and 40 stocks, which are actively managed to ensure profits are taken from the winners and recycled into more attractively priced stocks with greater upside potential.
The portfolio is well diversified, with exposure to seven major environmental themes – clean energy, clean transport, electrification and improved efficiency, recycling and the circular economy, forestry and agriculture, water, and responsible consumption.
Adding to this diversification, TT International takes a genuinely global approach, investing in innovative companies in Europe and the US, along with exciting Emerging Markets stocks. Indeed, TT’s world-class team of analysts have many years of experience researching companies across the globe, including in Emerging Markets, where TT has a market leading strategy.
Leading by example
TT gives one-third of its management fees to carefully selected environmental charities that help to tackle the twin problems of climate change and biodiversity loss. This now includes TT partnering with leading forestry charities, as research suggests that planting trees and ‘rewilding’ habitats are effective mitigating strategies against climate change and biodiversity loss.
In so doing, TT International hopes that other investment managers will follow suit, with this model ultimately becoming the standard approach for environmental funds and impact investment more broadly.
Global environmental investment expertise
The TT Global Environmental Impact Fund, distributed in Australia by Copia Investment Partners, provides an opportunity to gain exposure to companies that are not only making a positive difference to the global environment, but that should also compound growth and returns at high rates for many years to come, given the scale of transition that lies ahead of us.
TT International’s global equity strategy, managed by the TT Environmental Solutions team, has been in operation since May 2020 and has delivered strong outperformance against its benchmark since inception.
Founded in 1988 by a London-based investor, Tim Tacchi, TT International is a global asset manager with 12 investment strategies and over AU$17 billion assets under management. TT is wholly owned by Japan-based Sumitomo Mitsui Financial Group, and has offices in London, New York and Hong Kong.
DISCLAIMER | This information has been prepared by Copia Investment Partners Limited (AFSL 229316 , ABN 22 092 872 056) the issuer, distributor and responsible entity of the TT Global Environmental Impact Fund. This document provides information to help investors and their advisers assess the merits of investing in financial products. We strongly advise investors and their advisers to read information memoranda and product disclosure statements carefully and seek advice from qualified professionals where necessary. The information in this document does not constitute personal advice and does not take into account your personal objectives, financial situation or needs. It is therefore important that if you are considering investing in any financial products and services referred to in this document, you determine whether the relevant investment is suitable for your objectives, financial situation or needs. You should also consider seeking independent advice, particularly on taxation, retirement planning and investment risk tolerance from a suitably qualified professional before making an investment decision. Neither Copia Investment Partners Limited, nor any of our associates, guarantee or underwrite the success of any investments, the achievement of investment objectives, the payment of particular rates of return on investments or the repayment of capital. Copia Investment Partners Limited publishes information on the document that is, to the best of its knowledge, current at the time and Copia is not liable for any direct or indirect losses attributable to omissions from the document, information being out of date, inaccurate, incomplete or deficient in any other way. Investors and their advisers should make their own enquiries before making investment decisions.
The TT Global Environmental Impact Fund invests all or substantially all of its assets in TT Environmental Solutions Fund, a sub-fund of TT International Funds Public Limited Company, an Undertaking for Collective Investment in Transferable Securities.
TT International Asset Management Ltd (“TT International”) serves as investment manager to the Fund and is authorised and regulated in the United Kingdom by the Financial Conduct Authority. TT International is not affiliated with Copia Investment Partners. TT International does not take any responsibility for the accuracy or completeness of any information contained herein, or the performance of the TT Global Environmental Impact Fund offered by Copia Investment Partners. TT International disclaims any liability for any direct, indirect, consequential or other losses or damages, including loss of profits, incurred by you or by any third party that may arise from any reliance on these materials. TT International is not responsible for, nor involved in, the marketing, distribution or sales of shares or interests in the TT Global Environmental Impact Fund and is not responsible for compliance with any marketing or promotion laws, rules or regulations. No statement in this document is or should be construed as investment, legal, or tax advice given by TT International, nor is any statement an offer to sell, or a solicitation of an offer to buy, any security or other instrument, or an offer to arrange any transaction, or to enter into legal relations with TT International. Past performance by any other funds or accounts advised by TT International, including the TT Environmental Solutions Fund, is not indicative of any future performance by the TT Global Environmental Impact Fund.