When the three current partners joined forces in 2012, they were able to develop an investment strategy that had sustainability at its core. The rationale for all investments is based on an understanding that the products and services that investee companies supply ‘enable and benefit from the transition to a zero-carbon, more sustainable economy'. The investment strategy is structured around nine themes including five environmental themes (cleaner energy, environmental services, resource efficiency, sustainable transport and water management) and four social themes (education, health, safety and wellbeing). Every company that WHEB invests in manufactures products or services that fit into one or more of these themes. Across the fund, over 85% of all revenues fit into these themes.
WHEB believes that these businesses are exposed to higher revenue growth because the global economy is increasingly demanding more of the types of products and services that they sell. Over the last eight years, revenue growth in companies with this type of exposure has grown significantly faster than other parts of the economy.
The evolution of these themes and the shift to a zero-carbon, more sustainable economy is not, however, a short-term proposition, but one that is taking several decades to play out. Consequently, their investment horizon is long-term (typically >5 years). Therefore, in addition to the thematic focus of what the companies do, WHEB believes that how companies operate also has an important bearing on their ability to succeed over the long-term. WHEB therefore also assesses the ESG quality of how companies operate. WHEB believes that this type of research, when fully-integrated into investment research, provides important insights into the underlying quality of a business and is an important determinant of their long-term success.
Having a thematic research focus that also integrates ESG analysis within a long-term investment framework is critical in WHEB’s view to delivering superior risk-adjusted returns over the long-term. WHEB also believes that the culture of the business itself is important in supporting an investment approach that is focused on positive impact investing.
WHEB believe that the financial services sector has been “woefully slow in responding to the challenge of sustainable development. While we have seen progress in recent years, too much of the industry still sees the agenda as one that is primarily about risk and reputation management. This has created an opportunity for an investment manager that understands this agenda as strategic. This is the role that WHEB seeks to play.”
They also believe fundamentally that WHEB itself should be run as a responsible business and that, on principle, they should be transparent about how they operate. It is for this reason that WHEB has a radical approach to transparency that includes sharing not just the composition of the investment fund (something few other managers do), but also the rationale behind each holding and the discussions that they have with their independent Advisory Committee about the strategy (something few other managers do).
This combined with their impact reporting, impact calculator and other materials (such as their PRI assessment report) available through the ‘Impact’ section of their website sets WHEB apart from other investment managers. “We believe that this culture of responsibility differentiates us and will help us succeed as a business. If we continue to be successful, we will in turn encourage others to try and mimic aspects of what we do, thus driving a systemic change.”
