Hamish Chamberlayne, Head of SRI and Portfolio Manager, discusses the current coronavirus-related market uncertainty and how a sustainable approach can help to weather the storm.

  Key takeaways:

• The team aims to invest in resilient growth companies that are on the right side of big sustainability issues; this means that the portfolio was well positioned entering the recent period of market volatility.
• Technology has played a huge role in the crisis by enabling people to continue leading their lives without too much disruption and the team anticipate that this could accelerate the trend towards digitalisation.
• The strategy has little exposure to carbon-intensive businesses such as travel, oil and energy, which have been severely affected by travel restrictions and the steep decline in economic activity around the world.

Transcript

Good morning everyone. As you can see I’m working at home and yes I’m very glad to say that I am well, my family is well. The team is well, the families of the team are all well and I really hope the same goes for all of you and your families in these challenging times.

The transition to working at home has been relatively seamless for us actually because we have an international team. We have team members based in Denver and Boston. So, Aaron Scully, my co-portfolio manager is based in Denver and our client portfolio manager Steve Weeple is based in Boston. And so we’ve been having to live through a digital means of communication for many years now. And so therefore the transition to home working has been very very seamless and we continue to operate really as we have been accustomed to over the last two years, with regular team catch ups, video conferences and just plain forward phone calls and conference calls.

And it’s really interesting to think about the world we live in today because technology is just such a phenomenal enabler of things and as little as ten years ago the idea of having everyone having to leave your office and go to work at home would have been considered extremely disruptive. And yet it’s not just our industry but I’m hearing lots of other industries talking about how effective this transition has been and how actually it hasn’t been as disruptive as you might think. So, we’d like to reassure you that the world is continuing to move for us and we’re continuing to work as we normally do. We are having very effective team discussions. We’re continuing to operate our investment process as normal, as usual. And we feel very confident about being able to continue in this way for as long as it may take.

And just to sort of move on to, move on to the way the portfolio is working and the actions that we’ve been taking. So, the headline summary is that we haven’t been doing a huge amount to the portfolio. We were very fortunate that going into the recent period of market volatility we’ve had a very strong portfolio and (we think) it’s been well positioned for the recent turbulence and there are a few things behind that which I can just elaborate on now. As you know we have sustainability integrated into our investment process. We have this huge conviction that the best investment returns will be generated by companies that are thinking carefully about big sustainability issues, big environmental and social megatrends. That is the foundation of our investment philosophy. This idea that we want to find resilient companies, resilient growth companies that are able to compound wealth over time and navigate periods of uncertainty and thus far the portfolio has been behaving in exactly that manner.

And if I could just highlight a few things the… I mean first of all on the positive side we have had a significant allocation to technology companies and in and amongst those software companies and they really are the big heroes of the recent market volatility, enabling teams to carry on working remotely, enabling people to continue leading their lives without too much disruption. And we wonder whether this crisis will actually continue to accelerate this huge trend of digitalisation. So, these are software companies that we’ve been investing in. They have very high degrees of recurring revenue in their business models. They are… we regard them as having utility-like characteristics. And, certainly, the recent evidence suggests that they are behaving exactly like this. We’ve also been investing in other areas of new technology in areas such as telehealth which has seen a huge increase in demand over the course of this crisis and once again we think that this crisis could actually lead to a tipping point in general consumer adoption of telehealth. And that has been a very strong performance area for us in the portfolio.

Now portfolio performance is just as much about what you don’t invest in as what you do invest in and with our focus on sustainability we’ve been, we’re very careful to avoid investing in areas that do environmental and social harm. And so we naturally have very little exposure to parts of the economy which have been more sensitive to or more affected by the recent government measures in relation to this pandemic. So, we don’t have any investment in companies in the travel industry, which is obviously very carbon intensive, very polluting. We don’t have any investments in the energy industry, in the oil and gas industry, which again has been very severely affected by the steep decline in economic activity around the world. And so this has actually been very beneficial to our performance not having exposure to these sectors.

And it’s I think when we stand back and look at what we’re doing in our strategy and what we believe in, we do have this high conviction that we will come out the other side of this even stronger. That in many ways many of the things that we are focused on may actually be accelerated by this crisis. This trend towards digitalisation, how to organise our economies efficiently, thinking carefully about how we impact resources all of these things which are captured in our portfolio we believe will stand us in very good stead to (aim to) keep on investing in companies with resilient growth characteristics that are going to compound wealth over time.

So, I will leave it there. And as I said at the beginning I do wish all of you and your families the best of health and I hope you are able to navigate these challenging times in as best a fashion as possible. Thank you.

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