The theme of empowerment is one investors in the ESG/SRI space should be tapping into, AB’s Dan Roarty has said.
'Our best performing theme has been empowerment and, within that, there are two sub-themes that have done particularly well - financial inclusion and technology enablers,' he told Citywire Selector.
Citywire A-rated Roarty, who runs the AB Thematic Research Portfolio at the firm, currently has 19.87% allocated to financials and said several stocks have been able to connect people to the system.
'These companies are connecting people who have not traditionally been connected to the financial system, finding a way to connect them is part of the UN’s sustainability mandate. There is also another angle to this, which is gender equality.
'That focuses on the micro-lenders, there is a special class of people who have been disconnected from the system. We are invested in companies such as Bharat, which is an Indian microfinance lender, which performed quite well last year.
'We also hold an Indonesian bank called Mandiri and in India, we also have HDFC Bank, which are all examples of those financial inclusions names which have performed well for us.'
Neglecting the Nordics
The Nordic region is often viewed as pioneering SRI and ESG investment, with countries such as Sweden recycling nearly 100% of household waste and having introduced a deposit scheme for plastic bottles.
However, despite these positive steps in the Nordics, Roarty is not currently invested in the region.
‘There can be some differing opinions on how sustainability should be defined. I think that sometimes those different definitions can get in the way.
'We have addressed that issue by basically outsourcing our definition of sustainability to what we view as a very credible third party, the United Nations.'
The UN launched its ‘Sustainable Development Goals’ in 2016, which focus on both EM and developed countries. This is the definition used by Roarty.
'Investors are further along in the Nordics at understanding those issues and are a bit more aggressively trying to put capital into these issues, but that doesn’t mean that sustainability issues themselves are more prevalent in the Nordic regions.
‘Really our geographical allocations are driven by where we see the best opportunities to invest in a way that best positively impacts environmental and social impacts around the world.’
Over the three years to the end of December 2017, the AB Thematic Research Portfolio returned 33.87% in US dollar terms. This compares with a 32.96% rise by its Citywire-assigned benchmark, the FTSE World TR USD, over the same time period.