A common perception is that sustainable investing means having to settle for lower returns. But by investing in a cheap and efficient way, it's possible to match the market return or even better it.

1. Max Tennant
Managing Partner
Factor based investing + sustainability
Global Systematic Investors llp
Investing in a
better future

2. 2
Consumer
AdviserInvestment

3. Background
Adviser

4. “What do you want for society and
the world at large?”
Adviser

5. Global Warming
Adviser

6. Pollution
Adviser

7. Peace
Adviser

8. 4 out 5
Adviser
“Is there anything you’d like us
to do in the way that we invest
money for you?”
1 out 5
1 out 5 problem!
?

9. Adviser

10. Half Fat Version
We created a criteria for funds to get into
our portfolio and provided an opt-in
Adviser

11. 11
Factor based & low cost Narrow universe
Diversified Concentrated
Suitable to core allocation Satellite allocation
Lower tracking error High tracking error
Tracking error

12. 12
Factor based & low cost Narrow universe
Diversified Concentrated
Suitable to core allocation Satellite allocation
Lower tracking error High tracking error
Tracking error
Pension planning, ISA, GIA, IHT
planning, long term saving.
Social impact investing, wind turbines,
PV panels, batteries, water scarcity,
gender diversity.
90% 10%

13. 13
Economic Value vs. Moral Values
Core & Satellite
Lower tracking error High tracking error
Tracking error
Pension planning, ISA, GIA, IHT
planning, long term saving.
Social impact investing, wind turbines,
PV panels, batteries, water scarcity,
gender diversity.
90% 10%

14. Adding Sustainability to Core:
Asset Allocation
Short Dated Bonds REITS
UK Global Sustainable Value
ESG

15. The Journey So Far
2005

16. The Journey So Far
2005 2005

17. The Journey So Far
2005 2005 2015
Changed to
Opt-Out only

18. The Journey So Far
2005 2005 2015 2018
Changed to
Opt-Out only
Convert all
existing
clients to
‘half-fat’

19. 19
Consumer

20. 20
Consumer 24 hours as a consumer. Monday 11th Feb
Insects decline threatens ‘catastrophic
collapse of nature’s ecosystems’
Pesticides, pollution and climate change are
all wiping out insects at an alarming rate –
so much, that a new global review says they
could vanish within a century.
Call for end to plastic waste exports
Dealing with Britain’s mountain of
plastic waste is one of the most
pressing problems of our time.
@BBCTomFeilden
Follow Follow @BBCTomFeilden
More
Up next on #r4today: The IPPR's Laurie
Laybourn-Langdon on how we're failing to
grasp the scale of the environmental
catastrophe we face
10:46 PM - 11 Feb 2019
Institute for Public Policy
Research: We have entered
the age of environmental
breakdown.

21. 21
Consumer

22. 22
Adviser
What’s holding back this type of
conversation?

23. 23
Adviser
What’s holding back this type of
conversation?
There is a widely help perception
that there is a trade-off between
sustainability and returns.
I want to
give my
clients a
successful
investment
experience.
I don’t want to lose money.

24. 24
Adviser
I want to
give my
clients a
successful
investment
experience.
I don’t want to lose money.
Perception that
there is a
sustainability
trade-off.
Terminology &
use of words
when
discussing.
How does this
all fit in with a
long-term
strategy?
I’d like to do something,
but I don’t know how?

25. 25
Adviser Terminology!
Ethical
Socially
Responsible
Investment
Green
Environmental,
Social &
GovernanceSustainability
Social
Impact
Investing
Positive
Screening
Negative
Screening

26. 26
Adviser Terminology!
CFA Institute: ‘Sustainable Investing involves identifying investment
risks and opportunities with the help of ESG analysis.’
Environmental - steward of the natural environment.
Social - relationships with its employees, suppliers, customers and
communities.
Governance - leadership, executive pay, audits, internal controls
and shareholder rights.

27. 27
Adviser
“We can’t fix everything!
“We have a set criteria for fund inclusion and have added
an Environmental, Social and Governance overlay where
possible.
Our strategy is half-fat! But we are working towards full-fat.”
Terminology!

28. Evidence!
• There is stacks of it out there.
• SRI data goes back to 1990.
• ESG data from 2008.
• Morningstar have produced some material in the
last couple of years.
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Adviser

29. Conclusion from Morningstar
Sustainable investing has been driven by
regulation, an increased focus on long-term risks,
and mounting evidence that there is no
systematic performance penalty associated with
sustainable investing.
ESG factors AUM now total over $23 trillion
globally + 600% over the last decade.
Source: www.Morningstar.com/content/dam/Morningstar-
corporate/pdfs/Research-Sustainable_Funds_Landscape.pdf

30. Back testing of strategy
Benchmark vs. Factor Tilts vs. Factors+Sustainability (ESG)
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Investment

31. What factors do we apply to our strategy?
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32. Market Value Size
Profitability Momentum
Fund construction
Index tracker
(market cap weight)
Systematic risk factor strategy
(non-cap weight tilts to risk factors)
Sustainable
Systematic risk factor strategy
(ESG overlay on risk factor structure)
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Source: GSI LLP. Diagram for illustrative purposes only
Environmental Social Governance

33. Back testing assumptions
• The portfolios are rebalanced quarterly.
• ESG data from 2008.
• Trading cost assumptions have been included. Full notes at end.
• Developed markets: Australia, Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Korea,
Luxembourg, Netherlands, NZ, Norway, Portugal, Singapore, Spain,
Switzerland, Sweden, UK, US.
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34. Allocation to names in practice
46

35. Allocation to names in practice
47

36. Allocation to names in practice
48

37. Allocation to names in practice
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38. Simulated returns
19.99
14.62
12.61
19.81
14.26
13.05
19.75
14.35
13.06
0.
5.
10.
15.
20.
25.
3 Years 5 Years 10 Years
Global
Benchmark Factor Tilts Factor Tilts + ESG
50
Source: GSI LLP. Comparison of market-weighted returns (“Benchmark”) with returns based on GSI Factor Tilts only (“Factor Tilts”) and based on both GSI
Factor Tilts + ESG scores (“Factor Tilts + ESG”). Based on data supplied by Factset and Sustainalytics. Return periods of 1, 3, 5 and 10 years are shown as of
end September 2018. Portfolios are rebalanced at the end of each calendar quarter. Trading costs used are described on the last page.

39. 5.0
7.8
10.5
13.3
16.0
12.0 13.0 14.0 15.0 16.0 17.0
AnnualReturn(%)
Annual Risk (%)
Return / Risk Tradeoff (Last 10 Years)
Factor Tilts Factor Tilts + ESG Benchmark
Global
North America
Europe
Asia-Pacific
Simulated returns
51
Source: GSI LLP. Comparison of market-weighted returns and risk (“Benchmark”) with returns /risk based on GSI Factor Tilts only (“Factor Tilts”) and based on
both GSI Factor Tilts + ESG scores (“Factor Tilts + ESG”). Based on data supplied by Factset and Sustainalytics. The return period shown is the last 10 years
as of end September 2018. Portfolios are rebalanced at the end of each calendar quarter. Trading costs used are described on the last page.

40. 52
Adviser
Ifamax: ESG conversations with
clients for 14 years
• Delighted clients
• Happy staff
• More referrals
• And a significant point of
differentiation

41. 53
New
Government
Targets
UN Global
Compact
Consumer
Power
Accord de Paris: Signed 2015, starts in 2020
a) Hold temps below 2C pre-industrial levels.
b) Adapt to impacts to climate change – whilst not
threatening food production.
c) Finance pathway towards climate resilience.
The Ten Principles of the UN Global Compact
Cover issues relating to Human Rights, Labour,
Environment and Anti-Corruption

42. Thank you for listening.
Any questions?
Systematic Factor Investing + Sustainability
Our Mission: To provide a successful long-term
investment experience, whilst allocating more to
companies with a sustainable vision.

43. Important notes
Performance Disclosures:
Any performance information shown in this document represents the performance of a simulated portfolio of investments selected by Global Systematic Investors
over the period indicated. This information is for general information purposes only and does not reflect real investments actually made. The simulated data and the
returns indicated should not be confused with real investing; the returns indicated are shown before the deduction of fees, fund expenses or transaction costs other
than as described, all of which would actually have been applicable had real investments been made. Simulated results may not always be duplicated in reality. Any
reliance you place on this information is therefore strictly at your own risk. In no event will Global Systematic Investors be liable for any loss or damage including
without limitation, indirect or consequential loss or damage, arising out of or in connection with the use of this information. The simulated performance of an individual
strategy is not indicative, or a guarantee, of future results and it should not be expected that the actual returns of a live portfolio will replicate the returns of the
simulated portfolio. This information is provided to you on the understanding that, as a sophisticated investor, you understand and accept the inherent limitations of
such illustrations, will not rely on it in making any investment decision with respect to any investment with Global Systematic Investors, and will use it for the sole
purpose of evaluating the investment proposition of Global Systematic Investors.
Trading cost assumptions:
Trading commissions of 12bp per trade (plus stamp duty of 50 bp on buys in the UK).
Bid-ask spread estimates globally: large cap (top-70% of agg mkt cap) = 25 bp, mid cap (next 15% of agg mkt cap) = 50 bp, small cap (bottom 15% of agg mkt cap) =
75 bp (before S&P changed their large/mid/small definition in 2008 we used large/mid (top-80% of agg mkt cap) = 50bp and small (bottom-20% of agg mkt cap) = 75
bp).
We assume that we have to pay the full bid-ask spread for a round-trip transaction.
We assume that market impact costs are zero.
Global Systematic Investors LLP, 75 King William Street, London EC4N 7BE
www.gsillp.com Tel. 020 7717 5578
February 2019
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