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Roger Pim, Global Head of Private Markets Product Strategy & Solutions at Aberdeen Standard Investments, explains how the Global Sustainability Trust (GST) is constructed to deliver positive social and environment change.
The Global Sustainability Trust’s remit is to accelerate the United Nations’ 17 Sustainable Development Goals. So it’s a very wide-ranging strategy, isn’t it?
Yes, it’s highly diversified both in terms of its areas of intended impact and what it invests in. For example, to align with the 17 UN Sustainable Development Goals, the fund is constructed around eight ‘impact pillars’ that we have developed at Aberdeen Standard Investments: the Circular Economy, Sustainable Energy, Food & Agriculture, Water & Sanitation, Health & Social Care, Financial Inclusion, Sustainable Real Estate & Infrastructure, and Education & Employment.
To address these eight pillars, the trust invests in five distinct private markets: private equity, infrastructure, real estate, natural resources and private credit. So it’s unique both in terms of the breadth of its target impact and the range of private markets it invests in.
How do you cover such a broad investment remit comprehensively?
Comprehensive coverage is only possible because Aberdeen Standard Investments is one of the world’s leading top 10 investors in private markets. In total, the firm manages over £67 billion across the five private markets mentioned above and has more than 400 dedicated private markets investment professionals in 19 offices around the world.* So for each asset class, we have people on the ground, building relationships and generating a strong pipeline of opportunities.
In terms of appraising opportunities on their potential social or environmental impact, our big advantage is that Aberdeen Standard Investments already embeds environmental, social and governance considerations across its investment processes, supported by more than 30 ESG specialists. So the experience and resources required for analysing the impact potential of an opportunity are extensive.
*Source: Aberdeen Standard Investments, as at 30 June 2018.
Are you investing directly or indirectly – and what sort of opportunities are you looking at?
It varies widely. In private equity, we will predominately focus on identifying leading private equity impact fund managers, with specific expertise, then investing into their funds or, in some cases, co-investing into specific opportunities alongside a manager. We’ve been mapping the private equity impact universe to identify managers with specific niche skills in the impact space – be that in healthcare, clean energy or the circular economy which involves innovating more efficient use and recovery of resources and materials.
In real estate and infrastructure we are adopting a more direct approach, given our strong direct investment expertise both those areas. We work closely with the real estate investment teams to identify suitable opportunities such as delivering positive environmental and social impact by improving the environmental profile of existing buildings or developing new innovative buildings.
Infrastructure is also a key component of the portfolio given the potential positive impacts that can be generated across social infrastructure by helping to build hospitals, roads and schools and well as economic infrastructure with investments in areas such as recycling and renewable energy.
In natural resources, we are looking to invest both directly and indirectly via funds into areas such as timber, water and agriculture. Finally in private credit, we’re focused on investing in debt provided directly to businesses and assets, including asset-backed loans, subordinated debt and special situations financing such as microfinance to support underbanked low-income communities.
How will the portfolio be constructed?
We start with the Aberdeen Standard Investments’ Private Markets House View, which each quarter provides an objective macro-economic outlook on markets and sectors but also drills down into each private asset class to assess where we think the most attractive opportunities are by region, in say social infrastructure, private equity, real estate and so on. This house view helps to inform both idea generation and asset, market and sector allocation in the portfolio. To manage volatility in the portfolio, we also assess allocation across currencies, markets and sectors from a risk perspective, seeking to manage correlations and over-concentrations.
We aim to maintain broad but flexible exposure across the eight impact pillars mentioned above. Exposure will depend on the attractiveness of the opportunities we find and, obviously, can fluctuate as we enter and exit investments.
What portfolio turnover do you anticipate?
The focus on less liquid private markets, where assets can take time to realise value, means our investments will tend to be long term. Within private equity, the natural holding period is five to seven years. Real estate is also about five to eight years, depending on whether it’s a development, refurbishment or strategy-led opportunity. With an infrastructure project, it could be 10, 15 or even 20 years. Private credit can vary enormously from as little as 3 months for microfinance to 10 years for debt to fund real estate or infrastructure projects.
Overall, once the trust is fully mature, we’d expect to see 10-20% of the portfolio’s net asset value being turned into cash each year. That continuous turnover is important so we can keep investing in new opportunities and maximise our social and environmental impact.
Is the trust’s portfolio constructed with any particular type of investor in mind?
Quite simply, we want to create a highly diversified global portfolio that can act as a core holding in a standard private investor’s portfolio. It’s really important that the Global Sustainability Trust is seen as a mainstream fund – not a niche investment – so we can tap into the huge investor appetite to use capital to make a positive difference in the world.
Given that this trust provides one-stop exposure both to private markets and the full spectrum of social and environmental impact opportunities, we believe it’s a very compelling vehicle to help take impact investing into the mainstream.
Risk factors you should consider prior to investing:
- The value of investments and the income from them can fall and investors may get back less than the amount invested.
- Past performance is not a guide to future results.
- The Company’s investment portfolio may not achieve the desired positive measurable environmental and/or social impact.
- The Company’s investments are inherently illiquid.
- Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years.
- There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value.
- An investment in the Company is only suitable for investors who are capable of evaluating the merits and risks of such an investment
and who have sufficient resources to bear any loss which might result from such an investment.
- The success of the Company will depend, amongst other things, on the Investment Manager’s ability to identify, acquire and realise investments in accordance with the Company’s investment objective and policy. This, in turn, will depend on the ability of the Investment Manager to apply its investment processes in a way which is capable of identifying suitable investments for the Company to invest in. There can be no assurance that the Investment Manager will be able to do so or that the Company will be able to invest its assets on attractive terms or generate any investment returns for Shareholders or avoid investment losses.
The Company is an alternative investment fund for the purposes of the AIFM Directive and has appointed Aberdeen Fund Managers Limited as its alternative investment fund manager.
Domicile and legal form: The Company - The Global Sustainability Trust plc was incorporated and registered in Scotland on 17 April 2018 as a public company limited by shares under the Companies Act with registered number SC594582.
The Directors believe that the typical investors for whom an investment in the Company is appropriate are private investors and institutional investors investing for capital growth and seeking exposure to a diversified global portfolio, primarily consisting of Private Market Investments, which aims to create positive measurable environmental and social impact. An investment in the Company is only suitable for persons capable of evaluating the risks and merits of such an investment and who have sufficient resources to bear any loss which may result from the investment. Potential investors should consider with care whether an investment in the Company is suitable for them in the light of their personal circumstances and the financial resources available to them.
Investors may wish to consult an independent financial adviser who specialises in advising on the acquisition of shares and other securities before making an investment.
The AIFM and Investment Manager
Under the terms of the Management Agreement, the Company has appointed Aberdeen Fund Managers Limited as the Company’s alternative investment fund manager for the purposes of the AIFM Directive. The AIFM has delegated portfolio management to Standard Life Investments Limited as Investment Manager.
Other important information:
Issued by Aberdeen Asset Managers Limited which is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Registered Office: 10 Queen’s Terrace, Aberdeen AB10 1XL. Registered in Scotland No. 108419.
An investment company should be considered only as part of a balanced portfolio. Under no circumstances should this information be considered as an offer or solicitation to deal in investments.
Aberdeen Standard Investments is a brand of the investment businesses of Aberdeen Asset Management and Standard Life Investments.
We recommend that you seek financial advice prior to making an investment decision.
Investors should review the relevant Key Information Document (KID) and brochure prior to making an investment decision. These can be obtained free of charge from www.invtrusts.co.uk or by writing to Aberdeen Fund Managers Limited, PO Box 9029, Chelmsford, CM99 2WJ.
For more information, please visit http://www.globalsustainabilitytrust.co.uk/