Sustainable Investment: Identifying Long-Term Trends and Actively Managing for Alpha
Roodhals Capital™<br />Willem Appel - CEO<br />Co-PM - Branta Solutions Fund<br />27 May 2010<br />Alpha from Sustainability<br />TBLI Conference Asia 2010<br />Alternative investment workshop<br />
Important Notice<br />This document has been provided to you by the principals of Roodhals Capital B.V. ("Roodhals") for information purposes only.<br />Roodhals Capital B.V. and Stichting Bewaarder Branta Solutions Fund (“Branta Solutions Fund”, or the “Fund”) are incorporated in the Netherlands and are specifically NOT authorised or regulated by the Netherlands Authority for the Financial Markets, the Financial Services Authority in the United Kingdom nor by any other regulatory body in any other jurisdiction. <br />This document is for private circulation only. The information and opinions contained in this document are for background purposes only, do not purport to be full or complete and do not constitute investment advice nor the arranging of deals in investments. No reliance may be placed for any purpose on the information and opinions contained in this document or their accuracy or completeness. No representation, warranty or undertaking, express or implied, is given as to the accuracy or completeness of the information contained in this document and no liability is accepted for the accuracy or completeness of any such information or opinions.<br />This document does not constitute or form part of any offer to issue or sell, or any solicitation of any offer to subscribe or purchase, any investment or to provide services nor shall it or the fact of its distribution form the basis of, or be relied on in connection with, any contract therefore. Specifically, neither Roodhals nor its principals has provided you with this document for the purpose of soliciting any investment in the shares of any investment or service contemplated herein, whether by you or any other person and any such investment can only be made on the basis of the full Information Memorandum of the Fund.<br />Roodhals Capital - Confidential<br />2<br />
Alpha from Sustainability<br />Investing in sustainability as a value driver and source of alpha-based returns<br /><ul><li>In July 2009, Roodhals Capital launched the Branta Solutions Fund:
The strategy invests in public companies based on:
the materiality of their solutions for sustainable development;
their ability to translate current trends in sustainability into above average earnings growth and market valuation; and
value from a sustainable business model and responsible corporate governance practice.</li></ul>Roodhals Capital - Confidential<br />3<br />
The Challenge for the Sustainable Investor<br /><ul><li>Public financial markets are poorly equipped to value inter-generational issues
Difficult to look one year ahead, let alone >10 years.
and many sustainable investment propositions only promise long term payoff
Creative destruction</li></li></ul><li>Response to Long Term Risks and Concerns<br />5<br />Roodhals Capital - Confidential<br />Opportunities from a long-term trend towards sustainable development<br />For example:<br /><ul><li>Population growth, wealth shift & social trends;
Energy security; change energy mix and independence;
Adaptation to resource constraints, including fresh water, clean air, nutrients
(Corporate) governance models;</li></ul>Example: Exxon purchases XTO. Improving its natural gas capabilities with the acquisition <br />of XTO has a more material impact on Exxon’s carbon footprint than its attempts <br />to become involved in renewable energy. Shell and BP are making similar noises and are <br />transferring their focus from renewable energy projects to natural gas.<br />Example: The biofuels industry is underway with a search for a scalable second generation <br />bio fuel. The first generation (bio ethanol), while embraced by politicians and investors in <br />2004, was branded a “crime against humanity” in a 2008 UN report. <br />
Characteristics of Sustainable Investment compared<br />6<br />Roodhals Capital - Confidential<br />
Materiality and Scalability<br /><ul><li>Materiality drives alpha based returns.
Sustainable development is a transformation process where change provides opportunity.
General idiosyncrasies of sustainable investment1:
Status Quo: it takes a Herculean effort to displace existing technologies.
Scale: solutions need to be scalable to make a dent in most sustainability issues.
Size: the enormity of investment to achieve sustainability targets. How much is enough?
Speed: solutions should deliver returns in time: economic, political and ecological time.</li></ul>Example: Today, PV Solar requires subsidies and feed-in-tariffs to be competitive in the <br />electricity market, even if a cap and trade scheme is in place for carbon energy. But if <br />lower solar panel prices give local governments reason to cut subsidies, it offers investors <br />an opportunity to exploit this material sector event.<br />1After Angelo Calvello “Environmental Alpha” 2009.<br />7<br />Roodhals Capital - Confidential<br />
Investment opportunities from current trends in selected themes
Unique multi-strategy model for sustainable investing.
Experienced team, outstanding skills across investment, ecological and operational disciplines.
Anchor investment by an initiative of Dutch pension fund APG Investment</li></ul>Roodhals Capital - Confidential<br />Where sustainability is a performance driver<br />8<br />
Branta’s Current Sustainability Themes<br />Roodhals Capital - Confidential<br />9<br />Theme Trends Dynamic, bottom-up investment selection process<br />* EROI = energy return on investment (Energy acquired/Energy expended)<br />
Roodhals Capital - Confidential<br />10<br />Multi-Strategy Model<br />Roodhals aims to be a leader in theme-based sustainable <br />investing <br />* Actual allocations and holding periods may vary significantly from the indicative allocations in the table.<br />