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Pictet - Environmental Megatrend Selection

Pictet Asset Management | For professional investors only | Pictet - Environmental Megatrend Selection

Pictet Asset Management

February 2015

Geneva

Executive summary

Growth engine building block

in a global equity portfolio

› Targets an attractive long-term risk-return profile resulting from exposure to environmental opportunities

› Driven by global secular trends and designed for long-term investors looking for capital growth

› Provides diversification through lower correlation to traditional market-cap weighted equity indices

› Focused thematic global equity portfolio of 50-60 stocks, mostly unconstrained by sectors, sizes or regions

› Exposed to companies, which by contributing to solve environmental challenges through innovation, technology and intelligent use of natural resources will be future winners

› Management team (5 investment professionals) has access to a depth of resources (23 sector and theme investment managers) displaying a mix of financial and industrial expertise

› Builds on Pictet Asset Management’s successful US$24 billion sector and theme capabilities

2 Pictet Asset Management | For professional investors only | Pictet - Environmental Megatrend Selection

Sector and theme strategies within Pictet Asset Management

3

23 investment

managers

20 years of experience

Founded in Geneva in 1805 the Pictet Group has over USD 441bn

in assets under management & custody

Source: Pictet Asset Management, as at October 2014, *repositioned in 2007, **repositioned in 2005, †Double counting

Thematic strategies AuM (USD)

Water 2000 3.8bn

Utilities 2005 8.6bn

Premium Brands**

1998 2.1bn

Timber 2008 1.1bn

Biotech 1995 1.5bn

Digicom 1997* 870mn

Agri. 2009

860mn

HDS 2010 1.7bn

Security 2006

880mn Generics 2004

860mn

Clean Energy 2008

840mn

17%

Global Megatrend†

2008 3.4bn

EMS 2014

101mn


4

2005

2004

1998

2006

1995 2007

1997 2000 2010

2009 Leisure Biotech

Water Security Telecom

Generics

Clean Energy

Agriculture

High Dividend Selection

Global Utility

Source: Pictet Asset Management

Env Megatrend Selection

Premium Brands REPOSITIONED

Digital Communication

Timber

REPOSITIONED Global Megatrend Selection

2008

2014

Over USD 24 bn in Sector and Themes

Mar

ket c

ap a

lloca

tion

Domestic Developed Emerging Frontier

Large

Medium

Small

Traditional allocation

Thematic allocation

Geographical allocation

Sector and theme strategies within Pictet Asset Management


Table of contents

1 Investment case 4

2 Investment team and process 10

3 Portfolio characteristics 23

4 Appendix 30


1

Investment case


Decoupling standard of living from usage of natural resources

› Secular trend towards higher

standard of living

› 3 billion people will enter the

global middle class by 2030

› Finite natural resources lead to

scarcity and quality challenges

Opportunity for companies that recognize the trend and offer solutions in this space

7

Brazil

China

France

Germany

India

Indonesia

Japan

Qatar

Turkey

UK

United States

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

0 2 4 6 8 10 12

Hum

an d

eve

lopm

ent

index

(HD

I)

Environmental footprint (hectare per capita)

Standard of living vs. use of natural resources


Source: United Nations Human Development Programme; Globalfootprint Network; 2012

Governments increasingly under pressure to find solutions

› Population and private sector

are increasingly aware of

resource scarcity and pollution

and are drivers of change

› Environmental challenges

have risen to the top of

political agendas

› Supportive policies are

accelerating globally

› In China, $300bn air pollution action plan, water next

› In Europe, “circular economy” initiative, energy efficiency directive

› In US, EPA carbon rule

8

Air pollution

Protests

Premier declares war on pollution

Environmental spending in China


Source: CEIC, Environmental Financing Strategy, Credit Suisse, Pictet Asset Management

Private sector rising to the challenge

› Companies are recognizing the trend

› While leading corporations adapt their operations

to obtain environmental certifications

› The most proactive are revisiting their business

models and generating new opportunities

9

Number of ISO 14001* certificates attributed


Siemens Environmental portfolio: breakdown by elements

* ISO 14001 is an Environmental Standard Source: International Standardization Organization (ISO), Siemens Annual Report, WIPO statistics database. Last updated: June 2014, Pictet Asset Management

Number of granted environmental patents by region

Rising consumer demand for environmental products & services

10

North American boiler market


Source: BRG Building Solutions, sales of commercial boilers in NA, Jefferies equity research

North American market for organic products

› Consumers are increasingly aware

of resource scarcity and pollution

› Long term sustainable returns and

growth rates can be accessed

through companies with products

and services:

› …which increase resource efficiency

› …which help diminish pollution

A $3 trillion environmental market by 2020


Addressable environmental market growth


Addressable environmental market

Example: solutions for a ‘dematerialized’ economy


Examples of applications in aerospace, automotive, consumer products

Source: Ansys, Pictet Asset Management

Resource efficiency

can be achieved

through:

› Computer Aided

Design (CAD)

› Product Lifecycle

Management (PLM)

› Advanced

simulation software

› Internet of Things

(IoT)…


Environmental investing yields attractive risk-return characteristics

Source: Bloomberg, Pictet Asset Management Note: Environmental universe back-testing based on equal weighting, quarterly rebalancing

Universe’s 3 years risk/return simulation (31.12.2011-31.12.2014)

› Companies in our investment

universe benefit from under

appreciated secular growth

supported by environmental trends

› A systematic and proven thematic

portfolio construction process

leads to a best idea portfolio with

desirable risk/return characteristics

Simulations suffer from positive performance bias and are not indicative of future performance.

Results reflect objective of the strategy to outperform the market in the long run.

Investable universe characterized by secular growth

› Companies in investable

universe expected to grow

sales by 6%, vs. 2.4% for

MSCI World stocks*

› Growth is diversified and

stems from previously

highlighted secular drivers


Source: Pictet Asset Management Notes: *) Aggregate values **) Consensus estimates of 2015 sales growth by segment (sum of all companies sales forecast within segments)

Investable universe 2015 sales growth by segment**

2

Investment team & process


Investment team

› Pictet’s thematic experience

dates back to 1995,

environmental to 2000

› Highly experienced

management team

(13 years of experience

on average)

› USD 24bn AuM managed

by the Sector & Theme team

across a range of thematic

strategies

16

Luciano Diana Senior Investment Manager (Lead)

Gabriel Micheli Senior Investment Manager

Environmental Megatrend Selection

Hans Peter Portner Senior Investment Manager & Head of S&T

Laurent Belloni Arnaud Bisschop Christoph Butz Xavier Chollet Alice De Lamaze

Frédéric Dupraz Nolan Hoffmeyer Karen Kharmandarian Yves Kramer Cédric Lecamp

Bruno Lippens Alexandre Mouthon Caroline Reyl Philippe Rohner Sylvie Sejournet

Piotr Stopinski Gertjan Van Der Geer Louis Veilleux

Alina Donets Junior Investment Manager

Sector & Theme - Investment Managers


Marc-Olivier Buffle Senior Product Specialist


Advisory Board

Top-level advice from

distinguished professionals

recognized as thought leaders

in their field

› Used since 2000* with

existing thematic strategies,

with evidence of insight and

added value

› Helps maintain and develop

the investable universe

› Identifies emerging

technology, policy and

business trends

› Semi-annual meetings

17

Expert A – Resource scarcity E.g. brings in knowledge of the latest developments in the planetary boundary framework

Expert B – Environmental Technologies E.g. brings in knowledge of latest environmental technology development

Expert C – Environmental Policies E.g. brings in knowledge of trends and upcoming global and regional environmental policies

Christoph Butz – Senior Investment Manager Timber

Expertise: Environmental research concept, land-use & resources

Marc-Olivier Buffle, PhD – Senior Product Specialist for Environmental Strategies

Expertise: Water technologies & sustainability


External Experts (being recruited)

Internal Environmental Experts

Source: Water strategy

Primary research & knowledge transfer

Tools and resources at disposal include but are not limited to:

Bloomberg, Credit Suisse HOLT, Starmine, Factset, RepRisk, Style Research Skylines™, CFRA, ISS, Inrate, Hermes EOS, internally developed analysis and portfolio management software suites, as well as access to 60+ global and specialized research providers


What When

Formal investment team meetings to discuss portfolio activities weekly

Morning video-conference calls with Pictet AM sector analysts daily

In-person meetings with Advisory Board semi-annual

Company meetings >300 / year

Participation to bespoke field research trips, factory visits, conferences, trade fairs regular

Meetings with exclusive research partner monthly

WORLD EQUITIES

OPPORTUNITY SET

INVESTABLE UNIVERSE

SCORED LIST PORTFOLIO

c. 40’000 companies

1 2


3

c. 400 stocks

4

c. 200 stocks

c. 60 best ideas

Investment process overview


WHAT › Definition of the opportunity

set (at sub-industry level)

WHAT › Definition of investable universe

(at company level)

WHAT › Screening and scoring of

universe

WHAT › Portfolio construction

WHO › Advisory board › Exclusive research partner › Investment team

HOW › $200m market cap screen › Proprietary tool to identify

sub-industries with low impact on key natural resources

WHO › Exclusive research partner › Advisory board › Investment team › S&T IMs › Professional network

HOW › Identify companies whose active

contribution to pollution control and/or resource efficiency >20%

› Primary research

WHO › Investment team › S&T IMs

HOW › Leveraging scores when

available from S&T IMs › Fundamental analysis and

scoring of additional screened opportunities

WHO › Investment team

HOW › Stocks with most attractive risk-

return potential based on scoring process

› Additional judgmental assessment including industry view, intangibles

› Demand on environmental resources exceeds

the natural regeneration rate

› A novel and rigorous framework presented in

Nature in 2009 selected by our team

› Nine key environmental dimensions, each

with its own ‘threshold’

› “Safe operating space” defined as the area

within thresholds

Companies within the safe operating space are more likely to benefit from environmental trends

20


The nine planetary boundaries and the safe operating space

Source: Stockholm Resilience Centre

Definition of the opportunity set

21

GICS® Sub-Industries 1.

2.


Definition of the opportunity set

Initial sub-industry screen identifies c. 3’500

companies out of c. 40’000 world equities

1. We use a proprietary tool* to link GICS

sub-industries to the environmental emissions

of their products and services over their life-cycle**

2. We map those emissions to the planetary boundaries

and apply the screen to identify sub-industries and

associated companies in the safe operating space

We then add to those companies firms which are already

known by S&T IMs to be within the safe operating space

*) Tool builds on the EIOLCA model (Economic input-output-table of the US economy), Carnegie Mellon University, in part outsourced to an exclusive research partner **) Life cycle includes production, utilization and disposal Source: Pictet Asset Management

22

Final decision remains ultimately judgmental and at the discretion of the investment managers

› >60% companies found within screened industry groups

Companies are selected based on:

› Exposure to the environmental theme (>20%) › Strategic importance of environmental product and services › Percentage of new environmental products › Business model of providing solutions to others is more

valued than minimizing it own operational risk

Definition of investable universe

Does the company make a

substantial ‘active’ contribution?

Company within safe operating space?

Final quality control step:

› The safe operating space check repeated at the company level*


OPPORTUNITY SET


INVESTABLE UNIVERSE

c. 400 stocks

*) Outsourced to exclusive research partner


Input dataFinal Score

(incl.

Override)

Suggested

Score

Score

Weight

Business Franchise

Organic revenue growth

Last 7/5/3 years organic CAGR (Holt) & + 2FY Consensus Est.

(Bloomberg)

7.3 / 7.4 / 9 / 13.8 (%) 3 1 6

Market demand risk

% of revenues that are either recurring, contracted or under fixed

price terms3 3 3 6

CFROI

Last 7/5/3 years average (Holt) & +2FY Consensus Estimates

(Bloomberg)

10.1 / 11 / 14.4 / 15 (%) 3 2 4

Growth in EBITDA margin

Avg. YoY growth over last 7/5/3 years (Holt) & + 2FY Consensus Est.

(Bloomberg)

6.1 / 12.1 / 5.9 / 1.7 (%) 0 0 2

Historical operating margins

Last 7/5/3 years margins average (Holt) & +2FY Consensus Estimates

(Bloomberg)

13.2 / 13.9 / 15.7 / 17 (%) 2 -1 2

Capi

tal

Inte

nsity

Financial stress

Current Net debt / EBITDA (Bloomberg) 0.5 x 1 1 1

Policy

Impact of regulatory environment on operations (+3 to -3) 3 3 3 6

Environmental risk

Maintenance of license to operate (+3 to -3) 0 0 0 2

Social risk

Securing of community consent (+3 to -3) 0 0 0 2

BUSINESS FRANCHISE SCORE (-3% / +3%) 2.3% 31

Input dataFinal Score

(incl.

Override)

Suggested

Score

Score

Weight

Management

Management Quality Assessment

Quality of management (+3 to -3) 3 3 3 6

Accounting risk

Holt Accounting Quality Score 1 to 5 (Holt) 4 1 1 1

External growth risk

Goodwill impairment as % of shareholder equity in the last 5 years

(Holt)0% 0 0 1

Financing risk

% dilution in equity in the last 5 years (Holt)0% 3 3 1

Corporate governance risk

Protection of minority shareholders (+3 to -3) 2 2 2 2

MANAGEMENT SCORE (-3% / +3%) 2.4% 11

Exec

usio

nTr

ack

Reco

rdTo

p-lin

e G

row

thO

pera

ting

Qua

lity

RES

PEG

P/B

to R

OE

EV/

EBIT

DA

to

EBIT

DA

gr

Sal

es g

row

th

RSI

FY0 FY1 FY2 FY0 FY1 FY2 FY0 FY1 FY2 FY1 FY1 FY1 FY0-2 FY1 FY2 FY1 FY2 FY1 FY2 30d

5% 10% 10% 35% 20% 20% 15% 15% 15% 15% 40% 35% 35% 30%

P/E

P/B

Valuation

EV/

EBIT

DA

Operating Momentum ST Momentum

EPS

con

s. 4

w c

hge

EPS

gro

wth

(%)

EB

TDA

Mar

g ch

ange

(bps

)

Screening and scoring of investable universe

› We focus and score 200 companies in the

investable universe

› We leverage existing company analyses whenever available (when stocks are held within a S&T strategy)

› For companies w/o existing scores, financial screen is used and top quintile of screened stocks are scored

› Company scores based on analysis of:

› i) 30% business franchise

› ii) 20% management quality

› iii) 50% financial attractiveness*

› All the scores are strategy specific (scores from

other S&T strategy must be adapted relative to

current universe)

› ESG consideration are fully integrated

within the scoring process (e.g. G in mgmt quality)

Illustrative scoring templates

*) Attractiveness is a combination of valuation, operational momentum and short-term stock price momentum


Portfolio construction

3%

0%

-3%

Star

ting

weig

ht

Port

folio

co

nstr

uctio

n fa

ctor

Purit

y fa

ctor

Com

pany

fact

or

Initi

al w

eigh

t*

risk management active management

Port

folio

wei

ght

3%

Min

. -3%

From

0%

to 3

%

From

-3%

to

+3%

From

0%

to

+6%

Min

. -1%

Min

. -3%

Indu

stry

fact

or

6%

Portfolio construction walk-through

› Portfolio weights

systematically integrate:

› Risk considerations

› Fundamental analysis

› Industry assessment

› Conviction-based allocation

› 50-60 stocks with most attractive risk-reward potential

› No position with less than 1% weight

› No geographic, GICS Sector or currency constraints

*The sum of initial weights for all stocks in the investable universe is calibrated to <100% on a pro rata basis. Note: Portfolio construction factor is composed of liquidity and volatility. Liquidity is a function of the sustainable strategy size . Volatility is relative to the investable universe

Stock example

Theme segment driver Company profile

Market cap of $ 13.5 billion

Global leader in engine and drivetrain technologies

$ 7.4 bn annual sales

Theme segment: energy efficiency


OPPORTUNITY SET

WORLD EQUITIES

GICS’ “Autos & Components” not within the safe operating space. However, company known by our Clean Energy IM and considered an exception

Company ‘s products address fuel efficiency issues ( >20% of revenue). It is therefore part of the investable universe INVESTABLE

UNIVERSE

Company is scored and achieves a company factor of 2.5% (business franchise 2.5%, management quality 2.5%, attractiveness 0%)

Company factor is added to initial weight of 0.4% and industry factor of 0%, to reach a target weight of 2.9%

SCORED LIST

PORTFOLIO

Source: Pictet/CITI

Risk management overview

26

Review by Company Partner & Chief Investment Officer › Semi-annual formal quality review meetings with Partner and CIO

focusing on performance, risk, style, purity, exposure, positioning and portfolio construction

› Frequent informal updates

Compliance Team (10 FTE) › Daily compliance monitoring for pre- & post-trade

checks : compliance with investment guidelines and statutory regulations & quarterly updates to top management

Performance analysis & risk control (10 FTE) › Monitors all positions and risk metrics on daily basis

and provides monthly risk reports to top management

Investment Team › Purity, volatility and liquidity risk integrated in the investment process › Portfolio management system gives access to all the raw risk figures that are needed by the investment team › Real time risk contribution (tracking error / beta) › Portfolio liquidity monitoring

Our main principle = avoid active bets where risks cannot be estimated



Investment practice & guidelines


Investment practice:

› Targeted number of holdings 50-60

› Smallest Market Cap > $200m

› No short sells, no leverage, no hedging, no derivatives (excl. FX)

› Cash < 5%

› Turnover 50-120%

› No sector or regional constrains

› Liquidation of min 10% of strategy in 1 day

Selected compliance checks (investment guidelines):

› Sum of positions of over 5% must be less than 40% of portfolio

› Largest position < 10% of portfolio

› Own <10% of issuer’s capital (PAM-wide)

3

Portfolio characteristics


Portfolio characteristics

Theme by segments (%) Market capitalization (%)

Geography by sales (%)


Source: Pictet Asset Management, , data as of 30.01.2015

Geography by domicile (%)

Top-10 holdings


Source: Bloomberg, Pictet Asset Management, data as of 30.01.2015 Notes: *) Average FY15e and FY16e Bloomberg consensus, **) FY15e Bloomberg consensus

Company Domicile % in fund Market cap ($ bn)

EPS Growth* (%) P/E** (x) Net debt / EBITDA (x) Theme Sub-theme GICS Sector

Aqua America US 3.8% 4.8 5.5% 21.3 3.7 Water supply & technologies Utilities & concessions UT

Thermo Fisher Scientific US 3.5% 50.1 10.5% 15.1 3.2 Environmental services Environmental consulting & testing HC

American Water Works US 3.5% 10.1 7.6% 21.5 4.3 Water supply & technologies Utilities & concessions UT

AO Smith US 3.2% 5.3 16.5% 18.4 Net cash Energy efficiency Building Efficiency IN

Hain Celestial US 3.2% 5.4 13.6% 24.3 2.7 Sustainable agriculture & forestry Sustainable & organic food CS

NXP Semiconductors NE 3.1% 18.3 15.3% 14.4 2.3 Energy efficiency Industrial Efficiency IT

Weyerhaeuser US 2.9% 18.8 6.7% 18.6 2.1 Sustainable agriculture & forestry Timberland & Wood Products FI

Plum Creek US 2.9% 7.8 19.3% 29.9 7.0 Sustainable agriculture & forestry Timberland & Wood Products FI

Canfor CA 2.7% 3.4 50.3% 11.5 0.0 Sustainable agriculture & forestry Timberland & Wood Products MA

Sensata Technologies NE 2.7% 8.3 22.7% 16.3 2.4 Energy efficiency Advanced Transportation IN

Total 31.5%

Top-10 weighted averages 13.6 15.9% 19.2 2.8Portfolio weighted averages 9.9 15.6% 18.9 2.3

MSCI Sector exposure Currency exposure


Exposure analysis

Source: Pictet Asset Management, Style Research in USD, data as of 31.12.2014

32

Liquidity analysis*

Vs. MSCI World:

› Tracking error: 6.0% (anticipated 6-8% range)

› Beta: 1.05

› Volatility: 11.2%

› Correlation: 0.84


Style and liquidity characteristics

Source: Bloomberg, Style Research, Pictet Asset Management, data as of 31.12.2014 Note: profile: liquidity is measured according to the number of days needed to liquidate at 20% traded volume

Style analysis

Low overlap with global equity indices


Active share* profile (top 10 highlighted)

Source: Bloomberg, Pictet Asset Management, data as of 31.12.2014 *) Active share is a measure of how much of the portfolio is different from MSCI World, expressed as the absolute active weights

› Active share vs.

MSCI World:

99.1%


Performance

Source:: Pictet Asset Management as of 31.01.2015


Valuation characteristics

Source: Bloomberg, Pictet Asset Management. Data as of 30.01.2015

P/E ratio relative to earnings growth

› Price-to-earnings

growth (PEG) ratio

slightly above 1

› Attractively positioned

relative to global

growth, value and large

indices

Outlook for 2015 by segment


Segment Portfolio Weight Outlook Trend

Water Supply & Technologies 26%

• Favorable, stable regulatory outlook for US and UK water utilities • Water pollution action plan in China to stimulate wastewater infrastructure investments

Energy Efficiency 21% • Rising penetration of fuel-efficient technologies in automotive transportation • Increased semiconductor content to enable energy efficiency across consumer devices and

industrial processes

Renewable Energy 4%

• Sentiment challenged due to oil price drop, but solar stocks decline likely an over-reaction relative to fundamentals

Waste Management and Recycling

15% • Gradual rise in US domestic waste volumes as economy private consumption recover • Low US inflation environment a headwind to pricing and therefore margins

Pollution Control 5% • Huge rise in environmental protection spending in China to boost industrial pollution

control

Environmental Services 8%

• Environmental testing in China to increase, following deterioration of air, water pollution • Favourable policy to mandate higher levels of food testing in EU, US and Asia

Sustainable Agriculture & Forestry

17% • US housing market recovery to support lumber demand and favour wood products

suppliers • Organic food to maintain close to double-digit growth trend in US

Dematerialized Economy 4% • Attractive demand environment for simulation software solutions

4

Appendix


Biographies

Hans Peter Portner joined Pictet Asset

Management in 1997 and is Head of

the Sector & Theme Funds team and

also a Senior Investment Manager.

He began his investment career in

1992 with UBS Brinson in Basel as

Portfolio Manager for international

equities, where he managed single

country funds and capital preservation

funds. In 1997 he joined Pictet Asset

Management in Geneva as Senior

Investment Manager for international

equities, role he pursued

in London from 1999 to 2001.

Hans Peter is a Chartered Financial

Analyst (CFA) charter holder and

holds a Master’s degree in Economics

from the University of Bern.

Head & Senior Investment Manager

Sector & Theme Funds team

Hans Peter Portner

38

Luciano Diana joined Pictet Asset

Management in 2009 and is Head of

Environmental Thematic Investing. He

is a Senior Investment Manager in the

Sector & Theme funds team.

Before joining Pictet, Luciano spent

four years at Morgan Stanley, where he

headed the London based clean energy

sell-side research team. He began his

career in 1998 as an IT strategy

consultant at Accenture.

Luciano holds a Laurea in

Telecommunications Engineering from

the University of Padua, Italy, and he

was a Visiting Scholar at the University

of California at Berkeley. He holds an

MBA from INSEAD.


Luciano Diana

Gabriel Micheli joined Pictet Asset

Management in 2006 and is a

Senior Investment Manager in the

Sector & Theme Funds team.

Gabriel is a Chartered Financial

Analyst (CFA) charter holder. He

graduated with a degree in

Economics from the University of St.

Gallen.

Senior Investment Manager


Gabriel Micheli



Biographies

39

Christoph Butz joined Pictet Asset Management

in 2002. He is a Senior Investment Manager in

the Sector & Theme Funds team.

Before assuming his current role, he was a

sustainability expert responsible for the

development and implementation of

sustainable investment strategies. He was

instrumental in building PAM's timber

investment franchise.

Prior to joining Pictet, Christoph was deputy

head of sustainability research at Bank Sarasin,

covering the resources and forestry sectors.

Before starting his investment career, he had

worked in forestry in Switzerland, Canada and

Brazil, and as an environmental consultant.

Christoph holds a MSc degree in Forest

Engineering from the Swiss Federal Institute of

Technology in Zurich and is a Certified

International Investment Analyst (CIIA).



Christoph Butz

Marc-Olivier Buffle joined Pictet Asset

Management in 2014 as a Senior Product

Specialist in the Sector and Theme Funds

team.

Before joining Pictet, Marc spent 6 years

at RobecoSAM where he acted

successively as senior analyst, head of

industrials and head of SI research. Prior

to that he was responsible for business

development at the Danaher Corporation.

Marc started his career at Trojan

Technologies in London Canada, where he

lead a R&D team focusing on water

treatment technologies.

Marc holds a MSc in engineering from the

ETH in Zurich, and a PhD from EAWAG in

Environmental Chemistry and is the author

of patents, scientific articles, technical

and financial publications.

Senior Product Specialist


Marc-Olivier Buffle

Alina joined the Sector & Theme Funds in 2013

and is now a Junior Investment Manager working

on the environmental and water strategies.

She started her career at Pictet in 2012 as she

rotated across several equity funds and research

teams of Pictet Asset Management as a

graduate trainee. Her previous work experience

includes internships at Goldman Sachs in

London, and KBC Group in Prague.

Alina holds a Master’s in International Business

from HEC Paris, a Certificate in Energy and

Finance, as well as Bachelor’s in Business

Studies from Cass Business School, London.

Junior Investment Manager


Alina Donets


Environmental theme supported by powerful megatrends

40

A growing population coupled with increasing

consumption per capita is the main

environmental stressor; this creates

opportunity for products and services

mitigating its impact.

Demographic Development

Water, air and land pollution are by-

products of economic growth. Rising

incomes and rising awareness, especially

in developing countries, generate demand

for solutions that limit the negative effects

of pollution on human health.

Focus on Health

Economic growth is shifting from quantitative to qualitative developments;

increasingly internalizing the true cost of economic production and services.

Economic Growth

Technological development

enhance the efficiency of resource

use and help diversify away from

non-renewable resources; such

developments is increasingly

supported by national policies.

Technology Development

Replacing physical activities by virtual ones, in private and

in business, is a major trend and is a key lever to decouple

economic activities and value creation from resource use.

Dematerialization

Sustainability aims to integrate economy,

society and the natural environment.

Environmental sustainability specifically leads

to improved productivity in natural resources

such as energy, water and land.

Sustainability


Globalisation is bringing

economic development to

new regions, raising the

living standards of the

global middle class and its

associated resource

consumption.

Globalisation

States stretched balanced sheets increasingly lead to

a need for private sector participation in the

development of economically sustainable solutions.

Commercialization

Source: Copenhagen Centre for Future Studies; Pictet Asset Management

WORLD EQUITIES

OPPORTUNITY SET

INVESTABLE UNIVERSE

SCORED LIST PORTFOLIO

1 2 3 4

Integration of Principles for Responsible Investment (PRI)


WHAT › Pictet blacklist: Companies

involved with cluster munitions or controversial weapons

WHAT › Restriction to environmental

theme related stocks.

WHAT › Environmental, Social and

Governance –ESG– integration

WHAT Active Ownership › Proxy Voting › Engagement

WHO › Pictet Sustainable Investment

Board (SIB) & S&T team

HOW › Exclusion of 50 companies

from opportunity set

WHY › Reputational risk

HOW › Screen described above

WHO › Investment team › S&T IMs

HOW › Integration of Governance

analysis in management quality score; Environmental & Social analysis in business franchise score

› CFRA, Inrate, Sustainalytics, BB, ISS

WHO › ISS & IMs › Hermes EOS & IMs

HOW › All stock are voted on › Engagement is executed by Hermes under

guidance of IMs




c. 400 stocks

c. 200 stocks

c. 60 best ideas

WHO › Investment team

WHY › Investment Idea

WHY › Risk mitigation

WHY › Operational performance

improvement of company

The novel concept of planetary boundaries

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Ocean Acidification Deposition of acidic

compounds into the oceans

deplete their buffer capacity

for CO2, and impacts

heavily on shell-forming

organisms, and thus the

entire marine food web.

Biodiversity Loss Loss of species several orders of

magnitude higher than natural

background rate; gravely endangering

our natural “life support systems”

Atmospheric Aerosols Quantification not yet possible, but

already heavy loading with airborne

particles already impacting human

health, climate and ecosystem

Change in Land Use Conversion of forests & other natural habitats

for intensive agricultural or industrial

production releases GHG and degrades

ecosystems.

Stratospheric Ozone Depletion Ozone depleting substances destroy the

stratospheric ozone layer, often after complex

photochemical processes with heavy

consequences for human health and other

plant and animal organisms

Nitrogen & Phosphorus Cycle Human fixation of atmospheric N

has reached an unprecedented

scale with serious detrimental

consequences (health impacts,

eutrophication, global warming

and ozone layer )

Global Freshwater Water is overused and heavily

polluted in many regions of this

world with dire consequences

on ecosystems, human health

and economic production.

Chemical Pollutants Planetary boundary not yet quantifiable,

but consensus that level of pollution is

already too high and disruptive to health

and ecosystems

Climate Change Ever increasing GHG emissions

accelerate global warming that

threatens to change global

precipitation patterns, cause sea

levels to rise and increase the

severity of storms.


Source: Pictet Asset Management based on Rockström et al. 2009

Pictet Asset Management

This marketing material is issued by Pictet Funds (Europe) S.A. It is neither directed to, nor intended for distribution or use by, any person or entity who is a citizen or resident of, or domiciled or located in, any locality, state, country or jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Only the latest version of the fund’s prospectus, regulations, annual and semi-annual reports may be relied upon as the basis for investment decisions. These documents are available on www.pictetfunds.com or at Pictet Funds (Europe) S.A., 15, avenue J. F. Kennedy L-1855 Luxembourg.

The information and data presented in this document are not to be considered as an offer or solicitation to buy, sell or subscribe to any securities or financial instruments.

Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to change without notice. Pictet Funds (Europe) S.A. has not taken any steps to ensure that the securities referred to in this document are suitable for any particular investor and this document is not to be relied upon in substitution for the exercise of independent judgment. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Before making any investment decision, investors are recommended to ascertain if this investment is suitable for them in light of their financial knowledge and experience, investment goals and financial situation, or to obtain specific advice from an industry professional.

The value and income of any of the securities or financial instruments mentioned in this document may fall as well as rise and, as a consequence, investors may receive back less than originally invested. Risk factors are listed in the fund’s prospectus and are not intended to be reproduced in full in this document.

Past performance is not a guarantee or a reliable indicator of future performance. Performance data does not include the commissions and fees charged at the time of subscribing for or redeeming shares. This marketing material is not intended to be a substitute for the fund’s full documentation or any information which investors should obtain from their financial intermediaries acting in relation to their investment in the fund or funds mentioned in this document.

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