RobecoSAM Circular Economy Equities D EUR

Natalie Falkman is Portfolio Manager of the RobecoSAM Circular Economy Equities strategy. Before joining Robeco in 2022, she was a portfolio manager for Kapitalinvest, a global equity, 5-star rated by Morningstar, fund at Swedbank Robur in Stockholm. Prior to that, she worked as the Head of Emerging Markets research at Carnegie (formerly HQ Bank), covering Eastern Europe and Africa, before shifting her focus to Nordic stocks. She started her career in 2002 as an equity research analyst at Deutsche Bank in Moscow covering utility and shipping sectors. Natalie holds a Master in Finance from Stockholm School of Economics.

The fund is established in Luxembourg and is subject to the Luxembourg tax laws and regulations. The fund is not liable to pay any corporation, income, dividend or capital gains tax in Luxembourg. The fund is subject to an annual subscription tax ('tax d'abonnement') in Luxembourg, which amounts to 0.05% of the net asset value of the fund. This tax is included in the net asset value of the fund. The fund can in principle use the Luxembourg treaty network to partially recover any withholding tax on its income.

The fiscal consequences of investing in this fund depend on the investor's personal situation. For private investors in the Netherlands real interest and dividend income or capital gains received on their investments are not relevant for tax purposes. Each year investors pay income tax on the value of their net assets as at 1 January if and inasmuch as such net assets exceed the investor’s tax-free allowance. Any amount invested in the fund forms part of the investor's net assets. Private investors who are resident outside the Netherlands will not be taxed in the Netherlands on their investments in the fund. However, such investors may be taxed in their country of residence on any income from an investment in this fund based on the applicable national fiscal laws. Other fiscal rules apply to legal entities or professional investors. We advise investors to consult their financial or tax adviser about the tax consequences of an investment in this fund in their specific circumstances before deciding to invest in the fund.

The fund's sustainable investment objective is to finance solutions that support the transition from traditional production and consumption patterns toward a circular economy. Circular economy and sustainability considerations are incorporated in the investment process by the means of a target universe definition, exclusions, ESG integration, and voting. The fund only invests in companies that have a significant thematic fit as per Robeco's thematic universe methodology. Through screening on both Robeco's internally developed SDG Framework and Robeco’s exclusion policy, the fund does not invest in issuers that have a negative impact on the SDGs, are in breach of international norms or where products have been deemed controversial. Financially material ESG factors are integrated in the bottom-up fundamental investment analysis to assess existing and potential ESG risks and opportunities. In addition, where a stock issuer is flagged for breaching international standards in the ongoing monitoring, the issuer will become subject to exclusion. Lastly, the fund makes use of shareholder rights and applies proxy voting in accordance with Robeco's proxy voting policy.

In February, the market recognized that the 'no landing' scenario with its persistent strength in employment data poses its own set of risks. It forces the Fed to try to rein in inflation further, which in turn reduces the probability of a benign 'no landing' outcome. Nevertheless, we are past peak hawkishness, which somewhat improves forward visibility. The month of February was the peak of the Q4 reporting season and the companies’ first forward-looking outlook comments for 2023. This February, more companies than usual refrained from providing a full-year demand outlook and profit estimations. Following our conversations with companies, there are however a number of areas that have relatively higher visibility and growth prospects. The areas that stand out positively are often linked to promoting sustainability and growth in these areas is supported by regulations, financial support from global governments as well as many companies' own improvement commitments. Electrification, clean water, clean transportation and a reduction in the use of harmful chemicals are some of the areas.

Based on transaction prices, the fund's return was 1.47%. In February, the strategy outperformed the broader MSCI World Index. The sector allocation and the stock selection components were both positive contributors to performance. The main contribution to the relative outperformance of the portfolio came from companies that reported good quarterly results that were often above what market consensus expected. The top contributors came from a variety of different sectors – Wesco and Addtech from the industrials space, Cavco is a consumer discretionary company, AMD and STMicroelectronics are companies in the technology sector and Linde is part of the materials industry. The same reasoning applies to the individual stocks that made the largest negative contribution to the relative performance of the portfolio. The two largest negative contributors were the two companies that reported results below market expectations – Ameresco and Keysight Technologies.

For long-term investors, the current volatility presents many attractive opportunities. Market visibility remains relatively low, but in certain areas the transparency is substantially better. These areas are linked to several sustainability domains that receive substantial investment support from regulations and government-backed investments. Areas around manufacturing sectors' reshoring in the US are also showing a good level of visibility and growth. Regardless of the economic and market developments that will unfold as 2023 progresses, investing in structural growth areas and being patient when it comes to waiting for attractive entry points is an investment strategy that we expect to produce attractive returns for long-term investors.