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Environmental and Best in Class strategies

October 2016

Environmental and Best in Class strategies aim to meet our clients’ financial objectives and address their concerns about environmental, social and governance issues.

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Environmental strategies

Preparing for the future involves identifying the structural forces that are likely to shape the world of tomorrow. Among other trends, the planet’s steadily growing population, a GDP-driven shift in consumption patterns and the growing scarcity of resources represent a formidable challenge for industries across sectors. Because they are long-lasting, these global phenomena (which we refer to as megatrends) are giving rise to extremely interesting opportunities for investors.

Over the last sixteen years, Pictet Asset Management has been a pioneer in developing and launching several environmental strategies that sit at the intersection of various megatrends.

We have since become a leading participant and authority in these fields.

Our Water fund, launched in 2000, was not only the first but is today the largest in its sector. Tapping into trends such as urbanisation, heavily water-dependent economic growth and the shortage of clean water, the investment strategy focuses on perhaps the world’s most critical resource. The portfolio comprises companies which derive about two-thirds of their income from water-related activities. The strategy offers investors a compelling synthesis of defensive and growth stocks with long-lasting potential.

Since 2007, through our Clean Energy fund, we have been offering our clients the opportunity to invest in companies that contribute to and profit from the transition towards a low carbon economy. These companies are primarily involved in developing cleaner infrastructure and resources as well as carbon-reducing technologies and equipment. The investment strategy also targets companies that contribute to reducing energy demand through energy-efficiency.
We were also pioneers with the launch of our Timber fund in 2008. By investing in listed companies that own and manage forests and timberlands, investors can acquire a stake in this strategic renewable resource, while benefiting from the convenience and daily liquidity of a conventional investment fund.


In the same year, we saw the opportunity that was emerging in agriculture with the shift from traditional farming practices to agribusinesses, and launched our Agriculture fund. With a bottom-up stock selection process, it focuses on companies that provide solutions to improve farming practices and invests worldwide in the agribusiness value chain. The investment strategy has strict policies on investing in genetically modified organisms (GMOs) and avoids companies that damage the environment.

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Best in Class strategies

Pictet Asset Management began looking at broadly diversified sustainable investments in 1997. We target quality companies with superior corporate responsibility, on the premise that companies of this type that incorporate sustainability in their development strategies are in a better position to seize new business opportunities, mitigate operational, reputational and financial risks, motivate employees and, ultimately, create long-term shareholder value.

With this in mind, we have developed a new investment framework designed to capture the ability of companies to generate attractive and resilient shareholder returns while avoiding boom-and-bust business models. In order to be eligible for investment, companies must excel from both a financial and extra-financial point of view. Equally, we seek to avoid companies that are profitable at the expense of shareholders, employees, consumers or the environment, as well as companies that are “green” but financially unattractive.

Our first fund, the Swiss Sustainable Equities fund, was launched in 1999 and was soon followed by the European Sustainable Equities fund. As natural extensions of our expertise in sustainable core equities, we extended our range in 2012 to include the Emerging Markets Sustainable Equities fund.

All of these funds comply with the European Sustainable and Responsible Investments (SRI) Transparency Code. This initiative was launched in 2004 by Eurosif, the leading not-for-profit pan-European membership organisation whose mission is to promote sustainability through European financial markets and in particular in the principles and processes of SRI mutual funds.

Clean Energy

The portfolios offer exposure to core equities with the additional benefit of investing in sustainable companies. Our strategies promote companies that engage in low-carbon energy sources, healthy food and healthcare equipment. Conversely, they avoid those in the so-called junk food or tobacco industries. For example, companies held in our European Sustainable portfolio are 41% less carbon intensive and are significantly less exposed to ESG controversies such as bribery.

CARBON FOOTPRINT OF PICTET -EUROPEAN SUSTAINABLE EQUITIES
Carbon intensity of Pictet-European Sustainable Equities
Source: InRate, Pictet Asset Management. As at 30.09.2016
This indicator compares the carbon intensity of the portfolio against its benchmark. Greenhouse gas (GHG) emissions include direct emissions from production activities (e.g. from car manufacturing) as well as indirect emissions associated with product use (e.g. from car driving). In order to provide meaningful comparisons, total GHG emissions are expressed in tonnes of CO2 (tCO2 eq.) divided by company revenue. Final results are based on company weights in the portfolio and benchmark.

In recognition of our involvement in sustainable investments, we were awarded SRI/ESG Provider of the Year at the UK Pensions Awards in 2014, as well as at the European Pensions Awards in 2013. Our European Sustainable Equities and Emerging Markets Sustainable Equities funds have also received the SRI label awarded by Novethic, a Paris-based research centre that provides information and performs studies on Europe’s responsible investment market.

As at 30 June 2016, we were managing close to USD 10 billion in assets through our environmental and Best in Class strategies.1