Schroder Global Climate Change
Strategy Fact Sheet – 1Q16
Strategy overview
Team highlights
Schroders’ Global Climate Change is an actively managed thematic
global equity strategy that seeks to invest in companies that are
positively impacted, or likely to benefit, from efforts to mitigate
or adapt to climate change. We believe that companies that
recognize the threats and embrace the challenges early, or that
form part of the solution to the problems linked to climate change,
will ultimately outperform the broader market.
– Combined investment experience of over 50 years
– Two portfolio managers with specific expertise in sectors heavily
impacted by climate change (industrials, materials, autos
and utilities)
– Two Climate Change Specialists who provide legislative and
technical insight around climate change
– Supported by 9 Global Sector Specialists and 1 Global
Sustainability Specialist who are members of Schroders’ Global
and International Equity team and a further 100 locally-based
equity analysts and specialist teams of small cap, energy,
commodities and agriculture investors
What is distinctive about our approach is our appreciation that
climate change will have far-reaching consequences for companies
across a broad range of industries and affect significantly more
companies than those purely involved in renewable energy, energy
efficiency and environmental resources. Within the broad theme
we have identified five sub-themes within which climate change
investment opportunities are most apparent: Energy Efficiency,
Sustainable Transport, Environmental Resources, Clean
Energy and Low Carbon. We will not invest in companies that
report significant ownership of fossil fuel reserves (e.g. oil, coal,
gas, tar-sand, shale gas).
Key features
– Innovative approach to climate change investment capturing
implications across a broad range of sectors and across the
market cap spectrum
– Proprietary climate change universe and fundamental research,
with ESG evaluation integrated within our analysis
– Robust investment process resulting in a high conviction,
unconstrained portfolio of 40 – 60 stocks
– Bottom-up stock selection the primary source of added value
Composite performance
As of March 31, 2016
*Inception August 31, 2007
15%
10%
†
The MSCI World Index captures
large and mid cap representation
across 23 Developed Markets
countries. With 1,647 constituents,
the index covers approximately
85% of the free float-adjusted
market capitalization in
each country.
Schroder Global Climate Change (Gross)
Schroder Global Climate Change (Net)
MSCI World Index†
5%
6.93
5.35
6.82
6.51
4.63
3.08
3.18
1.66
0%
-0.46-0.83 -0.35
-0.46-0.83 -0.35
-5%
-10%
2.78
-2.72
-3.45
-4.16
QTR
YTD
1 yr
3 yr
5 yr
Annual S.I.*
Difference (Gross)
-0.11%
-0.11%
+0.73%
+0.11%
-1.89%
+0.41%
Difference (Net)
-0.48%
-0.48%
-0.71%
-1.47%
-3.43%
-1.12%
2015
2014
2013
2012
2011
3.48%
-3.48%
32.54%
13.63%
-11.29%
Net
1.95%
-4.91%
30.59%
11.95%
-12.60%
MSCI World Index
-0.87%
4.94%
26.68%
15.83%
-5.54%
Difference (Gross)
+4.35%
-8.42%
+5.87%
-2.19%
-5.75%
Difference (Net)
+2.82%
-9.85%
+3.91%
-3.88%
-7.06%
Gross
Past performance is not a guide to future performance. The value of an investment can go down as well as up and is not guaranteed. Please refer to the disclosures at the end of
the document for important information about the composite, including the definition of the Benchmark. Performance for periods greater than 1 year is annualized. Please see the
disclosures at the end of this document for more details about the composite creation date.
All data and statistics as of March 31, 2016.
Schroder Global Climate Change
Sector allocation (%)
Industrials
Consumer Staples
13.3
15.2
14.4
10.8
4.6
6.9
3.5
4.6
North America
Emerging Markets
8.3
Japan
10.9
4.0
Financials
Health Care
Cash 4.5
Pacific ex Japan 2.2
United Kingdom 3.2
17.6
Information Technology
Utilities
32.6
11.0
Consumer Discretionary
Materials
Regional allocation (%)
44.1
11.4
19.6
3.0
12.7
Energy 0.7
6.4
0.0
Telecommunication Svcs
3.6
Cash 0.0 4.5
0
10
Schroder Global Climate
Change
26.2
Continental Europe
MSCI World Index
20
30
40
50
Source: Schroders, MSCI as of March 31, 2016.
Source: Schroders, MSCI as of March 31, 2016.
Sectors/Regions listed are shown for illustrative purposes and are not to be considered a recommendation to buy or sell.
Portfolio &
risk statistics
Schroder
Global
Climate
Change
MSCI
World
Index
61
1,641
Weighted average market cap ($billions)1
48.02
97.30
Price to earnings ratio (trailing 12 month)2
21.13
17.51
Price to earnings ratio (forward 12 month)3
17.83
16.06
2.50
2.05
13.21
16.14
Tracking error (annualized since inception)6
6.50
-
Beta* (annualized since inception)7
1.10
-
Number of holdings
Price to book (trailing 12 month)4
5
Return on equity (5 years)
Source: Schroders, MSCI as of March 31, 2016. Inception date August 31, 2007.
Theme allocation (%)
Low-Carbon
Cash
3.9 4.5
Other/General
9.0
Clean Energy
40.1
9.6
Sustainable
Transport
Energy Efficiency
15.0
17.9
Environmental Resources
Source: Schroders, Factset as of March 31, 2016.
1. An average that takes into account the proportional relevance of each component, rather than treating each component equally. Market cap is the market price of an entire company
on any given day, calculated by multiplying the number of shares outstanding by the price per share. 2. Market price per share divided by annual earnings per share for the most recent
12 month period. 3. Market price per share divided by annual earnings per share divided by annual earnings per share using the estimated net earnings over the next 12 months.
4. A ratio used to compare a stock’s market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter’s book value per share. 5.
The difference between a portfolio’s returns and the benchmark. 6. A mathematical measure of the sensitivity of rates of return on a portfolio compared with rates of return on the
market as a whole. A beta of 1.0 indicates that an asset closely follows the market; a beta greater than 1.0 indicates greater volatility than the market. 7. A mathematical measure of
the sensitivity of rates of return on a portfolio compared with rates of return on the market as a whole. A beta of 1.0 indicates that an asset closely follows the market; a beta greater
than 1.0 indicates greater volatility than the market.
Sectors/regions/countries listed are shown for illustrative purposes and are not to be considered a recommendation to buy or sell.
Top ten holdings
1.
Hexagon AB
2.
Amazon.com, Inc.
3.
Danaher Corporation
4.
Lowe's Companies, Inc.
5.
NextEra Energy, Inc.
6.
Ball Corporation
7.
Alphabet Inc.
8.
Brambles Limited
9.
Seven & I Holdings Co., Ltd.
10.
Linde AG
Sector
Country
% of Total Market Value
Information Technology
Sweden
3.18
Consumer Discretionary
United States
2.99
Industrials
United States
2.78
Consumer Discretionary
United States
2.61
Utilities
United States
2.47
Materials
United States
2.44
Information Technology
United States
2.31
Industrials
Australia
2.23
Consumer Staples
Japan
2.18
Materials
Germany
2.08
Total
Source: Schroders, as of March 31, 2016.
Securities listed are shown for illustrative purposes and are not to be considered a recommendation to buy or sell.
25.27
Schroder Global Climate Change
Quarterly Commentary
Market Review
Following steep declines in January and the first half of February,
markets inflected in mid-February and have recovered some of
their poise as a confluence of interrelated factors triggered a shift in
market sentiment.
In climate developments, the UN World Meteorological Organization
confirmed that the global average temperature in 2015 shattered all
previous records. Elsewhere, the US government froze coal mining
rights on government land for three years in order to assess the
impact environmental and economic impact of the fossil fuel.
Performance Review
TThe Global Climate Change strategy underperformed over the
quarter, as stock selection, particularly in the industrials sector,
weighed on returns. Offsetting this to some extent was our
underweight exposure to financials, combined with strong stock
selection in the sector. By region, we suffered the most in North
America although we gained from strong stock selection in Japan
and Asia Pacific.
A solar power system provider was the biggest detractor as shares
came under pressure early in the quarter. In January, investors
responded badly to news that Nevada will implement new utility fees
in the state for residential solar users. Reports that the company
was selling some assets at slightly higher discount rates than had
previously been assumed by some also weighed on the stock.
Disappointment about declining installations also had a negative
impact on returns although this slower growth is in line with
management rhetoric regarding efforts to reduce costs and boost
profitability. We continue to believe that the company is well placed
to benefit from a favorable outlook for the solar industry.
A lighting manufacturer also weighed on returns. Amongst the
contributing factors to weak performance over the quarter was
weaker-than-expected earnings results thanks to ongoing pricing
pressure, currency headwinds and delays in the realization of cost
savings initiatives.
The top contributor was logistics firm which saw shares climb
sharply in February on the back of solid earnings results, which were
driven by strength in the core pallets division. We were particularly
encouraged by the strong performance posted by the Americas
pallets division as part of our investment thesis relates to the
company’s ability to benefit from increased penetration in US pallets.
We also gained from our position in a Brazilian hydroelectricity
producer. The company released stronger-than-expected Q4
earnings results in February and announced a healthy dividend
following its decision to postpone payouts in Q3. We continue to like
the stock given our view that the impact of local water shortages is
past its worst and that the company should be well-positioned to
generate good cashflow in the foreseeable future as well as benefit
from potential regulatory reform.
Outlook
In aggregate, the backdrop for equities is challenging and the
macroeconomic environment is highly uncertain. Low interest
rates reflect massive quantitative easing by central banks around
the world, artificially boosting many asset prices and creating a
potentially dangerous situation when rates start to rise. Significant
currency distortion, weak commodity prices, slowing growth in
China and mixed economic data in Europe and the US have added
to the uncertainty. For equities, this has meant low absolute returns
and increased volatility. It is therefore particularly relevant to take
a selective approach to investing, focusing on those companies
that can deliver unanticipated earnings growth despite the
uncertain environment.
Authorities are increasingly focused on de-carbonizing the global
economy. A global agreement at Paris in December 2015 to
improve and mandate disclosure is a major milestone in this
process. As such, the growth outlook for climate change themes
remains strong. Of these, we believe the returns on energy efficiency
investments continue to be the most compelling in the short term
and around half of the portfolio is exposed to this. We believe the
automotive sector is set for very rapid and fundamental change,
with an accelerated adoption of electric vehicles and other energyefficiency related in-car technology. We have good and diversified
exposure to this space. We also continue to expect rapid adoption
of renewable energy practices worldwide, particularly in solar
but also in wind. We have selective exposure to higher quality
investments in these areas, mindful of inherent industry volatility.
Finally, we have increased our exposure to environmental resources
via agriculture-related stocks in particular. After two years of excess
inventories and declining crop prices, we expect that farm incomes
are nearing a floor and that the sector has become more
appealing again.
Source: Schroders
Important Information: Schroders is a global asset management company with $466.9 billion under management as of March 31, 2016. Our clients are major financial institutions
including banks and insurance companies, public and private pension funds, endowments and foundations, high net worth individuals, financial intermediaries and retail investors.
Our aim is to apply our specialist asset management skills in serving the needs of our clients worldwide and in delivering value to our shareholders. With one of the largest
networks of offices of any dedicated asset management company and over 420 portfolio managers and analysts covering the world’s investment markets, we offer our clients
a comprehensive range of products and services. Further information about Schroders can be found at www.schroders.com/us. Portfolio data and risk characteristics based
on a sample account. Details may vary from account to account. This document does not constitute an offer to sell or any solicitation of any offer to buy securities or any other
instrument described in this document. The information and opinions contained in this document have been obtained from sources we consider to be reliable. No responsibility
can be accepted for errors of facts obtained from third parties. Reliance should not be placed on the views and information in the document when taking individual investment
and/or strategic decisions. Schroders has expressed its own views and opinions in this document and these may change. Past performance is not a guide to future performance.
The value of investments can go down as well as up and is not guaranteed. Sectors/securities illustrate examples of types of sectors/securities in which the strategy invested
and may not be representative of the strategy’s current or future investments. Portfolio sectors/securities and allocations are subject to change at any time and should not be
viewed as a recommendation to buy/sell. The opinions stated in this document include some forecasted views. We believe that we are basing our expectations and beliefs
on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee that any forecasts or opinions will be realized. Schroder Investment
Management North America Inc. is an indirect wholly owned subsidiary of Schroders plc and is a SEC registered investment adviser and registered in Canada in the capacity
of Portfolio Manager with the Securities Commission in Alberta, British Columbia, Manitoba, Nova Scotia, Ontario, Quebec, and Saskatchewan providing asset management
products and services to clients in Canada. This document does not purport to provide investment advice and the information contained in this newsletter is for informational
purposes and not to engage in a trading activities. It does not purport to describe the business or affairs of any issuer and is not being provided for delivery to or review by any
prospective purchaser so as to assist the prospective purchaser to make an investment decision in respect of securities being sold in a distribution. Schroder Investment Management
North America Inc. (“SIMNA Inc.”) is an investment advisor registered with the U.S. SEC. It provides asset management products and services to clients in the U.S. and Canada
including Schroder Capital Funds (Delaware), Schroder Series Trust and Schroder Global Series Trust, investment companies registered with the SEC (the “Schroder Funds”.)
Shares of the Schroder Funds are distributed by Schroder Fund Advisors LLC, a member of the FINRA. SIMNA Inc. and Schroder Fund Advisors LLC are indirect, wholly-owned
subsidiaries of Schroders plc, a UK public company with shares listed on the London Stock Exchange. Schroder Investment Management North America Inc., 875 Third Avenue,
New York, NY 10022-6225, (212) 641-3800, www.schroders.com/us.
Schroder Global Climate Change
Risk
All investments, domestic and foreign, involve risks including the risk of possible loss of principal. The market value of the portfolio may decline
as a result of a number of factors, including adverse economic and market conditions, prospects of stocks in the portfolio, changing interest
rates, and real or perceived adverse competitive industry conditions. Investing overseas involves special risks including among others, risks
related to political or economic instability, foreign currency (such as exchange, valuation, and fluctuation) risk, market entry or exit restrictions,
illiquidity and taxation. Emerging markets pose greater risks than investments in developed markets.
Schroder Global Climate Change Composite
As of: December 31, 2014
Definition of the Firm: The Firm is defined as all accounts managed by Schroder Investment Management in the UK and US, by wholly owned subsidiaries of Schroders PLC. Prior
to January 1, 2007 SIM London & SIM North America existed as two separate Firms which were compliant & verified as separate entities until December 31, 2006. The consolidation
of these two Firms was made as part of a move towards creating one global Firm. Composite and Firm assets reported prior to January 1, 2007 represent those of the legacy firm
which managed the product. Prior to January 1, 2011 the SPrIM (Schroder Property Investment Management) Firm existed separate to the Schroder Investment Management UK
and US Firm, from January 1, 2011 these Firms have been combined into a single firm. On April 2, 2013, Schroder U.S. Holdings Inc., a subsidiary of Schroders plc, purchased STW
Fixed Income Management LLC (“STW”) and on July 2, 2013, Schroders plc, purchased Cazenove Capital Holdings; assets managed by STW and Cazenove are included in the Firm
from January 1, 2014. Assets Managed against a liability driven mandate are excluded from the GIPS Firm. A complete list and description of the Firm’s composites and performance
results is available upon request.
Composite Definition: The Schroder Global Climate Change Composite (the “Composite”) is comprised of all Schroder Investment Management (UK & US), fully discretionary
accounts which seek to achieve returns above the MSCI World (NDR) index through long-term capital growth from an actively managed portfolio comprising of securities quoted on
the world’s stock markets including North America, Europe and Asia Pacific which Schroders believes will benefit from efforts to adapt to or mitigate the impact of climate change.
None of the accounts in the Composite uses leverage.
Composite Construction: New accounts are included from the beginning of the first full month of management on a discretionary basis. Terminated accounts are excluded from the
end of the last full month of discretionary management. This Composite has no minimum asset level for inclusion.
The composite currency is US Dollar
Composite Inception Date: 08-31-2007
Composite Creation Date: 10-31-2007
Calculation Methodology: The portfolio returns are time-weighted rates of return that are adjusted for cash flows. Portfolio returns are combined using beginning of period asset
weights to produce the composite return. Periodic returns are geometrically linked to produce annual returns.
Dividends on equities are recognized net of irrecoverable withholding tax. Since January 1999 dividends have been recognized as of the ex-dividend date having previously been
recognized on a cash basis. Performance results are presented before the deduction of management fees and custodian fees but after trading expenses.
Fee Schedule: The fee scale applied to the composite is 1.5% p.a.
Dispersion: The dispersion of annual returns is measured by the asset weighted standard deviation of portfolio returns represented within the composite for the full year provided a
minimum of 5 portfolios are available.
Additional Information: The exchange rates used are provided by WM. Each currency is valued at 4 pm on the last business day of the month. Additional information regarding
policies for valuing portfolios, calculating and reporting returns and a description of all composites are available on request.
GIPS Compliance and Verification: Schroder Investment Management (UK & US) claims compliance with the Global Investment Performance Standards GIPS® and has prepared
and presented this report in compliance with the GIPS standards. Schroder Investment Management (UK & US) has been independently verified for the periods January 1, 1996 to
December 31, 2014. The verification report(s) are available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements
of the GIPS standards on a firm-wide basis, and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards.
Verification does not ensure the accuracy of any specific composite presentation.
Composite Performance Results
Composite - Schroder Global Climate Change Composite
Benchmark - MSCI World (NDR)
Currency: USD
Gross Returns as of: Dec-31-2014
Firm: UK-INT
Year
2014
2013
2012
2011
2010
2009
2008
2007*
Gross Composite
Return
-3.48%
32.54%
13.63%
-11.29%
6.47%
44.60%
-42.79%
11.86%
Net Composite
Return
-4.91%
30.59%
11.95%
-12.60%
4.90%
42.46%
-43.64%
11.31%
Benchmark
Return
4.94%
26.68%
15.83%
-5.54%
11.76%
29.99%
-40.71%
2.22%
3 Year
1
Composite Risk
12.01%
16.14%
19.24%
22.63%
27.73%
n/a
n/a
n/a
As of Dec 2014
Annualized 3 Year
Annualized 5 Year
Annualized 7 Year
Annualized 10 Year
Annualized S.I.3
Gross Composite
Return
13.28%
6.55%
1.83%
n/a
3.32%
Net Composite
Return
11.60%
4.97%
0.33%
n/a
1.79%
Benchmark
Return
15.47%
10.20%
3.27%
n/a
3.43%
Composite Risk1
12.01%
16.39%
21.28%
n/a
21.06%
3 Year
Benchmark
1
Risk
10.37%
13.73%
16.98%
20.44%
24.05%
n/a
n/a
n/a
Benchmark
Risk1
10.37%
14.30%
18.35%
n/a
18.11%
Number of
Portfolios
(throughout
period)
<5
<5
<5
<5
<5
<5
<5
<5
Account
Dispersion2
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Market Value at
end of Period
265,517,217
348,379,915
289,321,545
287,587,889
384,331,594
346,306,533
221,105,895
406,496,904
Average Account
Value at end of
Period
88,505,739
87,094,979
72,330,386
71,896,972
96,082,899
86,576,633
55,276,474
101,624,226
1 Annualized standard deviation of gross monthly returns for the composite and monthly returns for the benchmark
2 Asset weighted standard deviation of annual gross returns of accounts that have been in the composite for the entire year
3 Since Inception
4 Since December 31, 2003 Total Firm Assets include non-fee paying accounts. 2003 Total Firm Assets value has been restated due to the inclusion of those non-fee paying accounts
Total Firm Assets from 2007 incorporate the UK & US firm merger as detailed in the Definition of the Firm, from the start of 2011 Schroder Property Investment Management Multi
Manager accounts are included in the Total Firm Assets
N/A - Information is not statistically meaningful due to an insufficient number of portfolios for the entire year
* Return from composite inception date to end of year
Source: Schroders
PFS-GLBLCLICH
Percentage of
Firm Assets
0.09%
0.14%
0.13%
0.15%
0.19%
0.21%
0.25%
0.25%
4
Total Firm Assets
282,697,291,678.31
255,707,099,715.41
223,940,416,622.14
194,958,113,724.01
202,946,283,267.48
161,183,088,769.55
89,646,473,691.69
161,124,537,714.28