Increasingly, the prominence of ethically governed investment is taking centre stage in pockets of capitalism that have substantial power to influence the decision-making of the corporate world in an effort to deliver constructive outcomes, which are aligned with ethical environmental and social principles.
In 2016, the Luxembourg Green Exchange started operating as a first green exchange, introducing green financial instruments. It is designed for issuers that channelise the capital raising for green investments.
It facilitates the market for green financial instruments, including green bonds, and disclosures on the utilisation of proceeds needs to be consistent with the Climate Bonds Initiative and International Capital Market Association.
Climate change and its ramifications on the long-term financial performance of the business has been driving the cause for the need for responsible investing, and renewed challenges for corporations to go carbon neutral/negative.
Corporate world has been aligning interests with the wider principles of climate change, responsible investments, environmentally and socially governed principles. And, this shift in the investment community, as well as investible opportunities, is creating pockets of spaces that could drive growth for businesses in the adjacent areas.
Perpetual Limited (ASX:PPT)
Perpetual traces its roots back to 1886 when the future PM of Australia and other intellectuals collectively opened a trustee company – Perpetual Trustee Company Limited.
Since 1886, the brand has been serving generations of Australians. It is one of the largest wealth managers in the country, serving high net worth individuals, businesses, and families.
On 31 January 2020, the investment manager announced its intention to buy Trillium Asset Management for a purchase consideration of USD 36 million and other perks.
Trillium is an ESG-focused investment manager based in Boston, USA, having funds under management of USD 3.8 billion.
It is believed that the transaction could establish a US-based distribution arm, which would be governed to accelerate the growth of the target business while augmenting its future acquisitions.
Also, the deal includes an earnout to ensure that interests are aligned with future growth, and the company intends to fund the acquisition through available cash. On an underlying basis, the transaction is said to be earnings accretive in the first year.
Source: PPT Investor Presentation, November 2019
Acquisition of Trillium brings two investment managers together with respected and demonstrated capabilities, in the addition to customer base, human capital, specialities etc.
Since 1982, the target business has been focused on ESG-investing, meaning one of the longest track records in managing ethically responsible investments that are driven by environmental, social and governance principles.
Some of Trillium’s products have demonstrated longevity in excess of 20 years, and its capabilities expand to US fixed income, global, US and thematic equity that is driven by ESG principles.
It is said that the products of the potential acquisition have a strong performance record along with a propensity to fuel further growth and positive net funds under management flows.
PPT noted that the acquisition would continue to operate independently under the existing brand.
The present management team would continue to lead the business with their interests aligned with business expansion, and there would be no changes to the investment teams or processes.
Perpetual views the transaction consistent with its intention to expand through further investment capabilities across asset classes, investment strategies, geographies and client groups.
US-based distribution team
As it is reported, the Australian investment manager has plans to improve its distributing capabilities through new ESG-offerings of Trillium to the Australian markets.
Also, the company has commenced the development of a US-based distribution team, and an appointment of a highly experienced and proven executive to spearhead the distribution efforts is expected in the upcoming weeks.
Given the business’ strong brand position and capabilities in the distribution, the company has plans to upscale distribution to achieve growth.
The US-based distribution team would be driving the growth for specialist ESG offerings of the target business across the US. PPT’s current distribution team would be expanding footprint to Asia Pacific, Europe and the Middle East, under the leadership of the company Global Distribution Head – Adam Quaife.
The company is committed to back further acquisitions through increased investment, marketing resources and other distribution capabilities that are required from distribution in the US markets as well as other jurisdictions.
Subject to regulatory approvals, the transaction is anticipated to be closed by the end of the financial year.
Perpetual Managing Director and CEO, Mr Rob Adams, stated that the transaction reflects the company’s global growth initiative, and he labelled the development as an important step in the execution of the strategy.
He added that it is a crucial stage in the evolution of responsible investing, and increasing investor demand, favourable outcomes of ESG backed investments in long-term financial performance, all of this is a part of intergenerational wealth transfer in history.
In the US and Australia, the shift towards ESG-backed investing is visible, and there has been a solid growth in assets that are managed under ESG driven strategies.
With ESG investing arriving at a centre stage, the target company has a demonstrated history in operating the high performing investment products aligned with the same cause.
He further noted that the company has found a dedicated match with long-term demonstrated capability in ESG focused investing, and the transaction is underpinned by strong cultural alignment.
Trillium CEO, Mr Matthew Patsky, noted that the business has found a partner in Perpetual, who is dedicated to endorsing the mission of ESG-focused managed, which is to deliver superior returns with positive outcome in the ESG metrics.
On 31 January 2020, PPT last traded at $42.7, up by 3.19 per cent from the previous close.
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