The Horizon Global Sustainable Equity Fund obtained overall a low score. It is an interesting fund because it combines a fairly sustainable portfolio with a suspicious method of investment and previously fraudulent management. Logical thinking would consider that since their method and management don’t perform well, then their asset shouldn’t. Yet, The Horizon Global Sustainable Equity Fund portfolio is surprisingly quite good. Indeed, there is a widespread lack of transparency and clarity in their investment method and the controversy of the home company further drops the score. The portfolio, however, provides a good example of how to invest in established corporations that are outperforming their competitors through sustainable improvements.
The Horizon Global Sustainable Equity Fund represents 1.02bn of dollars, mostly invested in shares of companies. Like many so-called sustainable funds, it avoids investing in activities that contribute to environmental and social harm. Yet, this doesn’t automatically imply that the fund is sustainable. Before diving into the detail of their portfolio, it is important to note that the fund is certified by the FNG-Label, which is the quality standard for sustainable investments in German-speaking countries. It gives a first positive impression, but as a critical and independent thinker, it is necessary not to take such information for granted, and assess whether or not I believe that the fund deserves such honor. When presenting its core values, the fund emphasizes its belief that there is a strong link between sustainable development, innovation, and long-term compounding growth. While I don’t completely agree with their vision, I like the fact that they are transparent about it and that it is coherent with the repartition of their assets, as indeed more than 40% are directed to equities in the sectors of information technology. Their other assets are invested in a broad spectrum of industries, such as Industrials (13.5%), Financials (12.9%), Consumer Discretionary (8.0%), Health Care (5.5%), Utilities (4.3%), Real Estate (4.1%) and Materials (2.9%). Only looking at the sectors in which the funds invest their money doesn’t tell us a lot about their commitment to sustainability, since one sector can regroup sustainable and unsustainable companies. To have a more concrete understanding of their assets, we will have a look at their top ten holdings. As of the 30 June 2021, it included Microsoft (5.6%), Autodesk (3.4%), Adobe (3.4%), NVIDIA (2.9%), Taiwan Semiconductor Manufacturing (2.7%), Humana (2.7%), Evoqua Water Technologies (2.6%), Lam Research (2.4%), Aon (2.4%), and Nintendo (2.3%). The top 10 holdings have an average weighted ESG score of 15,5, which puts them in an overall ESG risk category of low. What I found interesting is that the fund invests in companies that are not intrinsically sustainable, but have some of the best sustainable performance in their sector. This is especially true for their investment in the software and services industry and the semiconductor one. Indeed, Microsoft is ranked 16 out of 847 among its group and NVIDIA is ranked 3 out of 261 semiconductors companies. The positive point is that Horizon Global Sustainable Equity Fund guarantees to their investors that their money is given to companies that are participating in the shift of more sustainable industries. Overall, I am quite satisfied by the fund’s portfolio because it witnesses their commitment to reward big corporations (that are on the stock market) putting an effort to implement sustainable measures.
Researching about the method used by The Horizon Global Sustainable Equity Fund’s management to select investment opportunities, I found that it was rather unclear. What I first identified is that their strategy is closely related to the UN SDG’s criteria and provides a basis for outlining what they call their « ten sustainable development themes ». Divided into 5 environmental and 5 social themes, they are product-focused and the fund operates a 50% revenue threshold. While we won’t go into the detail of each theme, they are transparently communicated by the fund management. Yet, the way they rate their companies is not. Since I am not able to access the detail of calculations, I can’t comment on whether or not the company actually goes through the whole process. My only remark would be that the 50% revenue threshold is not enough, and witnesses a partial approach to sustainability. What lost me when looking at their method is that they talk about their 10 themes, but present an analysis of Microsoft, a company in which they have invested. Here, they rate its performance according to UN SDG’s criteria, and follow the same path to globally assess their portfolio. Which criteria are used to select and assess the sustainable capacity of companies is blurry and ambiguous. Another basis of their approach is ESG Key Performance Indicators. In the report, it is stated that the fund invests in « companies with high operational standards and report on the metrics that they consider as being relevant to all businesses, such as innovation, employee growth, gender diversity, and controversies ». While there is no information about when in the process this data becomes relevant, the very imprecise nature of these indicators harms the evaluation of the fund tolerance regarding companies’ results. It is a good idea, but it needs to be further outlined so that looking at this data becomes relevant and helpful to target sustainable investment. Finally, The Horizon Global Sustainable Equity Fund has put in place a low carbon strategy and looks to have a portfolio in line with the Paris Agreement’s 2*C scenario. To do so, they use the Taskforce on climate-related financial disclosures (TCFD) recommendations to frame and analyze the strategy’s alignment to resilience to the worst effects of climate change. This again is no further defined and explained, which is kind of disappointing. Overall, I have not understood the way the fund proceeds. I don’t know if the fund’s strategy is based on an unorganized accumulation of qualitative and quantitative data that are supposed to inform their investment decision, or if the fund’s management is trying to drawn investors under a mass of sustainable criteria to give them a peace of mind. In both cases, I believe that the way investment decisions are made lacks transparency and coherence.
The fund represents 1EUR billion of dollar and is managed by Hamish Chamberlayne and Aaron Scully, both manager of Global Sustainable Equity branch of Janus Henderson. They have a long-standing career in sustainable finance, Scully started as a research analyst and assistant of global sustainable equities in 2001 and Chamberlayne has arrived in the managing team of Janus Henderson in 2011. They have both started learning about sustainable finance before the recent boom of the activity, which may be a sign of their honest commitment to sustainability. Janus Henderson is a worldwide asset manager that works across all major asset classes. They were formed in 2017 from the merger between Janus Capital Group and Henderson Global Investors, and since then manage overall more than £293.6bn of dollars. Dick Weil is at the head of the company and has a long-lasting career in finance. The Horizon Global Sustainable Equity Fund is one of their numerous funds, including many funds with no particular interest in sustainability. Like many financial institutions, Janus Henderson has been developing activities in the sustainable sector such as the one under our study. The company has a low ESG risk rating of 18,9, which is a fairly encouraging score. Yet, in 2019 the company was fined £1.9m for overcharging thousands of investors, since the firm’s Henderson Investment Funds Limited division failed to tell 4,713 small savers that their investments were no longer being actively managed, but continued to charge them the same fees. While one example shouldn’t define a whole company, it stills highlights the lack of transparency and honesty of the institution.