The Inuit word for ‘polar bear’, Nanuk, entered the wider global stage in a pioneering film documentary made almost 100 years ago under a slightly different spelling.
Released in 1922 ‘Nanook of the North’ was the first feature-length documentary to screen in cinemas, garnering critical and box-office success that still sustains the film’s reputation as an all-time classic.
But if Nanook, the Inuit hunter at the centre of the movie, was around today he would probably find it harder sourcing the polar bear fleeces like those that feature in the 1922 documentary.
Of course, over the intervening years the polar bear has emerged as the poster animal for climate change; a symbol of destruction but also of hope that served as fitting image in 2009 for the founders of a new Australian sustainability-focused investment.
At launch, Nanuk Asset Management – co-founded by Australian financial services veterans Paul Chadwick, Tim Ryan and Ivan Wheen – was something of an outlier, according to the group’s head of distribution, Dan Powell.
“Sustainability wasn’t such a well-known investment label then,” Powell said.
He said the Nanuk thesis morphed from an inkling that clean energy would likely be an important investment theme in the post-GFC years to a more broader view of change across multiple sectors.
“But the idea is to look at how investors can benefit from the need to create a better world,” he said. “What products and services will people require and how can they invest in them to get a financial return?”
Starting with macro themes such as climate change, water scarcity and pollution, Nanuk scours the global equity universe for companies playing a part in solving the big problems, even if it’s not a leading role.
“We look across the value chain for firms that will benefit from these trends – there are all sorts of players and they may not be obvious names,” Powell said. “We’re looking for the pick and shovel suppliers, rather than the gold mine.”
For example, Nanuk recently bought into Danish wind turbine generator manufacturer, Vestas, to tap into the growing demand for renewable energy.
The manager has identified a subset of 1,000 or so global stocks that meet its sustainability criteria with about 200 or those under close scrutiny at any one time.
Powell said the portfolio currently holds about 70 companies, of which the top 10 holdings represent about 35 per cent. The Nanuk New World Fund – the manager’s sole product – is also diversified across its themes ranging from health diagnostics (about 13 per cent of the total) to building efficiency (just under 4 per cent).
Sustainability, however, is a fast-moving beast, he said, requiring a reasonable level of portfolio turnover.
“Our annual turnover is about 50 to 70 per cent,” Powell said. “That’s because we have firm price targets. We will trim our positions when stocks reach their targets.”
And while the sustainable theme is likely to extend over multiple decades, he said the underlying companies and technologies fueling the trend are “very dynamic”.
“It’s not really a buy-and-hold sector,” Powell said. “For example, we think electric vehicles will dominate in the future but we don’t know who or what solution is going to last over the long term.”
Nanuk also applies an ESG exclusion screen that knocks out the usual suspects of fossil fuel extraction, gambling, tobacco, pornography and the like.
However, he said the manager measures its progress more against the UN Sustainable Development Goals (SDGs), an increasingly popular reference point for the institutional investment world.
As well as in-house research and data from Institutional Shareholder Services (ISS), Nanuk also uses specialist Perth-based firm Sustainable Platform for SDG-based analysis.
Sustainable Platform offers “a scientific based approach in reporting on 17,000 companies to the UN SDGs”, Powell said.
“We can push our portfolio data through the Sustainable Platform system to show how it relates to the SDGs,” he said.
From launch in 2009 to the end of October this year, the Nanuk fund has grown to about A$310 million, sourced mainly from retail investors, returning an annualised 11.3 per cent since inception against the benchmark MSCI All Countries World Index result of 8.4 per cent.
The Nanuk fund listed on the FNZ platform earlier this year ahead of a bigger NZ push – via third-party distribution firm Heathcote Investment Partners – next year.
“NZ financial advisers are actually more receptive to the sustainable investment theme,” Powell said. “They understand that there opportunities in investing for a better world, not just for the sake of ‘goodness’.”