Spotlight on Amanda O’Toole, Partner & Portfolio Manager, Clean Economy Strategy & Biodiversity Strategy, Redwheel
Global Thought Leader Spotlight
Amanda O’Toole, Partner & Portfolio Manager, Clean Economy Strategy & Biodiversity Strategy, Redwheel
I am a partner at Redwheel and lead the team responsible for the Redwheel Biodiversity and Clean Economy strategies. My primary focus is the management of these two strategies. Both are actively managed portfolios of listed equities which offer products and services that contribute to the protection of biodiversity and the transition to a cleaner future. This means pursuing a process of fundamental analysis and stock selection designed to identify businesses which can generate attractive financial returns and to identify areas where engagement has the potential to mitigate risk. I also dedicate time to the transitions themselves, monitoring emerging sustainability related topics, and technological innovation.
Recognising the risks
In 2023, S&P found that 68% of the 14,000 companies in the S&P Global BMI have significant dependency on nature[1]. The loss of biodiversity which supports nature services is increasingly manifesting as physical risk, for instance through the loss of natural flood and storm protection. In addition, 46% of companies are estimated to have at least one asset located in a Key Biodiversity Area. Insufficient measures to avoid damage in such areas could mean reputational risk[2]. Corporates and policymakers are responding to both the dependency on and threat to biodiversity, creating the potential for regulatory risk and the need for significant investment to mitigate risk.
As corporates move to address this issue in their own footprints and their supply chains, we are seeing a focus on improving supply chain visibility and pressure for higher standards to be built into procurement policy. Improved visibility is a step towards the avoidance or mitigation of risk. This is a complex process and is challenging for corporates and asset owners alike. Nevertheless, the integration of these issues into investment decisions is crucial as inaction increasingly threatens business operations, market share, reputation, and cost of capital.
In the absence of perfect data, asset managers with a good understanding of the issues should be working towards identifying and mapping material risks and seeking mitigation through operational best practices.
As the real economy begins to address its biodiversity footprint, it must deploy cleaner solutions. This creates a long-term growth opportunity for businesses which offer differentiated products and services, supported by regulation and shifting consumer expectations.
Implications of the transition for investors
The transition in natural capital and biodiversity protection will impact activities throughout our economic system and it will impact all portfolios. Sophisticated investors must first seek to understand their exposure to physical, transition, and reputational risk.
Whilst data is not perfect, it is now possible to map both, dependency on biodiversity and activities which represent the greatest risk to biodiversity. To be effective, this must incorporate an understanding of physical location. Equipped with this information, investors can choose how to address their exposure. Options include:
Excluding those investments which have the greatest exposure to physical risk and/or transition risk. This approach offers some protection against investment risk and reputational damage.
Identifying laggards in verticals where biodiversity is most material and where there is potential to change. Seeking to engage with management to achieve progress towards best practice can address investee company exposure and allows the investor to capitalise on the improved risk profile this creates.
Identifying businesses for whom this transition represents a growth opportunity and investing in these businesses for financial return, which could offer a hedge against risk elsewhere in the portfolio and can have the potential to drive positive real-world change.
Whilst the universe of technologies is already rich and innovation is rapid, the scale of change required is enormous – to achieve a transition of this magnitude, support from public markets will be vital.
It is likely that a combination of all three approaches will have the greatest benefit for investors.
The role for active fund managers in biodiversity
As active fund managers with decades of experience investing in clean technology and natural capital solutions providers, we operate a process grounded in fundamental analysis, created specifically to identify opportunities for financial return generation through this transition.
This is supported by bespoke and targeted research produced by our in-house sustainability team in response to the needs of the Redwheel Biodiversity strategy. The flexibility and autonomy of process enabled by the Redwheel structure allows us to respond effectively to this rapidly changing landscape, allowing us to ensure that the strategy offers access to new opportunities and innovations, whilst managing exposure to emerging areas of risk.
Amanda will be presenting at Global Investment Institute’s upcoming Net Zero Investment Forum, taking place on Wednesday, 27 March 2024 at the Grand Hyatt Melbourne, Victoria.
To register your interest in attending, click here or for more information email zlatan.kapetanovic@globalii.com.au.
Sources:
[1], [2] S&P Global Sustainability Quarterly Second-Quarter 2023 Edition.
Amanda O’Toole, Partner & Portfolio Manager, Clean Economy Strategy & Biodiversity Strategy, Redwheel
Amanda joined Redwheel in April 2023 as a Partner and Portfolio Manager. As well as co-heading Redwheel’s Sustainable Growth Team, Amanda manages the Redwheel Clean Economy strategy and Redwheel Biodiversity strategy.
Prior to Redwheel, Amanda was Portfolio Manager of the Clean Economy and Biodiversity strategies at AXA IM and led as a global specialist on cleantech themes within the internal research team. Before this, she also held appointments as an Analyst at Nevsky Capital and began her career at PriceWaterhouseCoopers in corporate finance.
Amanda holds a BA (Hons) in Economics from the University of Newcastle Upon Tyne and is an Associate Chartered Accountant.
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