Partner Content by International Business of Federated Hermes

Impact Opportunities: H1 2020 Report

Letter to investors

Demand for impact investing has been on the rise: according to the Global Impact Investing Network (GIIN), a study of 1,700 impact investors found that aggregate assets under management increased from $502bn in 2019 to $715bn this year. And as the world wrestles with the unprecedented challenge of the coronavirus pandemic, we have seen this demand accelerate further as the virus has put the need for impact investing under the spotlight. 

In the first six months of the year, societies and economies everywhere as well as financial markets were affected by Covid-19. While the full effects of the global pandemic are still unfolding, these events have further cemented my vision for impactful companies – that is, that they are the drivers of future growth, and by investing in these new growth areas, we are investing in tomorrow’s leaders today. 

Against the backdrop of the pandemic, I believe a paradigm shift is taking place: the wider market is beginning to acknowledge that companies providing solutions to the unmet needs of society and the environment are exposed to more enduring demand and, in turn, higher potential for better growth outlooks. Indeed, this belief is core to our investment philosophy – and it helps us to demonstrate to investors how they may be contributing to the betterment of society and the planet as well as the Sustainable Development Goals. 

Impact investing: a key role to play in reshaping the future 

As countries, sectors and supply chains continue to grapple with the pandemic, the outlook remains uncertain for many industries. That said, the volatility that markets experienced in the first half of the year provided us with emergent opportunities: we added a few new holdings to the Fund and I believe there will likely be similar opportunities in the second half of the year. 

I am pleased with the resilience that our Fund has demonstrated during this period of tumult. We are currently in the midst of the second quarter reporting season, and I am delighted to report that the majority of our holdings have reported earnings above expectations, with some even raising guidance for the full year. This is a testament to our investment philosophy which seeks to identify businesses that are exposed to scalable and enduring demand while providing innovative solutions to world’s most pressing needs. We will continue to seek outperformance opportunities by investing in long-term holdings succeeding in their core purpose: to generate value by creating positive and sustainable change. And in doing so, active and collaborative corporate engagement will be an essential part of this approach: it results in better alignment between all stakeholders in a business and encourages investors to take a truly long-term perspective. As we work alongside our experienced stewardship team, EOS at Federated Hermes, we will endeavour to share examples of our engagement progress and discussions in our upcoming quarterly reports.  

Having joined the international business of Federated Hermes in February 2020, I feel privileged to be leading an impact investing team which targets truly impactful companies. As client demand for sustainable investment solutions continues to rise, we have bolstered our team with two new members: Jordan Patel joined in July as a Senior Analyst, while Amélie Thévenet will join us in September, with a view to her becoming a co-portfolio manager in due course.