In April 2018, Triodos Investment Management brought the asset management of the Triodos SICAV I sub-funds inhouse. At the same time, it launched an integrated impact investment approach centered around seven transition themes. These themes provide a comprehensive overview of the transitions the world needs to undergo to solve our most urgent sustainability challenges.
The fund team had a demanding year. Hoozemans explains: “The fund is about two thirds small and midcaps. In a declining stock market, companies of this size tend to perform worse than the broader market.” Responding to the market volatility, Hoozemans managed the fund with a relatively cautious stance. “Our key focus has been on managing risks and establishing a better balance in terms of sector, geographical and balance sheet quality. This has led us to divest several companies. We want to be impactful with our company selection, but the financials have to make sense as well. During the year we held a cash position to be able to weather the storm and take advantage of opportunities in share price corrections. We also adjusted our risk exposures away from lower-quality companies to companies with stronger balance sheets, without comprising the positive impact we want to achieve.”
Changes in geographical exposure
“In 2018, the US stock market was much more richly valued than other markets. In fact, it still is today”, Hoozemans tells. “The portfolio had positions in interesting US stocks with a good transition theme fit, but these were often quite expensive, and the fund was already geographically overexposed to the region. Hence, we trimmed or sold many positions, especially US medical technology and tech companies, and shifted our focus to the European and Japanese stock markets.” During the year, the fund took new positions in European companies, such as BE Semiconductor in the Netherlands (semiconductors) and Sophos (cyber security) from the UK. The fund also took positions in a few Japanese companies, such as Shimano (bike components), Sekisui Chemical (sustainable housing) and Yamaha (musical instruments).
During the year, the fund also invested in Bakkafrost, one of the world’s most sustainable salmon farmers located the Faroe Islands, between Iceland, Scotland and Norway.
“Bakkafrost farms its salmon in the fjords, in their natural environment and with a keen eye for their welfare”, tells Hoozemans. “The company is certified to the strictest standards, farming fish in the most sustainable way possible, employing a smart breeding program that produces large premium quality fish. Farming fish furthermore has a smaller environmental footprint than farming other types of protein like poultry and cattle, so it fits well into our transition theme of Sustainable Food and Agriculture.”
Hoozemans explains that given the market’s continued volatility and the analysts’ diligent evaluation of an investment’s suitability, the complete shift to the transition themes may take some more time, but is expected to be completed during the year. He believes that 2019 will continue to provide strong opportunities to invest in companies that have a positive societal impact and healthy financial returns.
"We’re working hard on finding new investible ideas, and we want to further diversify within and across themes.”
About the fund
Triodos Pioneer Impact Fund aims to generate positive impact and competitive financial returns from a concentrated portfolio of small- and mid-cap companies providing solutions for Triodos’ seven identified sustainable transition themes. It invests in companies with sustainable products, technologies and operating models. The fund actively engages with companies to drive sustainability at Board level and through collaborative dialogue and active use of shareholder responsibilities, aims to maximise positive impact. In 2018, the fund made a return of -11.3% (I-cap). The fund’s assets increased to EUR 245.9 million.