27 May 2021 / Company

Ninety One: We want to be the leading emerging market voice in the sustainable transition

By Natalie Kenway

UK MD at Ninety One Nigel Smith discusses the firm's sustainable initiatives and multi-asset fund rebrand

Ninety One: We want to be the leading emerging market voice in the sustainable transition

Ninety One’s heritage under its previous guise as Investec Asset Management is deeply connected to the conservation of the environment and wildlife, but the team has ensured this has continued and has broadened its sustainability initiatives even further as it makes its mark under its new moniker.

After sponsoring the Tusk Conservation Awards for a decade, Ninety One has more recently collaborated with Imperial College to train staff on climate change risk, created a nature and climate sovereign index with the WWF, evolved funds into vehicles with sustainable objectives – including a yet-to-be-announced multi-asset fund – and committed to joining the Net Zero Asset Managers’ Initiative.

Nigel Smith, in his fairly new role as managing director of the UK client group after moving across from being chief marketing officer, said his team had spent the past eight months since the rebrand “re-energising and reclarifying” what Ninety One, named after the year it initially launched (1991), stood for and has coined the term ‘sustainability with substance’ as its call to action.

“As investors we have a genuine obligation to curtail climate change, limit global warming and ensure the sustainability of the planet,” Smith said.

“Investing for a better future is our purpose as a firm.”

He told ESG Clarity the firm would be among the next wave of signatories of the Net Zero Asset Managers Initiative, which was set up last year with the intention of uniting fund groups on decarbonisation goals, net-zero targets, engagement strategies and creating investment solutions to mitigate climate change.

“We want to play our part in mobilising capital in line with the Paris Agreement. Not only that, we want to be the leading voice or one of the leading voices in the part emerging markets play in the transition,” he said.

Ninety One’s dual HQ is still in Cape Town, South Africa, and half of the company’s assets under management are held in emerging market equities or debt.

“It is a very difficult task [to achieve net zero] for emerging markets, there is a lot of understanding to go through on how it can be measured and tracked, but we are advocates of a just and inclusive transition where no countries or countries are left behind – there is a very real risk that could happen particularly in EMs if too much focus is placed on divesting from high emitters.”

The dual HQ location, however, means the carbon footprint of the company is relatively high as it is located in this carbon intensive region, Smith said. This came up in the firm’s recently released Taskforce for Climate-Related Financial Disclosure (TCFD) report.

“This really shows that investors need to look underneath and beyond the data,” Smith said as he pointed to the firm’s internal work on sustainability.

His team, for example, have all signed up to a sustainable living app to better understand their carbon footprint and how they can improve it.

“We are holding ourselves accountable,” Smith said, something which Last Word Media titles are championing in our Campaign for Better Governance.

Furthermore, the company has also collaborated with Imperial College on a bespoke climate risk programme for employees to deepen their knowledge of climate-related risks and opportunities, to help inform future investment decision-making. Some 60 colleagues have been through this three-week programme so far, predominantly on the investment side, and more are expected to complete the training too.

“It will help us, from an academic point of view, practically assess sustainability risk and price that into securities.”

In terms of other sustainable initiatives, he pointed to the firm’s collaboration with the WWF to launch the Climate & Nature Sovereign Index’ (CNSI), which is hoped will harness the $50trn sovereign debt market to support countries in their sustainable transition.

Commenting on the launch, Peter Eerdmans, head of fixed income at Ninety One, explained: “The natural world is a foundation of every nation’s development and continued growth. We look forward to seeing the index mobilise the scale of the sovereign debt market to invest for positive and sustainable change, future-proofing investments and helping countries make their inward investments and lending more attractive and sustainable in the long term.”

Multi-asset fund rebrand

Turning to products, Smith said ESG is integrated across the fund range but looking through the lens of Europe’s Sustainable Finance Disclosure Regulation (SFDR), most funds are categorised under Article 6. However, the group’s UK Sustainable Equity Fund, run by Matt Evans, and the Global Environment Fund, managed by Deirdre Cooper and Graeme Baker, would sit under Article 8 and 9 respectively.

Adding to this, the fund is about to rebrand a multi-asset solution, ESG Clarity can reveal: the OEIC version of its Diversified Growth Fund will become the Global Multi-Asset Sustainable Growth Fund in early July while the Luxembourg mirror has transitions on 1 June.

The change in name reflects the investment team’s continued integration of sustainable investments, Smith said.

“The Multi-Asset Sustainable Growth Fund has had full integration for a period of time, but this is a natural evolution of that. We have reached a milestone where it can be recognised that every holding can be seen as sustainable, so we wanted to give it a new name and investment policy to reflect that.”

The fund will remain a growth-orientated multi-asset investment strategy, run by co-portfolio managers Michael Spinks and Philip Saunders, but the name and policy change “formalise the evolution”.

Additionally, the fund has changed its return target – but Smith is quick to point out this is unrelated to the move to a sustainable approach.  

“There is also a change in the return target with it being moved lower from UK CPI +5% to UK CPI +4%.

“The sustainable element of the portfolio has been a strong contributor to performance, so it is not related to those changes. It is to reflect the renewed capital market assumptions on realistic returns. The simple reality is investors will need to accept lower expected returns and potentially higher volatility compared with what we have experienced in the past.”

Although UK-regulated, the Multi-Asset Sustainable Growth Fund would join the UK Sustainable Equity Fund in qualifying for the Article 8 categorisation under the SFDR, with the group planning to grow the number of solutions in this area.

“We hope to add more strategies to either Article 8 or 9 over time either through the evolution of existing strategies or bringing new products to market,” Smith said.