The upheaval of the war, the subsequent energy crisis, and inflation have suddenly disrupted the economy and markets. As a result, ESG investments have temporarily been placed on portfolio back burners in favour of immediately pertinent assets, like oil and armaments.
Since the conflict began in February, we have observed a negative correlation between ESG securities and the rise of geopolitical risk and inflation. Headlines about fossil fuels, a solution to the conflict, and the central banks’ efforts to contain inflation have become more pressing priorities than concerns about climate change.
As such, it is essential to block out the current “noise” and remember that climate change is a reality that requires urgent adaptation. We believe the present scenario is a one-off in the midst of the global climate agenda that does not require any modification to long-term commitments in sustainable investment.
The EDM Global Equity Impact fund considers environmental, social, and sustainability factors in the investment process. In this respect, quality companies—those with the strongest fundamentals—are the best poised to grow and generate shareholder value. And these days they can be acquired at very attractive prices.
The top contributors to the fund’s performance during the month were Roche and Schneider Electric, both with highly defensive profiles. In the case of Roche, its greatest impact on society is in the research and development of new drugs, as well as solutions in the field of personalised medicine and diagnostic products that advance science and improve people’s lives.
Schneider Electric, a global leader against climate change given its actions and strategies, provides industrial automation and energy management solutions with a clear focus on the pursuit of energy efficiency and sustainability. As an impact company, its commitment and range of solutions are fully aligned with the goal of climate neutrality and the aim of establishing innovative business sustainability strategies that maximise energy and resources.
Both companies trade at very attractive multiples (2023 P/E ratio of 14x and 16x, respectively), with expectations of growth trends in the high single digits.
We view the recent correction as an outstanding opportunity to invest in a fund like EDM Global Equity Impact. The fund consists solely of companies that comply with our strict sustainability criteria and that are industry leaders with competitive advantages, healthy balance sheets, strong cash flow, and successful management teams.
The portfolio trades at an attractive 2023 P/E ratio of 19x, with annual profit growth of +15% estimated for the next five years. We are confident that by applying ESG criteria to our selection we will add value to the fund’s return and meet the expectations of sustainable long-term investment.
Mariona Selva,
Analyst & Fund Manager
