Event Voice: Your Questions Answered by Baillie Gifford at the Investment Week Sustainable & ESG Market Briefing
Can you give a brief overview of your strategy in terms of what you are trying to achieve for investors, your investment process and the make-up of the investment team?
Positive Change is a global equity strategy with two equally important objectives. To generate attractive investment returns and to contribute towards a more sustainable and inclusive world. It is managed by a team of four decision makers: investment managers Kate Fox and Lee Qian, alongside impact analysts Edward Whitten and Michelle O'Keeffe. They are supported by three full time analysts and four portfolio advisors.
The team aim to invest in a small number of exceptional companies whose products and services are providing solutions to challenges across four themes: social inclusion & education, healthcare & quality of life, environment & resource needs and base of the pyramid (meeting the needs of those at the very bottom of the global income ladder).
The investment process is based on fundamental, bottom-up research. Two pieces of research are carried out before buying any company: fundamental company research (to examine the long term investment case) and impact analysis (to explore the contribution that the company is making to a more sustainable world). It is the team's firm belief that high quality companies which are contributing towards solving the world's challenges through their products have the potential to be exciting growth businesses. Profit complements purpose.
Positive Change has a long-term horizon and aims to own companies for at least five years. The portfolio is concentrated (currently around 35 holdings) and stewardship responsibilities are taken seriously. An Impact Report is published annually which details how the companies in the portfolio are contributing towards a more sustainable world.
How have you been trying to weather the storm caused by the Covid-19 pandemic and what could be the longer-term implications for your strategy?
Despite the backdrop of uncertainty, the Positive Change team remain calm and maintain their long-term investment horizon and philosophy. Their experience during the pandemic has reinforced their belief that investing in high quality growth companies which provide solutions to global challenges will be rewarding over time.
Indeed, the pandemic appears to have accelerated the long-term progress for which Positive Change has been positioned since inception: by harnessing technology and innovation, companies in the portfolio have delivered phenomenal growth and positive change in a range of areas.
A notable example is Moderna which successfully produced a Covid-19 vaccine using its novel RNA-based technology. Beyond Moderna, other healthcare companies are also making astonishing progress. Teladoc, the leading US telemedicine provider; M3, the Japanese online medical platform; and Dexcom, the manufacturer of continuous glucose monitoring devices for diabetics, have all grown strongly during the pandemic due to increasing recognition of the importance their innovative technologies will play in future towards meeting key healthcare challenges.
Importantly, it's not just healthcare: a wide range of companies operating in areas such as technology, renewable energy, and ecommerce, have all performed admirably in every sense of the word. As a result, the portfolio remains on an incredibly strong fundamental footing.
Can you identify a couple of key investment opportunities for your fund you are playing at the moment in the portfolio? This could be at a stock, sector or thematic level.
Positive Change has a rich pipeline of ideas and the team are researching a range of exciting potential investments across their four impact themes.
One area of focus is sustainable agriculture. The team use a diverse range of information sources, from independent research to engaging with academics and industry experts, to understand this complex area. Their aim is to identify high growth companies which are providing solutions to help meet the challenge of feeding the world's growing population whilst lessening the environmental impact of the agricultural sector. Two recent investments in this area are Beyond Meat which manufactures plant-based protein products and Deere & Co which is taking a world-leading position in the development of precision agriculture technology.
Another area the team is researching is single cell genetic analysis, a rapidly evolving area of healthcare research which has the potential to revolutionise our understanding of human biology. Recent investments in this area include participating in a placing for 10x Genomics and an initial public offering for Berkeley Lights.
Finally, companies which facilitate financial and social inclusion continue to be an area of active research. For example, MercadoLibre, the South American ecommerce platform which is helping small and medium-sized enterprises and improving access to finance.
