Just five years ago the London-based impact investment boutique, WHEB, boasted about £100 million in its flagship global equities strategy at a time when environmental, social and governance (ESG) was an obscure term circulating at the fringes of fund management.
By 2022 the WHEB Sustainability Fund, until recently the manager’s only strategy, had grown more than 10-times to total assets under management of £1.6 billion. (WHEB rolled out the new Environmental Impact Fund last week, seeded by storied European investment firm, Rothschild.)
But if the firm has been a beneficiary of the “ESG stampede” – as WHEB partner fund manager, Ted Franks, calls the flood of money into sustainable-labeled products over the last few years – it also stands apart as a pioneer in marrying ‘impact’ with listed shares.
Established in 2009, the WHEB global shares strategy targets “the opportunities created by the transition to healthy, low carbon and sustainable economies”, according to fund documents, with a clear focus on demonstrating real-world impact towards the stated goals.
“The key is that we’re very transparent about what we’re holding and why,” Franks said.
He said WHEB has developed a series of bespoke metrics that rank the world-improving performance of companies in the portfolio, culminating in an ‘Impact Map’ that plots the ESG profile of every holding against those measures.
“We publish everything on our website,” he said.
As well, WHEB created a nifty ‘Impact Calculator’ that shows clients the impact associated with their individual investments around a range of factors such as clean energy generation or carbon emission reductions.
The manager has also pushed back against the long-held view that impact investing is only possible via niche, direct private markets rather than large listed markets.
In a paper published last October, WHEB says the “traditionalistic” position that impact investing must be “additional” – or causing something positive to happen that would not otherwise occur – is unnecessarily restrictive.
Impact, the paper says, is demonstrably possible in listed markets both by encouraging the underlying business and through investor actions.
“In reality, asset managers and owners function as a part of a very large and powerful financial system. Understanding that system, including the importance of secondary markets, is the route to mobilizing impactful capital at scale,” the WHEB report says. “Impact investors serve at the vanguard of a movement within this system that is pushing sustainability to the top of the business agenda. It is through the system as a whole that real scalable impact can be delivered.”
Franks said in practice the WHEB strategy is a simple, long-only developed markets fund that currently holds 45 or so stocks out of a global listed “authentic” impact universe of “what we think is about 500 names”.
The underlying portfolio companies (that include Fisher & Paykel Healthcare) tend to be quiet sustainability-achievers rather than high-profile ‘game-changers’, he said.
“For example, if Unilever follows through on net zero targets it may have to buy products from some of our companies,” Franks said.
Dutch nutrition firm, Koninklijke DSM – one of the fund’s top 10 holdings – showcases the WHEB approach, he said, with the company’s core food and beverage business complemented by innovative technology sidelines including a methane-reducing cow feed supplement and a sustainable carpet-backing material.
Franks is part of six-member investment team managing the WHEB fund that has been available as an Australian unit trust distributed by Pengana since 2017.
WHEB took over as manager of the former Hunter Hall Global Deep Green Trust in 2017 after Pengana bought the well-known Australian ethical investment business.
Since inception, the WHEB fund has returned an annualised 7.4 per cent after fees, slightly underperforming the 7.7 per cent of the benchmark MSCI World Total Return Index.
With almost A$300 million under management, the Pengana WHEB fund is represented in NZ by third-party distributor, The Investment Store.
The wider WHEB story dates back to 1995 when founders, Kim Heyworth and Rob Wylie, launched it as a specialist corporate finance advisory firm – the Wylie Heyworth Environmental Business.
Ben Goldsmith, son of well-known UK billionaire Sir James Goldsmith, joined WHEB as partner in 2003, adding venture capital and infrastructure investment arms over time in addition to the global equities fund. However, Goldsmith left WHEB in 2015 with the business now focusing entirely on equities.
Wylie and Heyworth moved on earlier, too – the latter, in fact, to NZ.