Commentary Impact Measurement Investor Contribution

Engagement without the punch-ups

George Latham •

• 9th October 2018

The mainstream media likes to report stories with drama. A ‘punch-up’ between fund managers and company executives over CEO remuneration makes for a good headline. But it doesn’t always have to be this way. This year, in our fourth Impact report we measured the positive impact of WHEB’s investments and this has served as a more positive basis for at least one strand of our engagement activities.

Calculating impacts relies on data

WHEB’s Impact calculator measures the positive impacts associated with any amount invested in the Fund over a year. The nine social and environmental metrics we measure and report on are derived from a bottom up analysis of each company held in the portfolio at the end of the year. The methodology¹ involves a calculation of the outputs achieved by each company’s products. Then, based on the whole company’s impact, we determine the amount associated with the Fund’s shareholding. From there it is then possible to calculate the impact associated with each investor’s holding in the WHEB fund².

However, while the impact calculation is possible, it is not complete. We were only able to get figures directly from company reports in 38% of the portfolio’s holdings. For a further 22% of the Fund, we were able to use numbers from industry peers or market share data to make an estimate. This leaves 40% of the portfolio out of the analysis altogether as neither option was available. For example, we are confident that Xylem, which is a manufacturer of water treatment technologies, contributes to the cleaning and reuse of a vast volume of water around the world, but we don’t have any data to underpin this. Equally MSA Safety, a manufacturer of self-contained breathing apparatus for fire-fighters, helps to save many hundreds of lives, but again there is no data on the actual number. A key target for us as we continue to evolve our impact reporting, is to improve the coverage, accuracy and relevance of the impact calculator year on year. To do that, we need the companies we invest in to help us.

Pushing on an open door

We have sent letters along with copies of WHEB’s impact report to all our investee companies encouraging them to invest in the analysis, measurement and communication of each of their impacts. The message they should be hearing should be a really encouraging one. Only 16% of the MSCI World Index meets WHEB’s investable universe definition of providing a “solution to a sustainability challenge”. We only select a company for our portfolio on the basis that we believe it has a positive overall impact on society or the environment. We think that this is good for their long-term growth and profitability, so they should be proud of this and their achievements should be worth promoting, and not just to investors, but to all stakeholders in their business. Information about the value created for society can only have a positive effect on relationships with customers, employees, regulators and civil society.

The responses so far have been varied, ranging from (stunned?) silence to quite sophisticated. In many, perhaps most, cases this is the first time that they have been asked to think in this way. Some have misunderstood this to be yet another request for more ESG reporting on their internal policies and processes. So we are having to explain our more fundamental interest here in trying to work out how to measure the positive externalities associated with their products. In many cases the question presents some methodological challenges. How should we quantify the benefit of computer aided design software that is used to improve the efficiency of wind turbine blades, in terms of reduced carbon emissions or renewable energy generated? Others have understood very quickly what we are trying to get at. This sort of information has rarely been asked for by investors before, so it is often not readily at hand.

We don’t expect to have 100% coverage in next year’s impact calculator, but we do hope to make some progress. And along the way we hope we will have put the measurement of positive impact on the table for our investee companies. It is a quite an enjoyable way to start a conversation… “Congratulations, we think your company is making a contribution to a more sustainable future. Please will you help us to quantify this!?”

¹ The methodology is available on our website at https://www.whebgroup.com/impact/methodology/

² WHEB’s impact calculator can be used to calculate the impact associated with a given level of investment in the FP WHEB Sustainability Fund at https://www.whebgroup.com/impact/impact-calculator/

Important Notices:
Risks include: the price of shares (“Shares”) in FP WHEB Sustainability Fund, WHEB Sustainable Impact Fund or WHEB Environmental Impact Fund may increase or decrease and you may not get back the amount originally invested, for reasons including adverse market and foreign exchange rate movements. Past performance does not predict future returns. The Fund invests in equities and is exposed to price fluctuations in the equity markets, and focuses on investments in mid-sized companies in certain sectors so its performance may not correlate closely with the MSCI World Index (the benchmark). For full risks, please see fund prospectus on www.whebgroup.com

General: This information, its contents and any related communication (altogether, the “Information”) is issued by WHEB Asset Management LLP (“WHEB Asset Management”). It is intended for information purposes only and does not constitute or form part of any offer or invitation to buy or sell any security including any shares in the FP WHEB Sustainability Fund or WHEB Sustainable Impact Fund, including in the United States. It should not be relied upon to make an investment decision in relation to Shares in the FP WHEB Sustainability Fund or WHEB Sustainable Impact Fund or otherwise; any such investment decision should be made only on the basis of the Fund scheme documents and appropriate professional advice. This Information does not constitute advice of any kind, investment research or a research recommendation, is in summary form and is subject to change without notice. The performance shown does not take account of any commissions and costs charged when subscribing to and redeeming shares. WHEB Asset Management has exercised reasonable care in preparing this Information including using reliable sources, however, makes no representation or warranty relating to its accuracy, reliability or completeness or whether any future event may or may not occur. This Information is only made available to recipients who may lawfully receive it in accordance with applicable laws, regulations and rules and binding guidance of regulators. WHEB Asset Management LLP is registered in England and Wales with number OC 341489 and has its registered office at 7 Cavendish Square, London, W1G 0PE. WHEB Asset Management LLP is authorised and regulated by the Financial Conduct Authority with Firm Reference Number 496413.

FP WHEB Sustainability Fund

FundRock Partners Limited (formerly Fund Partners Limited) is the Authorised Corporate Director of the Fund and is authorised and regulated by the Financial Conduct Authority with Firm Reference Number 469278 and has its registered office at 6th Floor Bastion House, 140 London Wall, London, EC2Y 5DN. The state of the origin of the Fund is England and Wales. The Representative in Switzerland is ACOLIN Fund Services AG, Leutschenbachstrasse 50, CH-8050 Zurich, whilst the Paying Agent is NPB Neue Privat Bank AG, Limmatquai 1/am Bellevue, P.O. Box, 8024 Zurich . The relevant documents such as the prospectus, the key investor information document (KIIDs), the Articles of Association as well as the annual and semi-annual reports may be obtained free of charge from the Representative in Switzerland.

WHEB Sustainable Impact Fund

The Manager of the Fund is FundRock Management Company S.A., authorised and regulated by the Luxembourg regulator to act as UCITS management company and has its registered office at 33, rue de Gasperich, L-5826 Hesperange, Grand-Duchy of Luxembourg. The Representative in Switzerland is ACOLIN Fund Services AG, Leutschenbachstrasse 50, CH-8050 Zurich, whilst the Paying Agent is NPB Neue Privat Bank AG, Limmatquai 1/am Bellevue, P.O. Box, 8024 Zurich. The relevant documents such as the prospectus, the key investor information document (KIIDs), the Articles of Association as well as the annual and semi-annual reports may be obtained free of charge from the representative in Switzerland. The state of the origin of the Fund is Ireland. The Fund is registered for distribution to professional investors in Austria, France, Germany, Italy, Luxembourg, Norway, Singapore, Sweden and the United Kingdom, and is registered for offering to retail investors in Switzerland, Denmark and the Netherlands. The Fund is also available for professional investors in Belgium and Hong Kong. It is not available to investors domiciled in the United States.

WHEB Environmental Impact Fund

The MSCI information may only be used for your internal use, may not be reproduced or re-dissseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages (www.msci.com).

How to invest