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Cleaner Living Monthly Report | October

 

Key Takeaways from our Cleaner Living ETF Monthly Report

  • Evidence of the broad theme of Cleaner Living continues to emerge as companies are increasingly adopting language, positioning and in a growing number of cases, real changes to both product mix as well as manufacturing processes. For example, Walmart recently announced they will adopt “Built for Better” labelling calling out nutritious and sustainable items, and Pepsi Co recently announced they have set a goal to reduce the use of virgin plastic by 50% by 2030. [1]
  • As names in the underlying index for our cleaner living ETF transitioned into what traditionally has been the toughest six weeks of the year for equities, inflation and consumer discretionary spending concerns coupled with some profit taking saw the index give back 6.42% in September. Those inflation concerns could be overdone given findings from the IBM Institute for Business Value and the National Retail Federation that 71% of surveyed consumer are willing to pay a premium for “clean products.” [2]
  • Bucking the overall September trend were names like Hain Celestial (HAIN-US) and National Beverage (FIZZ-US).
  • Overall, Cleaner Transportation, Cleaner Food & Dining and Cleaner Building & Infrastructure led the index down with each contributing to 25% of index returns for the period on average. 

 

Macro Outlook

The main driver of this strategy is the secular trend of consumers’ awareness of what they are putting both in and on their bodies as well as the environmental impact of using these goods and services. This awareness, and the spending decisions guiding them have prompted corporations to begin to adjust positioning, product lines and production that better reflect what consumers want, what is more environmentally sound, and where public policy is heading. As thematic investors, we break the economy into three components: consumers, corporations, and public policy. When we see consumers and corporations pulling in the same direction, we know we have a solid investing theme. When public policy joins them, setting performance thresholds or providing development incentives, all three are moving in the same direction, creating powerful thematic tailwinds, which is precisely what we see with Cleaner Living.

In Europe, great emphasis has been placed on guiding pandemic-recovery stimulus funds towards incentives and projects that will increase demand for the types of products and services that are in the Cleaner Living investment theme. The same is occurring in much of North America, such as with US President Biden’s proposals in which spending plans are earmarked for Cleaner Living solutions. [3]

Looking ahead, we are optimistic that current supply chain woes will be resolved in the coming quarters. This resolution should be beneficial to several sectors especially Building & Infrastructure and Transportation. Food & Dining and Health & Beauty sector names often fall into a traditional Consumer Staples sector and given consumers’ willingness to spend on healthier and “better for them” food and products we see some resilience in these sectors in the near-term3. According to data published by Fior Markets, the global organic food, and beverages market is expected to grow from $255.2 billion in 2020 to $849.7 billion by 2028 as consumer purchases shift toward clean label products and natural ingredients without added sugar. [4]

The plant-based meat market is expected to reach $13.8 billion by 2027, a dramatic increase compared to just $3.3 billion in 2019. [5]

The non-GMO food products market is expected to grow to $2.7 billion by 2026, up from $1.25 billion in 2020. [6]

By 2027, the global natural cosmetics market is estimated to reach $54 billion, up from $36 billion in 2019, with the clean beauty market rising to $11.6 billion in 2027 vs. $5.4 billion in 2020. [7]

The global green building materials market was estimated at $198.50 billion in 2019 and is forecasted by Maximize Market Research to reach $480.5 billion by 2027. [8]

The outlook for EV adoption is accelerating due to a combination of more policy support, further improvements in battery energy density and cost, more ubiquitous charging stations, and rising commitments from automakers. Passenger EV sales are set to increase sharply in the next few years, rising from 3.1 million in 2020 to 14 million in 2025. [9]

 

Cleaner Living ESG-S UCITS ETF Performance Table (As of 30.09.2021)

1M

3M

6M

YTD

12M

SI

Cleaner Living ESG-S UCITS ETF

-6.98%

NA

NA

NA

NA

-6.98%

Tematica Bita Cleaner Living Sustainability Screened Index

-6.97%

-13.31%

-16.38%

-16.79%

30.13%

-6.97%

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 30/09/2021Performance 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 for the index is in USD. 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. Please note that all performance figures are showing net data.

 

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