Dougal Maple-Brown

The two key issues heading into mid 2023 are the outlook for inflation, and hence interest rates, and uncertainty around corporate earnings, according to Maple-Brown Abbott.

Chief investment officer Garth Rossler said while inflation may have peaked, there is concern the market is ignoring the risk that inflation may remain at a higher level for longer.

“Our concerns are derived from two issues: the global issue that commodity prices will remain elevated for longer, driven partly by supply constrained by under-investment, and the local issue that wage inflation may still be rising.

“A further uncertainty is what happens to corporate earnings. Despite rumblings on the horizon, there has still been very few out-of-cycle earnings downgrades for domestic industrials. The latest quarterly earnings from the US have, if anything, confirmed that the impact of sharp interest rate increases and tightening of lending conditions are yet to materially show up in earnings reports,” he said.

Dougal Maple-Brown, head of Australian value equities, sees opportunities for investors in the energy and broader resources space over the medium term, albeit with the risk of shorter-term volatility.

“Commodity prices remain elevated and we see potential for this to last longer than expected, with supply constrained by underinvestment and ongoing geopolitical turmoil. In the energy space we continue to see value in Santos (STO) and Woodside (WDS), and favour Rio Tinto (RIO) in the materials sector.

“With the rapid rise in interest rates already observed, we see opportunities in companies that benefit from this shift such as insurers and banks. There are also a number of opportunities in out-of-favour companies with depressed earnings or multiples. At a market level, we see risks among the premium-rated growth and yield stocks where valuations have not yet fully adjusted to a higher interest rate environment.

“In our view, it is more likely we will have a stock picker’s market in which past excesses continue to be addressed, an environment that should suit our value investment approach.”

Emma Pringle, head of ESG, says that ESG integration, when done well, is critical to realising returns in value-aligned stocks. Value names can tend to be in ESG-challenged industries and so typically score poorly against traditional ESG ratings.

“We believe there is more upside to be had than the market has yet priced in. At the same time, given the nature of these industries, the ‘real world’ downside when companies get it wrong can be so much greater and why we place such a focus on stewardship.

“Energy and resource stocks, for example, are highly carbon-intensive and tend to score poorly on backward-looking ‘out of the box’ ESG ratings. However, to avoid holding them would mean missing the opportunity to be part of the energy transition – through both facilitating access to capital and then engaging to advocate for sustainable long-term outcomes for shareholders and ultimately supporting better outcomes for the world we live in,” she said.

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Emma Pringle

Maple-Brown Abbott has launched the Maple-Brown Abbott Australian Sustainable Future Fund, focussed on playing an active role in supporting positive outcomes for people and the planet.

Emma Pringle and Chris Hotop are co-portfolio managers of the fund, formerly the Maple-Brown Abbott Responsible Investment Fund.

CEO and managing director Sophia Rahmani said the Maple-Brown Abbott Australian Sustainable Future Fund leverages the firm’s resources, expertise and track record in Australian equity investing and long history and focus on environmental, social and governance (ESG) factors.

“We believe investors can help shape a better future. The challenges facing our society –including climate change, resource management, financial inequality and disparity in living standards – require purposeful capital investment to enable solutions and support positive outcomes for people and the planet. The Australian Sustainable Future Fund looks to play an active role in that process.

“We believe we can help deliver a positive impact by supporting companies we consider to be making a positive difference by giving them access to capital they need to invest, by not supporting those that hinder social progress, and by engaging with companies to influence their behaviour. We also believe that this doesn’t have to come at the expense of strong financial returns.

“Maple-Brown Abbott recognised the significance of the United Nations supported Principles for Responsible Investment early and become a signatory 15 years ago. We consider ESG factors across all investment strategies, and launched our first responsible investment fund in 2009.”

Ms Pringle said within the Australian Sustainable Future Fund, it is a requirement that all portfolio holdings have a positive environmental or social impact.

“We are interested in knowing the likely real-world outcome of the companies we invest in, how they are contributing to solutions that will help create a better Australian future. We apply a positive screen across the investment universe to identify companies that make a positive contribution to one or more of our sustainable investment themes, which are informed by the UN Sustainable Development Goals.

“When assessing companies, we consider the degree to which revenue is derived from products and services that support our sustainable investment themes. We also assess a company’s future ability to support those themes, recognising that to be truly sustainable we need to consider the needs of both present and future generations. This is particularly evident in investing for a low carbon future, for example, where the needs of an energy system in transition will be different in the future than they are today,” Ms Pringle said.

“To bring this to life for investors, our reporting includes visual representation of the degree to which the Fund is contributing to each of the Sustainable Development Goals.”

The Fund also applies a negative screen to exclude businesses that have material involvement in activities that detract from a sustainable future.

Mr Hotop says an active management approach is key to success in sustainable investing.

“Identifying companies that will positively contribute to a sustainable future, as well as deliver strong risk-adjusted returns over the long term, requires stringent active management.

“The fund uses the value-driven approach of Maple Brown Abbott’s Australian Value Equities team to invest in listed Australian companies that contribute to positive environmental or social outcomes. It takes a ‘bottom up’ stock selection process, driven by in-depth fundamental analysis from our investment team, to identify stocks that have been undervalued by the market and that we expect to deliver income and long-term capital growth to investors,” Mr Hotop said.

The Maple-Brown Abbott Sustainable Future Fund provides investors with exposure to a diversified portfolio constructed of Maple-Brown Abbott’s highest conviction opportunities which we expect to deliver strong risk-adjusted returns over the long-term. It invests across a broad selection of companies listed on the Australian Securities Exchange and will typically hold 25-40 stocks. The minimum initial investment is $20,000.

The fund has been certified by the Responsible Investment Association Australasia (RIAA).

Emma Pringle has been head of ESG at Maple-Brown Abbott since 2020, and became co-portfolio manager of the Maple-Brown Abbott Australian Sustainable Future Fund in December 2022. She joined from BT where she was head of customer governance and sustainability across superannuation, investments and insurance. During her 14 years at BT, she also held strategy and operations roles in its private wealth, superannuation, investments, platforms and advice divisions. Ms Pringle has also served as co-chair of the Australian Sustainable Finance Initiative (ASFI) technical working group on meeting community expectations.

Christopher Hotop joined Maple-Brown Abbott in 2013. He has been the portfolio manager of the Maple-Brown Abbott Australian Sustainable Future Fund (formerly the Maple-Brown Abbott Responsible Investment Fund) since 2018. Prior to joining Maple-Brown Abbott, he was an investment analyst with the Australian equities team at CP2 for eight years, where he covered building materials, financials and retail sectors.

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Ms Pringle has a background in product governance and sustainability across superannuation, investments and insurance, gained at BT, most recently as head of customer governance and sustainability. Prior to this, she held strategy and operations roles in BT’s private wealth, superannuation, investments, platforms and advice divisions. Ms Pringle has also served as co-chair of the Australian Sustainable Finance Initiative (ASFI) technical working group on meeting community expectations.

Over the past 12 months, while in a maternity cover role, Ms Pringle has built on Maple-Brown Abbott’s long established ESG program.

This includes joining two leading investor collaborations aligned to Maple-Brown Abbott’s ESG focus areas: Climate Action 100+ and Investors Against Slavery and Trafficking Asia-Pacific. Maple-Brown Abbott also confirmed its commitment to managing climate risk, becoming a signatory to both the ‘Transition Pathway Initiative’ and the ‘Taskforce on Climate-Related Financial Disclosures’.

In her role, Ms Pringle will have oversight of the ESG process for all MBA’s Australian and Asian equity strategies and at the corporate level. In 2020, Georgia Hall was appointed to the newly created role of ESG Analyst for the Maple-Brown Abbott Global Listed Infrastructure business, an affiliate of MBA, to provide dedicated oversight of the Global Listed Infrastructure ESG process. Ms Pringle and Ms Hall have worked closely together over the past year on these important firm-wide initiatives.

“Emma’s appointment reflects Maple-Brown Abbott’s continued investment in the ESG space and how seriously we view integrating ESG factors into our investment process across all of our portfolios,” said Sophia Rahmani, Maple-Brown Abbott CEO and managing director.

“We expect this will be even more important as risks around climate change and social issues like modern slavery become more prevalent. Emma brings market-leading experience and talent and I’m confident that under her oversight we will continue to be a leader in ESG.

“Maple-Brown Abbott has been a signatory to the UN-backed Principles for Responsible Investment (PRI) since 2008 and was again being awarded an A+ for its approach in 2020. We have a long-standing commitment to integrating ESG factors into our investment process across each of our investment strategies. Our ESG strategy was formalised in 2008, one of the earliest for Australian-based boutiques, when the Board approved the first ESG policy and we became a signatory to the PRI.”

Emma’s appointment follows the departure of Natasha McKean as ESG investment analyst after she decided to take up a position in Brisbane, where she lives, following her maternity leave.

Garth Rossler, chief investment officer, said Ms McKean had been pivotal in developing and implementing MBA strategies over a decade.

“We thank Natasha for her immense contribution to Maple-Brown Abbott and wish her well for her future endeavours,” Mr Rossler said.

“With her strong ESG background, Emma will continue to build on what Natasha started. ESG considerations are playing an increasingly important role in our clients’ portfolios with the transition to net zero,” he said.

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