Andrea Carzana of Columbia Threadneedle has said the firm believes that it is now necessary to be exposed to the leaders of the future in terms of a sustainable investment strategy, and to focus on groups that are in the process of making a sustainable transition.
“The pandemic has reinforced the importance of having a sustainable business model, and highlighted the need to be able to adapt quickly to the constraints posed by the epidemic,” said Carzana (European Sustainability Specialist at Columbia Threadneedle) during a recent conference held at the Vlerick Business School. “With digitalisation, corporate sustainability is now the most sought-after factor in business.”
European advantage
“And in this area, Europe is particularly proactive in a segment that could enable it to regain a leading position at global level.” He pointed to the fact that the Old Continent devotes a proportionally larger share of its investments to the development of a sustainable business model.
“And we already have several groups that are leaders in their respective categories, such as Kingspan, Schneider Electric or Infineon. But more than today’s leaders, who are often overvalued, it is the leaders of tomorrow that we are looking to hold in our portfolio.”
Carzana also said he believes that it is now important for fund managers to support the transition of sectors that still have a long way to go in the field of energy transition. “Positive change will not happen without commitment from the financial world.”
Big difference
He pointed out that this is a big difference from other sustainable funds on the market, with research that will mainly try to find companies that will significantly improve their profile over the next few decades. “We don’t just want to hold the companies with the highest ratings today, we want to have exposure to companies that are going to make significant efforts in the future.”
Offshore wind energy production, he stated, is now being led by the Danish Orsted Group, which was still mainly a fossil fuel producer ten years ago. “It was during their transition period that this group delivered its strongest performance. And that’s also why I’m generally very sceptical when I hear about passive solutions to investing in the transition and engaging the management of companies.”
Sustainable qualities
“We spend most of our time talking to companies, an approach that requires strong engagement with group management.” In practice, he looks for companies that are financially sound, with which strong engagement is possible, and which are rapidly improving their ESG profile. “These are clearly the stock profiles we will be looking to hold in the fund I manage.”
He offered UK company Biffa, which will benefit from tighter legislation in waste management, as an example. “The group has invested heavily in building specialist plastic recycling plants. It is also the leader in the UK, a market that is still very fragmented. It is a way of gaining exposure to the development of a circular economy in Europe.”
Interesting values
Another stock he said he likes is Belimo, a player specialising in the construction of high-quality, sustainable buildings at European level. “It will be at the centre of efforts to reduce CO2 emissions by 2050. Moreover, Belimo operates in a duopoly where competitive pressures are low.”
He also mentionedSweden’s Sinch Group, a direct competitor to US-based Twilio in the communications field, which has been a big beneficiary of the pandemic by allowing companies to keep close links between sales teams and customers. “It is now a company whose services are used by a large number of players in the technology field,” including Microsoft for its Teams software.
Finally, he points out that he currently has exposure to only one Belgian stock: KBC Group. “The group has been active in eliminating its exposure to the coal sector, and focuses on financing companies that are carbon neutral. KBC is also financially strong and very conservative in the way it allocates its capital.”