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www.foresight-‐analytics.com Suite 9, L3, 3 Spring St Sydney NSW 2000
1
ESG Factor Report March 2016
Report Prepared for: Johnston Asset Management
www.foresight-‐analytics.com Suite 9, L3, 3 Spring St Sydney NSW 2000
2
Table of Contents
ESG Report (31/03/2016) ......................................................................................................................... 3 1.1 Overall ESG Tilt– Global Equity Strategy ..................................................................................................................................................................................... 3 1.2 Regional and Sector ESG Tilts ..................................................................................................................................................................................................... 4 1.3 ESG Tilts – Stock level ................................................................................................................................................................................................................. 7 1.4 ESG Factor Tilts – Historical Context ........................................................................................................................................................................................... 8 1.5 Historical Factor Tilts – Secular Biases ........................................................................................................................................................................................ 9 1.6 ESG Factor tilts – historical data ............................................................................................................................................................................................... 10 1.7 ESG Factor – Return Impact ...................................................................................................................................................................................................... 11 1.8 ESG Factor Ownership and Opportunity Zone .......................................................................................................................................................................... 12 1.9 ESG Factor Tilts – Data Providers .............................................................................................................................................................................................. 13
Disclaimer .............................................................................................................................................. 14
www.foresight-‐analytics.com Suite 9, L3, 3 Spring St Sydney NSW 2000
3
ESG Report (31/03/2016) 1.1 Overall ESG Tilt– Global Equity Strategy Key Points • ESG Factor (composite) is slightly below
the index • There is no statistically significant ESG tilt
towards or against the index • The Portfolio scores highly based on GMI
data, mixed across MSCI data and negative on OEKOM data.
• Based on GMI data the portfolio ESG
factor tilts are statistically significant across three underlying drivers of E/S/G
Exhibit 1: ESG Skyline Overall Portfolio1
1 Source: Foresight Analytics, Style Research
www.foresight-‐analytics.com Suite 9, L3, 3 Spring St Sydney NSW 2000
4
1.2 Regional and Sector ESG Tilts Key Points
• ESG Factor tilts strongest in the Americas and Europe
• ESG Factor tilts are weakest
in Pacific and Asia.
Exhibit 2: ESG Skyline by Region2
2 Source: Foresight Analytics, Style Research
www.foresight-‐analytics.com Suite 9, L3, 3 Spring St Sydney NSW 2000
5
Key Points
• ESG Factor Tilts strongest in Staples and Healthcare
• ESG Factor Tilts in IT sector is
negative and statistically significant.
Exhibit 3: ESG Skyline by Sectors3
3 Source: Foresight Analytics, Style Research
www.foresight-‐analytics.com Suite 9, L3, 3 Spring St Sydney NSW 2000
6
Key Points
• ESG factor tilt is negative across USA, Japan, Netherlands and China.
• The results are not statistically
significant except for in USA
Exhibit 4: ESG Skyline by Country4
4 Source: Foresight Analytics, Style Research
www.foresight-‐analytics.com Suite 9, L3, 3 Spring St Sydney NSW 2000
7
1.3 ESG Tilts – Stock level Key Points
• ASML, SAB Miller, Adecco and NXP are the highest rated stocks on ESG.
• Amazon, Baidu, Alphabet and
Facebook are the least rated stocks on ESG.
Exhibit 5: ESG Scores ranked by Stocks5
5 Source: Foresight Analytics, Style Research
User%Security%IdentifierSecurityName Market Sector PortfolioWeight BenchmarkWeight ESGUSN070592100 ASML%HOLDING%NV%?%ADR Netherlands Information%Technology 3.77% 0.00% 1.2641GB0004835483 SABMILLER%PLC UK Consumer%Staples 1.92% 0.19% 1.1001CH0012138605 ADECCO%GROUP%AG Switzerland Industrials 3.01% 0.03% 0.7382NL0009538784 NXP%SEMICONDUCTORS%NV Netherlands Information%Technology 4.41% 0.00% 0.6946US1924461023 COGNIZANT%TECHNOLOGY%SOLUTIONS%CORPORATION USA Information%Technology 4.38% 0.15% 0.5606DE0006231004 INFINEON%TECHNOLOGIES%AG Germany Information%Technology 2.08% 0.05% 0.3436DK0060228559 TDC%AS Denmark Telecommunication%Services 1.13% 0.02% 0.3408
Telecommunication%Services%(portfolio) Telecommunication%Services 1.13% 0.02% 0.3408Consumer%Staples%(portfolio) Consumer%Staples 6.35% 0.33% 0.3117
US0378331005 APPLE%INC. USA Information%Technology 4.06% 1.74% 0.2936US28176E1082 EDWARDS%LIFESCIENCES%CORPORATION USA Health%Care 1.50% 0.05% 0.2555KYG7800X1079 SANDS%CHINA%LIMITED Hong%Kong Consumer%Discretionary 2.75% 0.03% 0.2524FR0000121485 KERING France Consumer%Discretionary 3.69% 0.07% 0.2181
Industrials%(portfolio) Industrials 9.17% 0.09% 0.1994US61166W1018 MONSANTO%COMPANY USA Materials 1.12% 0.13% 0.1680
Materials%(portfolio) Materials 1.12% 0.13% 0.1680IT0003874101 PRADA%S.P.A. Italy Consumer%Discretionary 0.29% 0.00% 0.1469
Health%Care%(portfolio) Health%Care 4.88% 0.27% 0.0990US8545021011 STANLEY%BLACK%&%DECKER%INCORPORATED USA Industrials 4.13% 0.00% 0.0990US3156161024 F5%NETWORKS%%INC. USA Information%Technology 3.67% 0.03% 0.0615US1510201049 CELGENE%CORPORATION USA Health%Care 3.38% 0.22% 0.0295
Portfolio 100.00% 7.64% ?0.0055JP3205800000 KAO%CORP Japan Consumer%Staples 4.43% 0.14% ?0.0298US57636Q1040 MASTERCARD%%INC. USA Information%Technology 4.19% 0.23% ?0.0320INE001A01036 HOUSING%DEVELOPMENT%FINANCE%CORPORATION%LIMITED India Financials 2.07% 0.00% ?0.0320
Information%Technology%(portfolio) Information%Technology 55.56% 5.03% ?0.0389Consumer%Discretionary%(portfolio) Consumer%Discretionary 10.51% 1.23% ?0.0751
AN8068571086 SCHLUMBERGER%LIMITED USA Energy 3.69% 0.24% ?0.1498Energy%(portfolio) Energy 3.69% 0.24% ?0.1498
HK0000069689 AIA%GROUP%LIMITED Hong%Kong Financials 1.93% 0.19% ?0.1834KYG875721634 TENCENT%HOLDINGS%LIMITED China Information%Technology 4.36% 0.37% ?0.1873JP3633400001 TOYOTA%MOTOR%CORPORATION Japan Consumer%Discretionary 1.73% 0.47% ?0.2224
Financials%(portfolio) Financials 7.59% 0.29% ?0.2594US00724F1012 ADOBE%SYSTEMS%INCORPORATED USA Information%Technology 4.20% 0.19% ?0.3361JP3734800000 NIDEC%CORPORATION Japan Industrials 2.03% 0.06% ?0.3952JP3200450009 ORIX%CORPORATION Japan Financials 3.59% 0.10% ?0.4314JP3236200006 KEYENCE%CORPORATION Japan Information%Technology 4.10% 0.10% ?0.4634NL0010831061 MOBILEYE%NV Israel Information%Technology 2.04% 0.00% ?0.5942US30303M1027 FACEBOOK%INCORPORATION USA Information%Technology 4.55% 0.69% ?0.6583US02079K3059 ALPHABET%INC USA Information%Technology 2.74% 0.62% ?0.6632US02079K1079 ALPHABET%INC USA Information%Technology 1.34% 0.60% ?0.6632US0567521085 BAIDU%%INCORPORATION China Information%Technology 3.97% 0.06% ?0.8408US0231351067 AMAZON.COM%%INC. USA Consumer%Discretionary 2.04% 0.66% ?0.9536
www.foresight-‐analytics.com Suite 9, L3, 3 Spring St Sydney NSW 2000
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1.4 ESG Factor Tilts – Historical Context
Key Points
• Portfolio has statistically significant ESG tilt over the cycle
• Currently the tilt is neutral
to slightly negative. The current tilt is not statistically significant
• The portfolio ranks most
favourably on GMI data.
Exhibit 6: ESG Skyline – Historical Range6
6 Source: Foresight Analytics, Style Research
www.foresight-‐analytics.com Suite 9, L3, 3 Spring St Sydney NSW 2000
9
1.5 Historical Factor Tilts – Secular Biases Key Points
• There is evidence of gradual upgrading of a number of biases through time
• Social and Governance
factors rank quite highly
Exhibit 7: Secular Biases7
7 Source: Foresight Analytics, Style Research
www.foresight-‐analytics.com Suite 9, L3, 3 Spring St Sydney NSW 2000
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1.6 ESG Factor tilts – historical data
Key Points
• Portfolio rank on GMI data is persistently high
• All factors E/S/G have ranked
favourably in the past.
Exhibit 8: Historical Factor Tilt Heatmap8
8 Source: Foresight Analytics, Style Research
www.foresight-‐analytics.com Suite 9, L3, 3 Spring St Sydney NSW 2000
11
1.7 ESG Factor – Return Impact Key Points
• Return impact has been most positive from Carbon footprint and Impact ratio (being underweight).
• Overall ESG factors have
contributed positively to the portfolio since 2008.
Exhibit 9: Factor Return Impact9
9 Source: Foresight Analytics, Style Research
www.foresight-‐analytics.com Suite 9, L3, 3 Spring St Sydney NSW 2000
12
1.8 ESG Factor Ownership and Opportunity Zone Key Points
• Most overweights have positive ESG scores
• On a cap weighted basis there is
not much difference between the index and the portfolio on ESG composite factor
Exhibit 10: Portfolio Ownership and Opportunity Zone10
10 Source: Foresight Analytics, Style Research
www.foresight-‐analytics.com Suite 9, L3, 3 Spring St Sydney NSW 2000
13
1.9 ESG Factor Tilts – Data Providers Key Points
• Portfolio persistently ranks higher on GMI data-‐set
Exhibit 11: GMI vs MSCI Scores -‐ Overall11
11 Source: Foresight Analytics, Style Research
www.foresight-‐analytics.com Suite 9, L3, 3 Spring St Sydney NSW 2000
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Disclaimer The data and analyses contained herein are provided “as is” and without warranty of any kind, either expressed or implied. Foresight Analytics™ (Foresight) or its employees, or any third-‐party data provider, shall not have any liability for any loss sustained by anyone who has relied on the information contained in any Foresight publication. Foresight disclaims any and all express or implied warranties, including, but not limited to, any warranties of merchantability, suitability or fitness for a particular purpose or use. This communication reflects our analysts’ opinions as of the date of this communication and will not necessarily be updated as views or information change. All opinions expressed herein are subject to change without notice. Foresight or their respective shareholders, directors and employees, may have long or short positions in the securities discussed herein and may purchase or sell such securities without notice. Further distribution is prohibited without prior permission. For data vendor disclaimers, refer to www.foresight-‐analytics.com/infrastructure&data providers. Copyright 2016 (c). Foresight Analytics™. All rights reserved.