Robeco Circular Economy D USD

Natalie Falkman is Portfolio Manager of the Robeco Circular Economy strategy and member of the Thematic Investing team. Before joining Robeco in 2022, she was a portfolio manager for Kapitalinvest, a global equity, 5-star rated by Morningstar and AAA-rated by Citywire (Global blend-category) fund at Swedbank Robur in Stockholm. Prior to that, she worked at Carnegie (largest independent investment bank in the Nordics), first as the Head of Emerging Markets Research and thereafter with Nordic Capital Goods Equity Research. 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’s 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.The following sections display the ESG-metrics for this fund along with short descriptions. For more information please visit the sustainability-related disclosures.The index used for all sustainability visuals is based on MSCI World Index TRN.

August economic data reignited worries of a hard landing. The stream of quarterly reports revealed that many companies suffer from low visibility on short-term demand. Nevertheless, earnings estimates continue to point to expectations of high single-digit to low double-digit year-over-year earnings growth in the coming four to five quarters. Chinese demand continues to stay soft and decoupled. Hopes for a short-term rebound in broader demand from industry and consumers have largely been abandoned. In contrast, investments in AI are accelerating. Though debates are swirling around AI's future returns, that hasn't hindered the pace of AI-related investments. Nevertheless, the risk of recession is worrying investors. A sharp deterioration in profits could lead to an intensified focus on cash preservation and an AI investment slowdown. However, this has yet to be observed.

Based on transaction prices, the fund's return was 1.06%. In August, the fund underperformed versus the MSCI World. This can be traced back to a number of factors. First, building materials companies reported results below expectations and gave relatively muted guidance comments for H2. Within this group are TopBuild and Trex. Another group of companies that witnessed share price weakness were holdings that gave conservative, short-term guidance or that did not raise FY 2024-guidance during their quarterly results in August. Here, companies include nVent and Snowflake. Relative underperformance versus the MSCI World also stemmed from the strategy's lower exposure to the healthcare sector and no exposure to consumer packaged goods companies or financials. Positive contributors to the strategy's August performance were Tetra Tech, which reported strong financials and gave a positive demand outlook, Hermès, which also reported good numbers and continues to be a stand-out in the luxury sector, and finally Essity, which benefited from both good quarterly numbers and positive investor confidence after its divestment of China-based Vinda. In August, the fund underperformed versus its internal benchmark for similar reasons as described above.

September has historically been a month of weaker market returns. This year, investors enter into September with a strong YTD performance but also some cautiousness created by the upcoming presidential elections. Listening to companies, many cite a wait-and-see approach from customers when it comes to capital investment decisions. Some have also mentioned that as lead times for most goods have normalized, customer focus has shifted to prioritizing cash. September is likely to see the first interest rate cut by the Fed. Rate cuts are unlikely to initially lead to any large changes in companies' willingness to invest and spend. Nevertheless, if the economic data does not deteriorate and we can get past the uncertainty surrounding the elections, we should see more investments from smaller businesses as they take advantage of lower interest rates. We see the geopolitical uncertainty as a major short-term risk. While we hope for peace and prosperity, in reality conflicts and tensions could spur higher volatility. We therefore maintain our balanced approach to risk, awaiting more attractive entry points for a number of companies that are structurally appealing but still relatively expensive.