the
CLUB CARRINGTON WEALTH MANAGEMENT
“I can't change the direction of the wind, but I can adjust my sails to always reach my destination." Jimmy Dean
to WelcoMe the Summer edition of the
caRrinGtoN CluB
QA &
PROFESSIONAL INTERVIEW
Deirdre Cooper Co-head of Thematic Equity at Ninety One
www.ninetyone.com
Mohsin Bukhari, our Head of Investments, first met Deirdre at a sustainable investment conference at the start of 2020, shortly after the launch of her fund. She gave a very insightful and thoughtprovoking presentation on the idea of decarbonisation, and her passion for what she does was quickly evident. She had clearly spent a long time researching and investing in this area but, for the attendees, it was a fairly new concept. Soon after meeting her (and after thorough due diligence, of course), we purchased the Ninety One Global Environment fund for our Sustainable Growth portfolio. We’re thrilled that Deirdre took time out from her very busy schedule to chat with us about her career to date, her passion for what she does and how each of us can help effect change.
TELL US ABOUT YOURSELF AND YOUR CAREER I started at Morgan Stanley in the Mergers and Acquisitions department. I left after about four years because I was interested in doing something which was more aligned with the things that I believed in, so I went and worked in Pakistan in micro-finance for 6 months. After that I went to Harvard business school. During the summer I worked in microfinance at the United Nations on a project called the Micro-Entrepreneurs Awards Programme. Following that I went back to Morgan Stanley to work in Sustainable Finance, working for Jeremy Heywood who went on to become the Cabinet Secretary. He was a really inspirational person to work with and an amazing mentor for me. In 2006 I started Morgan Stanley’s Cleantech Investment Banking Group in Europe and the following year I moved to a small boutique called Ecofin. It was then I started to work with my colleagues at Ecofin on how to invest in decarbonisation in equities. In 2009 we won a mandate from the Norwegian Sovereign Wealth Fund to run a decarbonisation portfolio for them and I comanaged that for ten years. It was a really good experience working for the world’s largest Sovereign Wealth Fund – thinking about how best to invest in
Glossary of terms Climate Finance:
Local, national or global financing that seeks to support mitigation and adaptation actions that address climate change in developing countries.
Decarbonisation:
The process of reducing the level of carbon dioxide (CO2) output through lowering the amount of greenhouse gas emissions produced by the burning of fossil fuels.
Emerging Market:
A country that is in the process of developing its economy to become more advanced. It is transitioning from low income and is rapidly expanding due to high production levels and significant industrialisation with a higher standard of living. Examples of emerging markets include China, India, South Africa & Brazil.
Micro Finance:
A type of banking service provided to unemployed or low-income individuals or groups who otherwise would have no other access to financial services. It allows people to take on reasonable, small business loans safely, and in a manner that is consistent with ethical lending practices.
Supply chain carbon analysis:
The analysis of the level of greenhouse emissions that are produced through a product's supply chain. A supply chain includes everything from initial sourcing of parts needed to produce the product, to final delivery of the product to the consumer.
Sustainable Finance:
The process of taking environmental, social and governance (ESG) considerations into account when making investment decisions in the financial sector, leading to more investments in sustainable economic activities and projects.
PROFESSIONAL INTERVIEW
the sector both for output (returns) and for impact (on the environment). During this time I’d gotten to know Graeme Baker and Tom Nelson and the team at Ninety One, as they were on a very similar journey and our paths naturally crossed, being in the same industry. They were the managers of the Ninety One Global Energy Fund at Ninety One, and were early in identifying companies that were driving the transition to renewable energy. So, in 2019 I joined them, and we launched the Ninety One Global Environment Fund. We are now managing two and a half billion US dollars. It is a highly concentrated portfolio, investing in the companies that are both the biggest beneficiaries of decarbonisation and also those having the biggest positive impact. We track the level of carbon avoided companies so that we can find those that are doing the best job amongst their peers to reduce the footprint in their own business, but also helping develop products that are addressing other people’s carbon footprints, and therefore having a positive impact.
WHAT DO YOU FIND MOST SATISFYING ABOUT WHAT YOU DO? Graeme, my Co-Portfolio Manager and I really like meeting the companies, meeting the management teams, particularly in their own context. One of the things we struggled with this year is that we haven’t travelled due to restrictions. We try and manage our travel, so we do long trips and visit lots of companies at once, keeping our flights to a minimum. If we want to decarbonise we have to address not just developed market emissions but also emerging market emissions. 90% of emissions growth is coming from emerging markets so you really
need to get out and meet those companies. For example, China is a very big part of our investment universe as it constitutes about 30% of global carbon emissions. We think if we want to understand whether or not a company is truly sustainable it’s really important to understand not just the data but also the company’s culture and the context, and that requires getting out there and actually meeting the teams. So that’s the bit I enjoy the most.
I also enjoy talking to investors as I think more and more investors are starting to think about how to invest for impact. I think (and this is true for us at Ninety One as well) that we’re all very much at the early stages of this, nobody has the perfect answer, so sharing thoughts on how best to do this, how best to monitor progress in a way that is easy to explain to retail investors but also doesn’t oversimplify what is a very complicated area.
HOW HAVE YOU SEEN THE INDUSTRY CHANGE OVER THE LAST FEW YEARS? Oh my gosh, it’s been unbelievable. I’ve been looking at sustainable finance for almost twenty years and there’s probably been more change in the last year than the entire previous nineteen! And it’s hard to put a finger on what has caused that – I think part of it is probably increasing extreme weather events, I think that definitely has an impact. I think activists have really driven this up the agenda too – whether you’re Greta Thunberg
PROFESSIONAL INTERVIEW
or David Attenborough, there are many great people helping to bring this to people’s attention. I think generational change has also possibly helped. All of our kids, well my kids certainly, are the people in the house that come back and say “oh you can’t throw that away” or “you need to be more careful about the way you recycle” so I think that’s part of it too. But it’s very hard to tell for definite what’s driven the change – somehow it all seems to have come together. It’s great that it’s happened over the last year but it’s perhaps a little late. There’s no question this year that emissions will grow by about 5% against last year, and that’s the single biggest growth in emissions ever, other than in 2009 (emissions are highly correlated with economic growth). Last year there was a big decline because economies worldwide declined but as the economies come back that trend will be reversed. We’ve had governments and politicians talk about net zero, but all those pledges get you to a place in
2030 where emissions will be about 0.5 of a percentage point lower than where they were in 2010. If we were on a net zero pathway that number should be nearer 45%. So that’s depressing on the one hand, but it also means that there’s a lot of opportunity for positive surprises – and I think the momentum is there. While the politicians signing up to 2030 net zero don’t really change the pace, the implementation of that does. I think that’s a really exciting tailwind for the companies that we invest in and I think it gives us the potential to be cautiously optimistic that we are actually starting to move towards a more sustainable pathway.
HOW DO YOU SEE THE MARKET CHANGING IN THE FUTURE? I think that a lot of the answer to that is in my answer to the last question, but this will be a pivotal year because we have the UN Climate Change Conference (COP 26) in Glasgow in November and that’s going to be really important.
YOUR CAREER HAS BEEN FOCUSSED ON REDUCING THE CARBON FOOTPRINT OF HUGE INDUSTRIES AND ORGANISATIONS, BUT WHAT CAN WE DO AS INDIVIDUALS, ON A DAY-TO-DAY BASIS, TO HELP EFFECT CHANGE? There are lots of things, I guess I would point you to my book recommendation, as it’s worth looking at the carbon footprint of everything. We do that when we invest, for example when we look at investing in electric vehicles (EV) we look at the fact that to make an EV is about twice as carbon intensive than to make a combustion engine – but when you drive it you save emissions, and as the electricity grid gets greener you’ll save even more emissions. That’s why we feel very confident that the EV is actually having a positive impact, but it’s really important to look at the whole value chain, and that’s a big part of our process. We’re doing a lot of work at the moment on the decarbonisation of the food chain and again the answer isn’t perfectly simple – yes, we need to move more towards plant based and less meat, but different meats have different carbon footprints, different plant based alternatives have different impacts on biodiversity and water, so that sort of systems thinking is really important. It’s important to be careful of the source of your information gathering on subjects like this as well, as there will be people with vested interests. If your information on “EV’s are bad” comes from a refiner, they probably have a reason as to why they have that point of view!
Change is hardest at the beginning, messiest in the middle and best at the end Robin S. Sharma
PROFESSIONAL INTERVIEW
YOU’RE ON THE BOARD OF THE NON-PROFIT ORGANISATION “GIRLS WHO INVEST”, WHY IS THIS IMPORTANT TO YOU? HOW HAVE YOU SEEN THE INDUSTRY CHANGE, IN TERMS OF WOMEN IN INVESTMENT/ FINANCE, SINCE YOU FIRST JOINED THE INDUSTRY? It’s really important to me. The people who make decisions as to where capital is invested have an enormous impact, and as of today women are massively under-represented, particularly in the portfolio management/ investment decision-making side of the asset management industries. Women tend to be more in sales and marketing operations, and I think it’s really important to change that – to have a more diverse group of people making decisions as to where to allocate capital. That’s exactly the mission of Girls Who
Invest - to take that percentage of the world’s investable capital that is managed by women from single digits today to 30% by 2030. I really feel very strongly about mentoring and growing young women in the asset management industry, it’s an incredibly rewarding and interesting job, and is one that maybe isn’t high enough on the agenda for bright young women graduating and thinking about what they might want to do with their lives.
Vital Statistics... BORN: Limerick, Ireland LIVES: London FAMILY: Husband, three children and a dog FAVOURITE HOLIDAY: West Coast of Ireland HOBBIES: I like to paint - oils and acrylics. I really enjoy it and I paint with my kids. WHAT COULD YOU NOT LIVE WITHOUT? My family – including the dog (pre covid dog!)
"Try again, fail again, fail better." Samuel Beckett
PROFESSIONAL INTERVIEW DO YOU THINK THAT THOSE WOMEN KNOW HOW TO GET INTO THE INDUSTRY? THERE’S A LOT OF INFORMATION OUT THERE FOR HOW TO BECOME A LAWYER, AN ACCOUNTANT ETC BUT PERHAPS NOT ENOUGH ABOUT HOW TO GET INTO INVESTMENT? No probably not – we as an industry need to do more as I think finance in general is put into one category and there’s a big difference between the job that I started life in at Morgan Stanley and being an asset manager, particularly at somewhere like Ninety One. At Ninety One we look at long term fundamental based investing, so you really are spending time understanding companies, understanding management teams and their culture and then allocating capital. And that I think we would argue is the really rewarding part of the asset management industry. It’s important that we can communicate this to women, along with clear guidance as to how they can enter the industry.
IF YOU NEVER HAD TO WORK AGAIN WHAT WOULD YOU DO WITH YOUR TIME? I really enjoy what I’m doing so I don’t want to stop working.
COULD YOU SHARE A FEW OF YOUR PROFESSIONAL/PERSONAL GOALS? Our mission, not just me but the entire team at Ninety One, is to allocate capital sustainably – the company’s slogan is “Investing for a better tomorrow”, but what that really means is that we want to allocate capital sustainably, allocate capital to those companies that we think are really investing not just for their financial shareholders but
for all stakeholders. Me particularly, I’ve clearly always been especially focused on climate. Where we are today is that the world is investing about $6-700bn a year in climate finance, that number needs to be $3-4tn. So, I would like to play, what would be an absolutely tiny part in that, but if I can play that tiny part then that’s absolutely worth doing. One of the things that we’re very conscious of at Ninety One is that the biggest gap, when it comes to capital allocation, isn’t in developed markets, it’s in emerging markets. So, one of the reasons I chose Ninety One is that it’s a firm that has a very different perspective on many things sustainable. As a firm born in an emerging market - South Africa, a market that has a lot of physical climate risk, a lot of transition risk (it’s a very coal-based economy) and it has significant social issues (e.g. high unemployment) - we’re very conscious of the fact that more than half of investment in climate finance has to go into emerging markets, because 90% of emissions growth comes from
those markets. Our mission is therefore to grow that kind of climate finance but we really want to focus on those countries where capital is most scarce.
IS THERE ANYTHING YOU DO OUTSIDE OF WORK THAT CONTRIBUTES TO YOUR OWN SENSE OF WELLBEING THAT YOU FEEL IS REALLY IMPORTANT? My painting – it’s great because it’s very mindful.
IF YOU HAD ONE THING FOR PEOPLE TO THINK ABOUT FOR HOW TO AFFECT CHANGE WHAT DO YOU THINK IT MIGHT BE? Don’t give up. Try again, fail again, fail better!
PROFESSIONAL INTERVIEW
WHAT IS YOUR CURRENT FAVOURITE BOOK? Mike Berners-Lee – How Bad are Bananas? The Carbon Footprint of Everything. It explains the carbon footprint of everything, and we use that detailed supply-chain carbon analysis in our process. It’s also interesting because it’s counter intuitive as to what is and isn’t sustainable. It is called How Bad are Bananas because people think bananas are terrible because they are transported – but because they’re shipped and not air freighted, and because they’re energy and nutrition intensive per unit, they’re actually good. We’ve worked with Mike Berners-Lee over the years in terms of foot printing and environmental analysis
AND FAVOURITE APP? Well, I’m going to have to promote my new most favourite app which is Onto, which is an electric car rental app in the UK. It’s absolutely fantastic – they’ll have an electric vehicle (EV) outside your door in a week, at a reasonable price (I have a Hyundai Ionic). It’s very reasonable and it comes on a one-month lease agreement, so if for example you’re away for a month and you’re not going to use it, you can give it back. It comes with your tax, insurance and charging all included and the app tells you where the nearest charging points are. I think it’s a very sustainable way to use cars – you lease it when you need it, and you give it back when you don’t need it.
All investments carry the risk of capital loss. Sustainable, impact or other sustainability focused portfolios consider specific factors related to their strategies in assessing and selecting investments. As a result, they will exclude certain industries and companies that do not meet their criteria. This may result in their portfolios being substantially different from broader benchmarks or investment universes, which could in turn result in relative investment performance deviating significantly from the performance of the broader market. This interview is being provided for informational purposes only. Circulation must be restricted accordingly. Nothing herein should be construed as investment advice, an offer to enter into any contract, a recommendation of any kind, a solicitation of clients, or an offer to invest in any particular fund, product, investment vehicle or derivative. Any decision to invest in the Fund should be made after speaking to your financial adviser and reviewing the full offering documentation, including the Prospectus, which sets out the fund specific risks. Fund prices and copies of the Prospectus, annual and semi-annual Report & Accounts, Instruments of Incorporation and the Key Investor Information Documents may be obtained from www.ninetyone.com.
CARRINGTON WEALTH MANAGEMENT
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