ESG Equity Monthly Report | August

08 August 2022

Sustainable ETF Monthly Report: Key Takeaways 

The tug of war between bulls and bears continued in July with bulls grabbing the upper hand, especially following Federal Reserve Chairman Powell’s comments that the economy appeared to be slowing following the decision to raise rates by 75 basis points for the second consecutive month.[1] That decision was followed by sharp stock market rallies across much of the world, perhaps led by the belief that if economies appear to be slowing, inflation can’t be far behind, and rate hikes may be nearing their end.

The scenario outlined above may turn out to be correct but there’s one more step in the process that can’t be ignored – recession. The latest figures to emerge from Europe indicate the eurozone’s average PMI has dipped below 50, signalling contraction.[2] Meanwhile, establishing price stability remains the top concern for central bankers, meaning additional rate rises are a near certainty, placing additional pressure on economic activity.

In July, the Saturna Sustainable ESG Equity HANzero UCITS ETF gained 6.57%, in line with broad global indices. During the month stock selection was strong in Information Technology, Consumer Staples, Industrials and Materials. Dassault, Apple and NXP Semi led in tech, Reckitt Benckiser in consumer, Schneider Electric and Vestas in industrials, and Johnson Matthey in materials. Detracting from returns were Healthcare and Consumer Discretionary stocks including GSK and Adidas, although US DIY home improvement stocks Lowe’s and Home Depot performed well. From a regional perspective, our underweight exposure to the US capped returns as it was among the stronger performing countries and carries a majority weight in global indices. On the other hand, apart from the UK, our European investments are concentrated in France, the Netherlands and Denmark, all of which did better than Western Europe as a whole.

Source of all data: Saturna Capital. Please note that all performance figures are showing net data. Past performance is not indicative of future performance.

 

Macro Outlook

Following the sharp reversal in stock market fortunes in July seems like a good time to reiterate that we do not invest tactically. We do not make market calls or adjust portfolio positioning based on an interpretation of where we are in the cycle. We seek well-managed companies demonstrating positive ESG attributes that have an identifiable and, what we believe to be, sustainable competitive advantage. We seek to invest in these companies at attractive prices with the goal of outperforming over the cycle. We believe that we position ourselves more favourably for success through this strategy, rather than guessing what the Federal Reserve may do, when inflation may peak or whether economies will fall into recession. We will make long-term judgements on countries where we do not wish to be invested. We have never held stocks in Russia and are not engaged in South America. We have decided to eliminate investments in China-domiciled companies for Social and Governance reasons, as well as our belief that China faces significant demographic, debt and decoupling challenges that are best not solved by installing a leader for life.

 

 

Sustainable ETF Performance Table (As of 31.07.2022) 

 

1M

3M

6M

YTD

12M

SI

Saturna Sustainable ESG Equity HANzero™ UCITS ETF (Acc)

6.57%

-2.36%

-11.74%

-18.76%

-16.08%

-15.82%

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/07/2022Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product.

Learn more about our Sustainable ETF here.

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