Subscribe to get our latest investment news and insights straight to your inbox.

    red and grey Ask signage

    Recorded Webinar: “Ask Me Anything” with Emilie O’Neill of IMPQ

    Transcript

    All right, we’ve reached the hour. Thanks for joining us, everybody. My name’s Jodi Pettersen and I’ve joined Emilie O’Neill. And tonight we’re going to do our first ever ask me anything webinar. It’s a bit of a new thing for us. And the evening time slot is a new thing for us. But if the period of covered has taught us anything, it’s that you’ve got to try new stuff. And so we’re trying. So we’re hoping tonight will be super casual, super free. And again, this is an ask me anything. So you really encourage to ask any questions you’d like.

     

    It can be super complex and detailed. It can be super simple and a bit. And a dumb question this no dumb questions here tonight. So it’s just an opportunity to really pick the brains of Emily. And, you know, she’s been on a number of podcasts recently.

     

    So I know that some people who’ve joined us tonight would have heard Emilie in the podcast. She was on the Shares for Beginners Podcast recently, as well as Equity Mates. And we’ve received a lot of interest from those podcasts. And I’m sure there’s some people here who’ve joined up who will listen to the podcast.

     

    And it’s just a really great opportunity to ask additional questions about investing in small caps, about investing sustainably, about investing in active ETFs and really just kind of look under the hood a little bit. So before we jump in, let me do a couple of explainers.

     

    The disclaimer, you guys probably know the drill already, but I will definitely repeat it for everyone’s sake. So tonight, of course, this is just general information only. This is not financial advice. We don’t know your specific circumstances, so it’s always best to seek your own advice. And remember that all the PDS are available at eInvest.com.au and I encourage you to read them. What we’ll also be doing is there is the Q&A function. So if you look at the chat bar on your webinar tonight, you’ll see there’s a Q&A section. You could submit your questions there and we will answer them as we as as we go along. And I’ve also had some people emailed me and questions already, too. So I’ve got those listed here and I’m ready to drill Emilie.

     

    Please excuse us, but it’s the evening and we’re going to have a glass of wine while we do this, because this is hopefully going to be really fun. So let me introduce to Emilie.

     

    It’s Emilie is the RSG and equities analyst of one of eInvest’s active ETFs, which is called the eInvest Future Impact Small Caps Fund. And the code for that is IMPQ. We only do active ETFs and that is ETFs that are actively managed by professional fund managers. And you can buy and sell the units on the exchange just like any other share. The eInvest Income Future Impact Small Caps Fund. I’m just going to refer to it as IMPQ, which is the code that you use to type into your online broker. IMPQ invests in in Australian, New Zealand, small companies with a strong sustainability focus. And so what’s really cool about Emilie’s role is not only does she look at the financial performance of the companies that she chooses to invest in alongside Damian, you’ll see on the screen who is the portfolio manager of IMPQ. So not only does she look at it from a financial perspective and obviously try and make money for the investors that have invested alongside her in IMPQ. But she also does the analysis in terms of sustainability and ESG, which is a term that we use to kind of reference sustainability, which we will be going into soon. So she does she has kind of two hats. And so it’s really interesting to explore how those two ideas intersect. And that’s what we’re going to do tonight. And my name is Jodi, if you’ve known me, some of you don’t. I work for eInvest and I look after investor relations. So you will see me on our YouTube channel. You’ll see me and our videos. I write the content. I do a lot of wear a lot of different hats to invest. But we’ve probably met some of you I. I’ve seen some familiar faces of familiar names on the list tonight, so for those who I’ve met in person before at conferences and the like, it’s great to see you joining us tonight.

     

    So I think I’ve said all I need to say and I’m going to hand it to you, which may begin.

     

    Well, let’s just get straight, straight into it. So if you go to the first slide, I’ll just make a few introductory comments and then we’ll dive into some of the questions. Like you said, there’s been some pre submitted questions and we’ll address the questions that come through on the Q&A bar as well.

     

    So just answer the first slide and start submit your questions in the Q&A. We’re going to do a few slides of a guest, just introductory information to provide context for tonight’s discussion. But start dumping your questions and we’ll get to them shortly.

     

    Thanks. So let’s start with the basics of what ESG. So I’m actually going to put you on the spot here. Do you know what it stands for?

     

    Stands for what is written on the screen there to give away, giving it away or it stands for environmental, social and governance?

     

    Yeah, that’s exactly right. So it’s all about the environment, social and governance, performance of a business and its operations. And I put some examples on the slide there of some of the factors we look at. It’s by no means exhaustive, but it just gives you a little bit of a flavor. So in environment, it’s all about, of course, the the impact on the on the natural environment, Social, all about people and the treatment of customers, employees and communities and in governance by looking at the corporate governance structure. So how the business is run. And not all of these factors are relevant to every company.

     

    And what we like to talk about is material. So, for example, in the mining sector, you might be looking at greenhouse gas emissions and safety record. That’s really important, but they might not be as relevant. For example, companies in companies, perhaps cybersecurity or business ethics, are kind of more important there. So that gives you a bit of a flavor for what materiality is and some examples of ESG drivers that that we’re looking at on the screen.

     

    So just onto the next slide, please.

     

    So why do we need a sustainable future? Well, it does seem like a while ago, but it was only actually last year where we had the devastating fires that that went through Australia. And then that was followed by the severe floods at the end of last year towards the start of this year. And we know that extreme temperature abnormalities have been associated with the increasing greenhouse gas emissions trapped in the atmosphere. So one of the things of our portfolio is renewable energy.

     

    And that’s all about trying to reduce the emissions associated with coal and oil, electricity generation. So we invest around that and we also invest in low carbon technologies. So an example of that is the cement industry contributes to nine percent of global GHG emissions. And we have a company, the portfolio that is trying to reduce the emissions associated with development. And, of course, you need it cement for a lot of important things in the industry. Another really critical theme is water treatment. One in three people don’t actually have access to fresh and safe drinking water. And there’s actually going to be a 40 percent shortfall in fresh water by 20 30. So we have a few companies that are associated around that phase and social welfare. So there are things like diversity. We know that some of you may have heard me talk about this before, but we know that it’s on the ASX 200, which is the top two hundred companies on the stock exchange, that only thirty point seven percent of all members are female and only females only represent 18 percent of catch positions. So that’s a critical thing. And another one we look at in social welfare is modern slavery. So when you kind of think of slavery, you don’t really believe that it still exists. You know, we think of it. We have a very traditional view of what slavery looks like, the people who built the pyramids. But I just want to throw that to Jodi and just say, if you want to have a guess around how many people you think might be modern slavery conditions, I’m going to say 10 million people perhaps. So it’s actually forty point three million people who in modern slavery conditions, which is pretty scary when you when you see the figure like that. And that is according to the UN. So I’m not making that statistic up. And when we’re looking at modern slavery, we’re thinking about low wages, debt bondage, you know, bad living conditions and things, things like that. Child labor is exactly that that comes into it.

     

    It’s like it’s like I think people think slavery and I think slavery. I think the people that made the pyramids or something along those lines. But I think that is the risk that the everyday. Consumer items that you and I we touch every day could be made. These dodgy human slavery conditions, so that’s something that I feel about.

     

    Yeah, yeah. So that’s why we we look very closely to supply chain practices and how businesses are managing those risks. Education is another thing that you can say there. And one in five people in the world of schooling, education aren’t actually being properly schooled. We know that. Ninety one percent of children were impacted by the closure of schools over the period. And we actually invest in a digital education provider that helps to solve some of these issues going forward. And you invest in them before? Yeah, we did. So it’s an interesting concept because when we’re investing in this way, we’re thinking about what are the themes for the future. But actually that’s been very beneficial with some of the outcomes that we’ve seen. It’s kind of accelerated those things. And so we’ve had a few stocks that have been beneficiaries of the shift to online, for example, or the push towards treatment of infectious disease.

     

    Well, I will go into more of those. I’m sure I’ve already had a few questions come through about who’s benefited from covid, which know. And so I’m really looking forward to unpacking that a little bit more. Should we jump to the next slide? Yeah.

     

    So we really believe that sustainable investing matters, but why should you care? So, I mean, myself and Jodi are very passionate about the environment and societal influences that we have on the world. So you may be using a keep cup. I know I was pretty covid you might be turning vegetarian to try and cut out the emissions or for animal welfare reasons. But a lot of people aren’t actually aware of where their money is sitting and what types of companies they’re investing through their support or through the general personal investing.

     

    So what I think is that directing capital towards companies that are doing good things is one of the best drivers of positive change. But besides, obviously doing good things for for the society and for environment, besides the warm and fuzzy, it actually does lead to better performance in our view.

     

    So what I’ve done here is discuss some of the benefits of investing in a sustainable way. So we’ve got sustainable business models and returns performance on sustainable business models by thinking about their social licence to operate. So that’s all about are they meeting the minimum requirements that society expects them to to operate in that conditions? Are they legitimate, creating trust and consumer demand? So consumers like us are seeking more sustainable products and services. Sixty four percent of consumers are already buying foods with sustainable or eco friendly packaging, and another twenty three percent expect to that going forward. So that is that demand for more sustainable offers and stock actually do really care about sustainable that if their company is sustainable. So we know that companies that have a huge focus on RSG usually are able to attract katelin more easily that able to retain the talent they have stuff that is more engaged and more satisfied in their work, which leads to better performance. There’s also I’ve got regulation there, so we are seeing kind of increasing awareness from regulators that are driving business outcomes towards more sustainable benefits for society. So an example of that is the talk, the discussion around a carbon tax, which will hopefully shift towards positive companies that are doing more positive things to that. That’s really important.

     

    And so I think it’s really interesting because if we’re looking as investors today.

     

    The carbon tax doesn’t exist yet. Maybe it will in the future, but the businesses that are already taking actions towards positive change, they’re going to be a step ahead of the competitors. So that’s actually a competitive advantage for the future, that they’re going to be ahead of the momentum ahead of the game.

     

    So that’s pretty exciting. Yeah, exactly. And so wrapping all of that up, what does that actually mean for these companies? Well, it actually means we think positive shareholder returns. So there is increasing recognition that it’s related, positively related to performance and it can affect risk in return. And that’s because one of the reasons is that they tend to have low volatility and they have less controversy, less funds that some of their industries that are subject to less regulation.

     

    I’m going to jump in. I know there’s a few people that are at the early stages of their investing journey onto that volatility is how much the share price goes up and down.

     

    So if it’s going to bring big waves, big highs and lows, that means I have high volatility, which is as scary as an investor.

     

    Yeah, exactly. And the other thing is I tend to have these companies that focus on sustainability, a low cost of capital, and that basically means I have a cheap access to funding to go, which actually increases valuations. So what the business is worth.

     

    So they’re getting more competitive finance. Exactly. Because they’re doing these things, all the other stuff probably.

     

    Yeah, exactly. And we also know it’s in gaining, gaining, increasing investor focus. It’s being talked about a lot more. It’s expected that over 20 trillion dollars of money will flow into ESG funds over the next two decades. And we’re seeing that ESG investing is actually the one of the greatest sources of inflows for asset managers like us. So it’s really important. So, you know, I like to say you can you can do good while doing well. And that’s our philosophy here. So it’s good for good for the world, but also hopefully generates better performance. So we’ll just touch onto the next time.

     

    And so, yep, this is what this is. This is important. We’re talking here about active management before we jump in. I’m going to quickly provide a definition of active management for those people who, as I said at the beginning of that journey, I’m going to be a translator tonight. And so I’m going to jump in with definitions every now and then say active management is where you have a portfolio, in this case shares. And that portfolio is managed by professionals like Emily and Damien and the team who actively decide what goes in the portfolio and what goes out that. So they make those decisions every single day in order to achieve a certain outcome for the portfolio. Passive management is simply just investing in the market as without any buying or selling or manipulating that problem at all. So you’re only going to get market which are actually going to get less market return because you get a Pigface. And so you’re going to take the good, bad and the ugly of whatever is in the market. Whereas Emily and Damien are deliberately picky.

     

    Yes. So, yeah. So it’s where they were active managers. So we’re selecting where stock picking. We’re selecting what goes into the portfolio. We can pivot, we can buy, we can sell depending on on how the outlook looks for the company or if there’s a thing called. Exactly. And why it makes sense when investing sustainably is there’s a number of reasons on the slide. So you can say that negative screening applies to both passive and active funds. Negative screening is basically where you exclude companies that operate in industries that might be controversial. So it could be alcohol, could be fossil fuels, weapons, tobacco and the like. But but what we do and what active has the ability to do is actively invest in more positive stocks. So we call the sustainable future enablers and their stocks that are actually contributing by the nature of what they’re doing to assist it, sustainable future. And that’s our focus in the fund.

     

    We’re also able to improve outcomes through engagement. So we’re regularly meeting with with management, with boards, with the key personnel in the business to discuss what they’re doing about sustainability and how we can put our advice and say, you know, you should be doing this, this and this.

     

    And also we’re investing in really exciting, innovative, small Australian companies that have a sustainability angle and often have global operations. So that’s something that that’s different in in our offering.

     

    And one last slide before we jump into the question. This is the slide. It really shows, you know, it hasn’t worked in terms of actual returns to investors, so tell us, Emily has been working, so he just lays out performance over one, three, one, two, three months and one year since its inception figure.

     

    So the second lot of numbers, that is our benchmark, which is the small Ordinaries index. And you can say that over the past 12 months to 30 June, we if you’d invested in the index, you would have received a return of negative zero point of negative five point seven percent. And we actually added nine point four percent of alpha over the benchmark. So you would have to say three point seven percent if you invested in one year ago. And this is also true on a one month, three month and since inception basis. So that’s just a bit of a flavor of how we think about results from an investment perspective.

     

    Nine percent Alpha is is quite considerable, especially over a period of intense volatility that we’ve experienced. It’s been a it’s been a big ride over the last 12 months. Definitely wouldn’t have expected what happened recently, 12 months ago. So kudos to you and your team. I am pretty keen to open up to the questions now. So I had a couple come through. I’m going to ask what happened to mine. Why don’t we start with one of the great idea. Fantastic. So I’ve had here this one is this one came through to me. On what evidence is there to say that sustainability helps returns? Does having a strong focus as an investor in ethical investments come to the detriment of absolute returns? And how does the fund address this? So this is really asking and thank you to the person who email this story to me, because it’s a fantastic question and a great place to start on it. This really to is are you are you harming yourself by investing sustainably? Are you better off just going all in on the miners and the tobacco stocks?

     

    Well, what I think is the best place to start is just going to slide 12 on our presentation appendix.

     

    I’m having a technical issue here, but I’ll start talking to it before we get it up. But it just basically outlines some of the some of the evidence for sustainability investing. And there’s been a number of studies to show that there’s no diplomates trade off. And in fact, it actually helps.

     

    It actually helps with performance. So if we the first one that I’ll talk to is from the Harvard Business School, and that was a study done in twenty fifteen, and that basically found that companies that performed well on material ESG factors actually delivered enhanced shareholder returns for those companies that didn’t. So that’s on the return and stock performance point of view. Morgan Stanley’s Institute for Sustainable Investing. They analyzed almost 11000 funds and actually found that from 2004 to 2008, there was no financial trade offs in return, investing in funds that were focused on sustainable investing versus additional funds. And actually, they saw that it had offered lower market risk. So it was 20 percent smaller downside deviation in sustainable focused funds than traditional funds. And that goes back to that point on volatility, that journey to find for us a little bit earlier. Another study that I found recently was Australia and that found that stocks that ranked better on factors actually had a lower cost of capital, which we addressed earlier. So that means I have a cheap access to funds and high valuation. MSCI study found that performance on ESG stocks had less idiosyncratic and systematic risk than really what he terms. But basically it means it had less market risk and less individual company risk. So that’s all about having high profitability through lower exposures to terrorists and also less downside deviations. So there are some examples, but let me compare the performance of our fund to other sustainability funds. We perform quite well, but more importantly, compared to all funds out there, we’ve actually been in the top performers in other small caps funds. And that kind of goes to our point that we think sustainable investing actually helps us deliver better returns because we’re thinking about all of the rest of the business, not just the financial risk. And of course, we’re also looking at the financials. But sustainability is is a key importance in what we’re doing.

     

    Obviously, I’m going to stop the share and so we can just say this there up. And then here’s a question. Here we go. Have you heard of ASX SES? They are an Australian sustainable compostable packaging manufacturer, which I may assume might fit within your universe. Is this company on the radar and do you have any comments?

     

    Interesting question. I actually haven’t heard of that stuff before, but I’m definitely happy to look into it. It is quite interesting because the circular economy thing is quite prevalent at the moment. It’s all about having a closed loop economy. So if you’re buying something, what’s the product lifecycle of the packaging, for example, in your case? So we know that each year families actually the average family actually disposes of 40 kilos of plastic waste, which is pretty scary. We do have a number of companies in the fund that address that. So one of them is which is a metal recycling company and is looking to kind of close that loop, recycle the metals and produce it into new materials. We also have Cleanaway, which is a waste management company. They’re doing a really interesting energy from waste project and also keeping the materials that they can recycle when they collect the waste. Also, interestingly, from a different angle, we have Kathmandu, which is an outdoor apparel and retail company, and they’re actually using recycled material and specifically plus old plastic bottles in their in their clothes. So last year, they use nine point three million plastic bottles in their clothes and they have a target of 10 million for this year. So hopefully they make that. But it’s definitely important things like the economy where we’re looking at it. It’s it’s really important for missions point of view. And, you know, we know that if we continue on current trends, there’s going to be more plastic in the ocean than fish, which is really scary. And that’s by 20, 40. So it’s it’s a critical part of the ecosystem to be able to close that loop, I think.

     

    And I think I know at least amongst our friends, and maybe it’s not the whole of Australia, but definitely amongst our circles. And I can see a few of my friends on the chat tonight. So thanks for joining us, baby. And I know that amongst us, I definitely choose sustainable packaging wherever I can, as we all. I think there’s a strong consumer demand for it and whichever company can that they’re going to do so well, they’re going to do so well because I’m sure Woolworths and Coles are just waiting for the right innovation to occur. And I’m sure it’s a lot more complex than just saying everything on cardboard. But what I’m trying to say is that we can look at this from an environmental perspective, which is a circular economy, you know, plastics in the ocean, but also from a Investor and consumer demand. Whoever solves that problem is likely to make a lot of money. And in solving that, because I think there’s such a demand out there. So it’s definitely a really important thing to be getting amongst. And so we will look into it. I haven’t heard we haven’t heard a but she’s writing it down as we speak and no one is. Let’s do another one. So I’ve got another one here. Do you invest in coal?

     

    No, we do not invest in coal. So we actually don’t invest in any company that has any revenue associated with the extraction or sale of thermal coal, uranium, oil or gas. That’s one of the revenue thresholds that that we have in our fund. Every fund is different on how they think about some coal. Some funds have a sense that they might say we don’t invest in any company that has more than 10 percent revenue from coal as a zero percent revenue threshold. We completely avoid it. So, no, we don’t.

     

    And are there different types of ESG or sustainability investments?

     

    Yeah, so so there is. So there’s a whole range of different ways to invest sustainably and how investors look at it. I’ll just bring up a chart on my own on my own notes here.

     

    But there is what we call integration and that is basically considering ESG factors in your investment decision process alongside financial factors. But you don’t have a specific theme or exclusion. It’s just considering those risks in the process that moves along to ESG engagement, which is all about actively working with management to drive positive change. So it’s cold sometimes called activist shareholders. There’s also negative screening, which we touched on, which is about excluding companies and industries that might be controversial or positive. To society, so called weapons, alcohol, tobacco, logging, animal testing, for example, then we have sustainability. So that’s investing alongside sustainable outcomes. So like renewable energy, like education, like health care. And then there’s also impact investing, which is in about about improving environmental and social outcomes at a return. But it may be let the market return and then we have philanthropy. So that’s about basically improving society, but without any oversight. So they’re kind of up the scale. We kind of in a few different elements of that, but we consider us quite strong on the scale.

     

    I think it’s I think deep green is is the word that you would like to refer to more dedicated sustainability investors.

     

    I think there’s a real risk and I know it’s a word that you used in the podcast that they commented on. And so I’m going to bring it up again because I think it’s a really interesting term, the idea of greenwashing. Can you share a little bit more about that?

     

    Yeah. So greenwashing can occur on a company basis, but also a fun basis. And it’s all about marketing the sustainability credentials that might not be genuine. We’ve seen a few companies. Oxitec, I guess, is the word. So they might produce a sustainability report just to get that tick on the box. They might put out a target for diversity just to tick that box. But it doesn’t mean they actively contributing to a sustainable future. So that’s a big risk that we look through. And part of our engagement is trying to, I guess, work out are you greenwashing or not? And also funds can be greenwash. So they can say that they’re doing a lot of sustainable screening, for instance. But if you go in and look at their stocks, you may actually be quite surprised what you find. I know I’ve done that exercise recently where I’ve gone around and looked at some of our competitors holdings and made a little bit surprised about some of the things in those portfolios that marketed themselves as an industry fund that only had a five percent allocation to sustainable investments.

     

    Yeah, so 95 percent was just like whatever. And then there’s a Phuket’s mopping themselves, if you like. OK, I won’t name any names because I’m not I’m not about that. But I think it does help in this case to really kind of operator and everyone’s on that journey.

     

    But I encourage you to go to these funds and look at the underlying holdings just to make sure that aligns with what you believe in and what you can do to make your values and your environmental concerns. And we’re very public about our funds. We upload them on the website every month. It’s two months late, but you can have a look at what is in our portfolio in the ratings. So we do encourage everyone to look at it.

     

    If you go to our website and today I am PKU, Page says, and best dot come to you for I think you scroll down, you’ll see a bubble chart and that actually has every stock that is sitting in the portfolio.

     

    So you can have those stocks and read about them then. Yeah. And if you have any questions about why a certain stock might be in the portfolio, feel free to email the Web page. It goes to Jodi and she will ask me and I will provide the feedback as to why that stock is not portfolio, because we’re very open about each stock and why it’s in them.

     

    We have a reasonable and there’s also a chat function on the bottom right hand side of the page that I also respond to during business hours as well. So if you just want to keep chatting to me, I’m there all the time. So let’s anymore have come up. Let’s have a look to. Oh yeah, there’s some scene here. So I’ve actually got a pretty simple question and maybe it actually might be better. One for me to answer is what is an ETF? Yeah, you can all answer that one because that’s my day job. So it’s a really good question because there’s so much stock in this industry and I’m really you know, I’m kind of weird to using some of it, but I try and break it down as much as I can. So ETF stands for exchange traded fund and what that means, it’s a portfolio of, in this case, shares, but it doesn’t have to be shares, but mostly shares that you trade as one entire portfolio, but you buy and sell the units on the exchange. So it’s like the same process as buying a share. So I could be like, OK, I want to buy it. Westpac shares. I would go into my online broker. There’s lots of them out there. Commsec is very popular. Self-wealth is increasingly popular, particularly with the equity crowd. And you just type in the card for if you just want to buy one, share that Westpac code, but you can also buy a whole portfolio shares in the same way. So in this case, you type in the card and pick you and then you buy the units in the fund and you sell them in the same way.

     

    What’s different about IMPQ compared to a lot of other attacks out there? It is what we call an active ETF. So active ETF. Like I explained earlier, that portfolio that you’re buying into is actually managed by a team of professional investment managers like Emily, like Damián, and they actively choose what goes in and out of that portfolio and can adapt accordingly so that the active management be really important, particularly during covid, because suddenly there’s all these crazy changes. And, you know, maybe you don’t want to be holding country stocks right now just so you can you can jump in and out. And so that’s actually, I think, the only the only ETF that invests in both small caps and with the sustainability focus available in Australia right now. So it’s quite unique, active, active. And it’s unmatchable. Yes. So it’s quite it’s a quite a unique portfolio and we’re sort of a part of it. Let me answer to the question. Oh, here we go. It says the thumb in the eye is small. Is there any chance that it could do list? And the answer is absolutely not. We’re still at the very beginning of on Kikhia and we’ve got a long way to go. And what’s great about an active ETF is compared to other structures such as an LLC structure, is that it’s open and it’s open ended. So it doesn’t matter how big the portfolio that the fund is, it doesn’t impact at all what Emily and her team does, and it doesn’t impact the price that you can get in and out of in the portfolio. So, yeah, definitely not so.

     

    So it can’t do this because it’s basically a bucket of listed companies which are liquid and traded on the stock exchange. So when you buy the units, you’re directly buying into the companies that we hold. So it is small where it’s been. The IMPQ who has been listed for just over a year now, it has another strategy behind it that’s been going on for a lot longer. But the actual listed strategy hasn’t been going on for that long. We’re in marketing phase. This is why we’re doing these education sessions, to get investors like yourself familiar with what we’re doing. And we hope that it will grow and that, of course, we’re in our early stages. It’s more now, but there’s no textbook listing. But thank you for the question. It was very interesting.

     

    And I have another question here. And I think it’s really, again, that equity markets crowd from your podcast. What is the difference between this fund and the beta shares? Sustainable ETFs.

     

    Yeah. So Betashares is a passive ETF provider, and you’ve touched on that pretty well over the course of this. But basically, they map their portfolio to an index. It’s not necessarily it’s not active stock picking. And the British have specifically they do a negative screen, which is similar to us. And they also kind of look to invest more in companies with responsible investment considerations. But if you go into the website, you can see the performance, they track the index, they underperform the index because those days and you actually on a one month, three months, six months and one year underperformed and you actually would have had a negative return of zero point eight three percent if you had invested in that fund one year ago and 30 it. So it also if you go in and look at the underlying holdings, you can see some of the stocks in that and some of them you may not agree with. That should be a sustainable fund. But what the difference is, is with our fund is that we’re investing in 50 percent of our portfolio in a sustainable future, enablers which have a positive impact on society and the environment. And we’re really focused around those themes of renewable energy, low carbon technology, education, health care and the like. So that’s kind of the key difference in this.

     

    And I think there’s also other key difference is that those portfolios, from what I understand, I haven’t studied them in great depth, but they’re large. They invest in larger companies overall, whereas you’ve got more of a small cap focused. Yeah, yeah. And again, it’s around that passive first active debate. You know, they do analysis as to what the what is held in those portfolios. They do that kind of sustainability analysis. But from what I understand. Again, I can’t I can’t really comment that much on other people’s products, so this question is a little bit tricky and I can’t be for it. But from what I do understand is that while I do that sustainability analysis, they’re not moving in and out of companies. They’re not changing the construction of that portfolio based upon the financial metrics of those companies. The only thing they’re looking at, sustainability and the rest, they just kind of they take they take a ride, if that makes sense. So, yeah, there’s some pretty key differences. And I think that’s one of the sustainable ETF with better shares that focuses on global companies. So another key difference is I pick you focuses just on companies in Australia, New Zealand, where is one of those funds has an Australian focus. The other has an overseas focus. So, again, you’re going to get very different exposure.

     

    And sometimes active funds can be worked in complement with passive funds. Oh, yeah. So you can sometimes complement or balance that risk with some active and passive. But you should definitely speak to a financial advisor and read the PDS and look at look at the websites and do your own work based on that.

     

    Definitely. But I think we at eInvest we focus only on active ETF. But, you know, I think there is a really good argument for investing passively as well. I’m not against it at all. But I find if you’re investing particularly in small caps, so that is the small end of the market. Actually, maybe you should give a definition of small time. We haven’t done that yet, and that is investing in smaller companies. So there is a lot of both academic and financial evidence suggesting that active management really makes a lot of sense, particularly in the smaller end of the market. So can you provide that for those who don’t know what a small cap is? And again, I’ve got I’ve got a mixed audience tonight, so some of you will sort of be one. Can you provide a definition?

     

    Yeah. So when we’re looking at small caps, we’re thinking outside ASX 200 in our IMPQ, we have to say that we can invest up until outside 50 if they have so equity meeting and the top 50 companies on the stock exchange. So we exclude those from our investable universe. We can go into what they call midcaps or middle sized companies, but that’s only if they really have a sustainable focus. And we’re not investing in super microcap. So they’re the smallest stocks available on the stock exchange. We do have a limit of 50 million and we actually can only invest in five stocks under two hundred million.

     

    So we’re not in the super, super small end, but we are kind of in that small to mid-cap space because I think what’s really for those who haven’t looked at small caps before, there’s the top 50 or the top two hundred companies. They’re the big Australian companies that you probably are familiar with, the big banks, the miners, the AMP capital’s, the CSL, all those really big companies that you know well. But there’s actually over two thousand companies that are listed on the stock exchange. So there’s these really the top ones are huge. And they make the majority of the value of the ASX because they’re so big and there’s this long tail of all these small companies that you may never have heard of. And what’s really interesting is that most people focus on the big guys, the big names. And that’s also in the sense of most equity research, focus on the big guys and there’s a lot less attention shown on the smaller companies. And that’s as an investor. That makes it quite interesting for you and your team to go out and find some interesting little opportunities that maybe other people haven’t uncovered and that maybe aren’t getting the attention at that. So while there is over two thousand companies that sit in the small end of right around two thousand companies that sit on the small end of the ASX in particular only holds roughly 40 companies.

     

    So it’s about 40 and adding about forty five right now, but it can range from 30 to 70.

     

    So you’re only choosing a small little handful of the best in that really long tail of all. Yeah. Mixed bag stuff out there. So from an investor perspective, it’s really like it’s kind of rock picking’s the area and it is. That’s what makes it really exciting. But also it makes a quite. Because there’s not many funds that are active ETFs that focus on that area, so please, please keep the questions coming, we have about 15 minutes left.

     

    There’s enough corrections to get us through. So please ask me anything like the title of the Web chat was titled.

     

    Oh, I’ve got one question. Is that Banksy behind us? It is a Banksy wall. This is our office. We have Banksy here. And so you go. That’s a fun question. Yes. So at best, we’re in the office right now and we have our meeting rooms named after artists and people who know me. I’m really into art, so I might have had something to do with that. But yeah, I’m sitting around and out of office. This is the Banksy room and next door we have this Frida room named after Frida Kahlo. And yeah, we do have a Banksy mural, which just makes life a bit fun. So let’s jump in.

     

    We’ve got a couple more questions and even more creepy.

     

    Yes, I got a few here and so I got a few here, but I’m kind of renewable energy. This is a good one. How much of the portfolio is exposed to renewable energy? Because I know that’s I get that question a lot, actually, because people really want to invest in renewables. It’s such an important way that we can accelerate decarbonisation.

     

    So at the moment, we actually have full renewable energy companies on our fund. Unfortunately or fortunately, one is actually under takeover offer at present. So that was really good from performance point of view. But it means we lose one of our renewable energy providers. We actually have a statement in the presentation which you want to go down a pull it up.

     

    Where is it? Right. Here we go. What side is it? I’m not actually sure. Keep going. Keep going. We’ve got a lot of people, a lot of these background slides in case things came up.

     

    And you keep going. Keep going, keep going. Yeah, it is. Yeah. So we actually have enough holding companies have enough renewable energy to power one point eight million homes with renewable energy instead of coal or gas energy. We have quite a diversified portfolio across geographical location. So in Australia, New Zealand and the US. And it’s also quite diverse in terms of top of renewable energy holdings. So we have a holding companies have solar, hydro, wind energy storage and geothermal assets. And like I said, one is under takeover of us. So we will lose some of those megawatts. But what’s really interesting is a lot of these companies have long term contracts, so they’re not on the retail market. They’re actually locked in with with corporates on a price. And that’s really important when we’re looking at the financial end of the returns, because that really means as financially that makes them much more safe.

     

    Stable investment is. Yeah, yeah. It’s really interesting because my husband also works in renewables and it was this is a bit of an anecdote, but it’s a little food for thought and you might agree with me. So during he was always to say that he’d go to speak to investors and investors would say all renewables are so risky. I much prefer investing in airports and ports and toll roads. They’re much less risky investments. What’s been really interesting to encourage, and that’s actually this is going to be good said an exhibition, is that during covid, renewables have not been impacted in the same way.

     

    Like at least, you know, they they have shown resilience because the sun doesn’t care about carbon.

     

    Meanwhile, those traditionally safe assets such as airports, ports, toll roads, have all been incredibly impacted in a way that I think a lot of investors never anticipated. So food thought reassessing what is risk and. I’m going to I’m going to bring up covid, because I think he has a few questions coming about it, and I think it’s really important what happens. I mean, we know that the stock market has kind of gone through a historic period of volatility and covid is something that we’ve never really had to experience in our lifetimes. How is the portfolio been impacted?

     

    But part of it, yeah, sorry, it is I do hope that your family and yourself as well, because it is a really terrible time at the moment that we’re all going through. The share market was severely impacted during the downturn and was actually quite a unique downturn in that both kind of defensive and cyclical assets were impacted on. What that means is you have assets that are typically more resilient to a downturn and then you have assets that are very susceptible to a downturn. What we saw during the recovery period is that both were impacted. And so that was quite a hard time for investors to work out what they were going to be pivoting to or keep it out of. We have had, fortunately, a number of investments that have been able to do really well during covid, and that’s because we are investing in sustainable things around health care, around the move to online or digital. And they’ve actually performed really well. You would have if you have listened to the podcast, you would have had a few examples. Mesoblast is a company that treats Acute Respiratory Distress Syndrome, or ODS. And obviously when you have when you experience covid-19, you have respiratory distress and it’s showing some really promising results for patients. Another one which I talked about is genetic signatures. That is a rapid pathology testing kit that was able to pivot and include the 19 test. And they’re able to do pathology testing. And we also mentioned general education, which won a number of contracts to host educational platforms online. And obviously that’s important as people can’t go in and physically be next to each other, they can still learn through online names. So that just a few examples of stocks that we have been in before covid and we’re fortunate enough to do really well during the period just because of the nature of what they’re doing and they were able to pivot. And that’s kind of an example or a testament, I guess, to our investment strategy, looking at kind of larger long term things.

     

    Yeah, I think it’s a really long term focus, I think is so important. And I think it’s there’s been a lot of a lot of news in the media about things like short term traders. They own the Robin Hood on these strange platforms looking for a quick buck. That’s not how we do this. This is focusing three to five years out, at least. Me personally, I invest in you and I don’t really I just and I see it as a five, 10, 15 year investment. And it’s, you know, that’s what it’s designed to be. It’s a lot it’s a long term view. And what’s really lucky is that the themes that you’ve been looking at, as long term themes happened to be some things that really benefited during covid or accelerated during covid. What about ESG during part of it?

     

    Yeah, that is a really great question. And we’ve got about 10 minutes left to any last minute questions. Please, please ask them. Put them in. So historically, RSJ has really focused on the energy environment as we’ve seen climate change come to the forefront and also governance.

     

    And we’ve looked at females on the board or how companies run or remuneration, how basically executives are paid. They kind of been the focus going historically. But in the current period, there’s actually a massive shift towards the S or social. And that’s because we you wanted to make sure companies are bringing safe conditions for workers. So we’ve seen a lot of outbreaks in work workplaces. That’s been obviously really tragic to their performance, but also to the employees and their families who have been affected by the of it, also making sure that keeping their customers safe. So what steps are they taking to ensure social scene, for example, in stores all through use of products or delivery methods, making sure that the aisles are large enough to be able to be able to walk through or creating up and down arrows? We’ve seen that companies. So it was a massive shift towards the S of social. And that’s something that we’ve always focused on as one of the key components. And we’ve had a number of conversations with executives about how to think about as one of our holding companies would use their executive pay by 20 percent just until conditions improve. And we thought that was quite strong executive leadership given some companies. The market have gone out and actually increased CEO pay when their profits have been down and shareholders have suffered. So it’s really about making sure they’re doing the right, the right thing for their employees and other stakeholders, including customers.

     

    And I think it’s really interesting because, again, like you’d think logically, you’d think treating your customers well, particularly during a time like this, is better for businesses. And yet not every investor thinks that way. So it’s I think the S has been increasingly important. And as unemployment is ticking up, I think it will increase even further. Employment important. So watch this space. But we can’t forget that a well, of course, to get climate change. That’s really important. Look, I am out of questions right now, and I think that we’ve covered heaps to know. So this has been a real pleasure. We haven’t done this before. We’ll probably have to do another one of these. This is great fun. If you do think of questions later on that you should ask Emilie, but you know where to find me on the advice website. You can send me an email. You’ve got my email address. I emailed you all this afternoon. You can chat to me on the chat about social media. I hope you’re following us on social media. You know the drill. You can contact me and I’m happy to pass the questions through to Emilie. And I hope that tonight has helped you. If you’ve got additional questions about how to invest in Q feel free to hit me up as well and always happy to answer those questions. And let’s all keep focusing on the long term investment prospects out there. And thank you again for joining me. And thanks, Emily, again for your time.

     

    Thanks for me. And I really appreciate you guys attending. I think it’s really important that it needs to be addressed. I think we’re going to see more investing in the future. So thanks again. Thanks. Bye, guys.

    Disclaimer: The Responsible Entity is Perennial Investment Management Limited ABN 13 108 747 637, AFSL: 275101. The Investment Manager is Perennial Value Management Limited ABN 22 090 879 904 AFSL: 247293. This promotional video has been prepared by ETF Investments Australia Pty Ltd trading as eInvest Australia (‘eInvest’) ABN: 88 618 802 912, as the corporate authorised representative of Perennial Investment Management Limited. This promotional video is for information purposes only. Accordingly, reliance should not be placed on this information as the basis for making an investment, financial or other decision. This information does not take into account your investment objectives, particular needs or financial situation. While every effort has been made to ensure the information is accurate; its accuracy, reliability or completeness is not guaranteed. Past performance is not a reliable indicator of future performance. You can download the PDS at www.einvest.com.au