As a part of our drive towards innovation, we launched the Old Mutual ESG Equity Fund in June 2020. This is the first South African-based actively managed ESG fund. The fund seeks to balance risk, returns and the following two ESG outcomes:

• Enhanced exposure to companies with strong ESG profiles
• A reduction in overall carbon intensity of the fund’s portfolio relative to its benchmark, the FTSE/JSE Capped Shareholder Weighted All Share index (Capped SWIX).

To incorporate these two ESG outcomes, we have developed objective measures that are hard-coded into the fund mandate.

ESG INTEGRATION WITHIN THE FUNDWe have developed an in-house proprietary ESG signal using cutting-edge research that we believe holistically measures the ESG profile of a company. The signal is continuously researched to ensure it is consistently relevant in the ever-changing investment landscape and that it adds enhanced return and value over time. The fund explicitly targets a significantly higher overall ESG profile score to its benchmark, the Capped SWIX, and a substantially reduced weighted average carbon intensity relative to benchmark – as can be seen in the charts.

A company’s carbon intensity as a result of its business operations is a crucial measure within the fund. We also filter out companies that operate in controversial industries, and/or are involved in controversial activities. In addition, we consider a company’s intention and progress (or lack of ambition) in transitioning to a greener economy. Alongside these fund objectives, we seek to identify and hold HIGH-QUALITY, SUSTAINABLE companies with favourable GROWTH prospects at ATTRACTIVE VALUATIONS, and invest in a risk-controlled manner. The fund has tangible and measurable objectives in our quest to invest for a more sustainable, cleaner and greener future. We support our stock selection process with an active approach to proxy voting and engagement with company Boards and management teams.

COMPANY EXAMPLE: PROSUS N.V.

Our ESG approach is evident in Prosus – a global consumer internet group and one of the largest technology investors in the world. The company is organised into six business areas: classifieds, payments & fintech, food delivery, e-tail, ventures and travel. It also holds investments in listed social and internet assets. We applied our ESG Profile proprietary score, our carbon Intensity reduction model and our stock selection model to Prosus. The company rates in the top quartile on its ESG Profile score and scores exceptionally well on its carbon emissions – while being in the technology sector and having a very low carbon footprint relative to other JSE-listed equities. It also scores much higher than average on ESG momentum, meaning that its ESG Profile score has been in an upward trend – and improving over time. Prosus is a high-quality company with very favourable growth prospects, perfectly in line with the fund’s investment philosophy. This is supported by Prosus’s excellent medium- to long-term profitability, healthy profit margins, good earnings quality, a resilient balance sheet and favourable growth prospects… all attributes that contribute to its position in the Old Mutual ESG Equity Fund’s top 10 holdings.

Prosus N.V. has made a commitment to building a sustainable business, striving to balance the needs of all its stakeholders wherever they may be. It has explicitly stated that it is positioning itself to meet the challenges of sustainable development by making commitments to enrich its people, communities and the environment in which it operates. The company appointed a Global Head of Sustainability in January 2021 to spearhead and drive its sustainability and ESG objectives, which will aid in its contribution in transitioning to a greener economy.