Colleen Denzler Joins Loomis Sayles as New Head of ESG

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Loomis, Sayles & Company announced that Colleen Denzler, CFA, has been named the firm’s head of ESG. Colleen, who is based in Boston, will report to David Waldman, chief investment officer. 

As head of ESG, Colleen will advance the firm’s ESG initiatives, support sustainability efforts.

She will work across the entire firm to refine ESG priorities, goals, metrics and criteria, as well as maintaining alignment with the ever-evolving regulatory requirements for ESG.

In addition, she will partner with investment teams to identify how ESG considerations may be further incorporated into their investment processes and to determine areas of engagement with companies in which they invest and collaborate with various industry groups to foster best investment management practices; and

She will communicate Loomis Sayles’ approach to sustainability and ESG to clients and stakeholders.

In addition, Colleen will oversee the existing firm-wide ESG committee structure to provide strategic support to Loomis Sayles’ investment teams, conduct internal education and serve as a thought leader on material sustainability issues. 

“Prioritizing ESG and sustainability – which meaningfully impact the global economy, the financial markets and society at large – is a matter of fiduciary responsibility and good stewardship of clients’ capital,” said Kevin Charleston, chief executive officer. 

“Good governance and sustainable business practices are inherent factors in our decision-making as long-term investors who seek to deliver superior long-term, risk-adjusted returns to our clients,” said David Waldman, chief investment officer.

 “Colleen’s extensive background will be an asset as we strive to leverage ESG insights and data in our investment processes and to design products consistent with clients’ ESG objectives,” Waldman adds.

Over her more than 35 years in the asset management industry, Colleen has held a number of investment and ESG leadership roles. She began her career at Calvert Asset Management, an early leader in responsible investing, where she was an ESG portfolio manager and analyst. Colleen went on to leadership roles at Janus Henderson, where she was Global Head of Fixed Income Strategy, and American Century Investments, where she was a senior Portfolio Manager and Head of Money Markets. 

She then served as Chief Investment Officer of First Affirmative Financial Network, a sustainable investment focused RIA, and president of its industry-leading SRI Conference. Colleen later leveraged her expertise as a strategic advisor to asset managers on ESG and sustainable investing. Most recently, Colleen led ESG integration efforts at Smith Capital Investors.

US Healthcare’s Cyber Risk Vulnerability Is Rising

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Cyberattacks on US healthcare companies is a growing risk that could have negative implications for issuer credit profiles due to increasing financial and reputational costs, says Fitch Ratings.

Both quantitative and qualitative factors, including the persistence of effects on operations and cash flow, management’s response and leverage headroom relative to sensitivities, will influence future rating actions. Cybersecurity is already a factor in Fitch’s ESG Relevance Scores for healthcare issuers, due to the social and governance aspects of attacks.

The frequency and severity of attacks with respect to the number of individuals affected and costs to healthcare companies has increased over the past five years. There were 713 known breaches affecting approximately 45.7 million individuals in 2021, up from 329 breaches affecting 16.7 million individuals in 2016, according to data from the US Department of Health and Human Services.

We believe greater use of medical devices, remote patient monitoring, slow upgrades to technology, the use of post-merger legacy systems and increased use of third parties due to the digital transition have raised the sector’s vulnerability to cyberattacks.

Cyberattack costs can include expenses for notifying patients, lost business and ransom payments, with insight on the cost of a ransomware attack to a hospital’s bottom line beginning to surface.

Cybercrime in healthcare has increased during the pandemic, as the sector experienced periods of elevated patient demand and staff shortages. These things spurred new legislative proposals to strengthen US businesses’ defense mechanisms against cyber threats.

The SEC voted to propose rules for incident reporting and disclosures, providing shareholders enhanced and standardized information regarding cybersecurity risk, along with management’s strategy to prevent attacks.

Transparency about the nature of cyberattacks, damages suffered and remediation actions is viewed favorably. Fitch’s ESG Relevance Scores, which include considerations for cyber incidents, reflect the relevance and materiality of ESG issues and explain their impact on our credit rating decisions

Luisa Montoya Appointed Head of Diversity, Equity and Inclusion at Santander US

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Santander US has hired Luisa Montoya to lead its commitment to diversity, equity and inclusion.

“I’ll be joining Santander US as its Head of Diversity, Equity and Inclusion Engagement for the US,” Montoya posted on her LinkedIn account.

Montoya comes from J.P. Morgan’s Houston office where he also worked in the same area.

In addition, she worked at KeyBank for one year between 2016 and 2017. She then served at BBVA between 2017 and 2021 in charge of retail banking and business banking and global wealth.

“This is a significant milestone in my career as my passion for supporting the employees and our communities have finally found a home. It is great to join a company in which 58% of its employees are women, and 70% are people of color,” adds Montoya.

 

J.P. Morgan Private Bank hires Carolina Yepes in Miami

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Carolna Yepes joined J.P. Morgan in Miami from Credicorp Capital.

“I am pleased to share my new position as Vice President SC at J.P. Morgan Private Bank,” the advisor posted on her LinkedIn account.

The Colombian financial advisor has 15 years of experience in Latin American markets.

Her CV includes 10 years at Credicorp Capital, where she served in different roles as Senior Private Banker in Medellin and then Financial Advisor in Miami.

According to industry sources, Yepes controls $120 million of AUMs.

The advisor has a master’s degree in finance from Universidad EAFIT. In addition, although her new Brokercheck registration does not yet appear, he has FINRA Series 7, 65 and 63.

 

The Purchase of a Stake in Xp Is Part of Itau’s Expansion Strategy

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Itau Unibanco bought a stake in Brazil’s XP in line with its strategy, sources at the Brazilian bank told Funds Society on Monday.

Itau bought an 11.36% stake in brokerage XP for about 8 billion reais (equivalent to about $1.6 billion approximately).

Sources at the Brazilian bank told Funds Society that the XP purchase is in line with Itau’s strategy.

“It is part of Itau’s strategy to buy entities that have attractive profitability,” the sources said.

Itau clarified in an internal memo that the deal does not change XP’s governance and this purchase is not expected to have a relevant effect on 2022 results.

In November, Itau received approval from Brazil’s central bank to buy the stake, Reuters reported.

The bank sources added that Itau is expected to buy companies “in the Fintech field.”

Investing in the Earth: How to Manage Water Risks in Sustainable Investment Portfolios

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Water is the ultimate renewable resource – yet it is scarce, and has been burdened with our overconsumption, pollution, and the effects of climate change. Global water use has more than doubled in the last 40 years. It is estimated that we will need 50% more food and 40% more freshwater by 2030, said an article by La Francaise.

According to the UN, 45% of the global gross domestic product (GDP), 52% of the world’s population and 40% of global grain production is expected to be at risk due to water stress by 2050 if business-as-usual persists. Companies are already experiencing financially-material stresses related to water scarcity and the associated degradation of ecosystems.

Groundwater – our main freshwater resource is scarce and fast depleting

22nd March was celebrated as the World Water Day and the theme of this year was ‘Groundwater – making the invisible visible’. Our Blue Planet is named for the abundance of the blue liquid on its surface, yet less than 1% of it is usable is its natural form. For most of our uses – domestic and industrial – we pump water from under the ground. Groundwater is the most abundant form in which freshwater can be used, but it is fast disappearing. We are pumping non-renewable groundwater reserves at unsustainable rates to counter droughts across the world without even knowing how much we have left. 

As data from NASA suggests, globally, one-third of our largest groundwater basins are under distress – being rapidly depleted by human consumption. In US alone, almost half of the water supply needs are met by pumping from underground aquifers. Add to these, the enormous amounts of pumping that is done by bottling companies, other industries and the groundwater reserves have been depleted beyond repair. NASA estimates that the likelihood of mega droughts (lasting more than 30 years) in US Southwest and Central plains is going to increase to 60%, even if we achieve net zero by 2050 (which the IPCC’s latest reports claim we will not). 

Industries face multiple forms of risk from the growing water scarcity

Industries and agriculture use 90% of global freshwater resources – with agriculture accounting for the lion’s share. Global water demand (in terms of water withdrawals) is projected to increase by 30% by 2050 (despite the increasing scarcity), mainly due to increasing demand from manufacturing and electricity sectors (OECD). A growing and increasingly wealthy global population needs more food, materials and energy – placing intense pressure on water resources. Water-related risks, from physical to reputational, can potentially damage companies’ financial performance. 

Source: Barclays Research, PRI

Industries such as the food and beverage sector are riddled with water-related risks. Agriculture, for example, uses a major share (70%) of global freshwater resources and its survival is questioned by climate change. Water is vital to industry even when it is used for cleaning, cooling, or heating and the rising scarcity is increasing costs for companies. According to Global Water Intelligence (GWI), average global municipal water tariffs have roughly doubled over the last decade.

Many more industries are exposed to water-related risks such as water scarcity through their supply chains. The current global semiconductor chip shortage, exacerbated by water issues, is roiling automotive and technology industries. Companies like Sony, Samsung and GMC are already struggling to meet production targets because of no chips. The shortage is expected to last well into 2022.

If water becomes scarce, companies can lose their license to operate. Adani, a coal mining company in Queensland, failed in a Federal Court to get access to billions of litres of water for its venture. Construction of the mine and rail project is still underway, but resolution over the impact on water and biodiversity must be found. In northern India, a Coca-Cola plant was ordered to close after farmers blamed it for using too much water. This came 10 years after another Coca-Cola plant was closed for the same reasons in the southern state of Kerala. Nestlé exited its US Waters business last year – at least partly due to numerous protests, lawsuits and fines over the draining of local watersheds for its bottling operations.

Water Risk Management – a new frontier for investors in sustainability

Key is disclosures. At present there is an information deficit for investors and other stakeholders on the reporting of material water-related financial risks and opportunities in mainstream corporate reporting. A shortfall means investors are unable to allocate capital that can effectively instigate change. CDP Water disclosure campaign provides a good starting point for data gathering. In 2021, 

90% of all companies targeted by CDP Non-Disclosure campaign participants responded to the Water security questionnaire – that is an impressive response rate, and led to a 20% increase in corporate disclosure. According to the CDP Water Report 2020, the cost of inaction on water security is over five times the cost of action.

The next step will be target setting. Science Based Targets Network (SBTN) is working on setting guidelines to have water-based targets for companies in subsequent years. As investors, another important factor towards tackling the water risks in our portfolios is also dependent on market-wide guidelines on best practices. The Climate Disclosure Standards Board’s (CDSB) Water Guidance offers companies a means of developing their reporting practices and ensures investors are receiving the material water-related information needed for effective investment decision making. 

Above all, what is most valuable in the case of water risk at present is active ownership on these issues. A water-secure world requires companies to rethink their strategies and transform their business models. Companies need to take into the account the risks and opportunities in their supply chains related to water scarcity. There are plenty of opportunities to engage collectively on these topics through PRI, CDP and SBTN. As responsible investors, we need to go beyond numbers and make sure companies are involved in managing water availability in their operations, supply chain as well as communities in which they operate in. Water, unlike carbon, is a local resource – its sustainability depends a lot on the sustainability of the entire watershed. 

 

 

U.S. Energy Sector Poised to Regain Dominance

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Pixabay CC0 Public Domain. ..

Russia’s invasion of Ukraine has triggered plans by many oil and natural gas importing countries to curtail Russian imports and transition to what may be perceived as more reliable, less unsavory sources of supply, while accelerating their transitions to green energy – opening the door for the U.S. to re-emerge as the world’s dominant oil and gas provider, according to Preqin.

Reducing dependency on Russian energy will be onerous, particularly for Europe, which imports about 30% of its natural gas and 25% of its oil from Russia. So far, the U.S. and some EU countries have curtailed imports of Russian crude oil and if more countries follow suit, there will be strains in the global markets to adjust to accommodate a reconfiguration of the 5 million Bbl/d (barrels per day) of waterborne exports from Russia. Indeed, Russia’s oil tanker exports are being offered at a significant discount of roughly $30/Bbl to Brent, indicating that new buyers aren’t fully absorbing demand lost in the boycott.

Recent releases from the U.S. Strategic Petroleum Reserve (SPR) (30 million Bbl) and from international partners (30 million Bbl) provide minimal relief. Potential deals – if they could even be reached – with Iran (1 million to 1.5 million Bbl/d) and Venezuela (less than 1 million Bbl/d) would still not be enough to fill the void. If anything, the recently announced historic SPR release (1 million Bbl/d for six months) suggests that these deals are unlikely to be completed soon and emergency responses are needed to meet demand.

The war in Ukraine comes at a particularly vulnerable time of tight inventory and a low backlog of oil wells, with little room for disruption. According to the U.S. Energy Information Agency, prior to Russian sanctions, OPEC+ excess capacity stood at only 3%-3.5%, or roughly 3-3.5 Bbl/d, down from about 8% to 9% in 2002. However, from recent discussions with energy officials in the Middle East, true spare capacity could be even lower at just 2.5%.

We believe OPEC+ will likely stick to its current plan and not increase output further, despite higher oil prices. This is because if the cartel decided to bring more volumes online, the investment community might react to the prospect of little-to-no spare capacity by sending oil prices even higher. Moreover, Russia is joint chair of OPEC+, leaving it unclear whether it will be able to fulfill its share of the cartel’s production.

The U.S shale industry – which produces both crude oil and natural gas – is well-positioned to increase production in the lower 48 states, but it will take time. During the last few years, energy producers curbed spending on new wells, following two mini U.S. shale boom and bust cycles, the latest causing roughly $55 billion of defaults. Responding to shareholder demands for strong investment returns, producers pivoted from a focus on production growth (“drill baby drill”) to one of capital discipline – maintaining modest leverage metrics and consistent cash returns on volume growth of just 0% to 5%.

As a result, exploration and production (E&P) operators face shortages in oil rigs (utilization is approaching 90%), frac fleets (which are completely sold out), and labor. E&P executives have indicated they could deploy more capital and maintain high profitability levels – thanks to improvements in drilling and completion technology – but estimate it will take them up to 12 months to increase current production volumes. In our view, the U.S. Shale “3.0 model” (e.g., spending within cash flow) of reliable production volumes and consistent cash returns could make U.S. energy attractive to countries overseas over the medium- to long-term.

Along with growth in U.S. shale production, Preqin expect recent geopolitical events and consequent rise in oil and gas prices to accelerate investments in green energy. As green energy becomes a larger component of the overall global supply, traditional U.S. oil and gas will likely remain a dependable baseload power source in the overall market.

Snowden Lane Partners Adds $350 Million Advisor Team

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Snowden Lane Partners announced that Andrew Randak has joined the firm as Senior Partner and Managing Director, alongside his colleagues, Nicole Boutmy de Katzmann and Kristian Sedeño, both of whom joined as Managing Director and Partner.

Together, they form The Mile Creek Global Group, based in Snowden Lane’s New York, Coral Gables and New Haven offices and overseeing $350 million in client assets.

Randak is a CFA and boasts nearly 30 years of industry experience. He provides sophisticated and unbiased advice to successful businesspeople, their families and their companies. Like Boutmy de Katzmann and Sedeño, he specializes in helping clients throughout Europe, North and South America manage wealth and tackle complex, cross-border issues.

Similarly, Boutmy de Katzmann advises families in Europe, Latin America and the United States, with expertise in multigenerational wealth planning, investments, philanthropy and gifting. Sedeño is a CPA and has also provided wealth management and private banking services to domestic and international families for over a decade.

“We were excited when Andrew, Nicole and Kristian expressed interest in joining the firm and are pleased to officially welcome them to the team,” said Greg Franks, Snowden Lane’s Managing Partner, President & COO.

“We have the utmost respect for Fieldpoint Private, as they have done outstanding work in our industry. We are fortunate to have The Mile Creek Global Group come on board and I’m looking forward to witnessing the big impact they will undoubtedly have at Snowden Lane,” he adds.

Prior to Snowden Lane, Randak and Boutmy de Katzmann each served as Managing Directors and Senior Advisors at Fieldpoint Private, while Sedeño worked as Vice President and Associate Advisor.

Randak began his career in private banking at The Chase Manhattan Bank. He spent two of his six years in Chase’s Santiago, Chile offices, where he managed the firm’s private client lending platform. In 2000, he joined Brown Brothers Harriman & Co. where he was responsible for wealth management and trust clients in South America. He moved to Fieldpoint Private in 2015 with a mandate to grow the firm’s wealth advisory and private banking business outside the United States.

Sedeño is a Certified Public Accountant and worked at PricewaterhouseCoopers (PwC) from 2009 to 2011. Following that, he joined Brown Brothers Harriman as an Associate, working with ultra-high net worth families in South America. Together with Randak, he joined Fieldpoint Private in 2015 to help build the firm’s global presence.

Boutmy de Katzmann’s career in global banking started at Republic National Bank of New York. With Republic, she served as an international private banker in Montevideo, Milan, London and New York. A few years after HSBC acquired Republic in 2000, Republic’s former senior executive team invited her to join them in forming a new firm, NuVerse Advisors, where she remained for over a decade. After NuVerse, she was a Senior Director in Oppenheimer & Company’s Private Client division for over three years.

Snowden Lane has 122 total employees, 69 of whom are financial advisors, across 12 offices around the country: Pasadena and San Diego, CA; New Haven, CT; Coral Gables, FL; Chicago, IL; Pittsburgh, PA; Baltimore, Salisbury and Bethesda, MD; San Antonio, TX; Buffalo, NY, as well as its New York City headquarters.

Thoma Bravo Makes Push Into Latin America

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Orlando Bravo, courtesy photo. , foto cedida

Thoma Bravo, a successful private equity firm focused on the software and technology-enabled services sectors with over $100B of AUM, is making its first foray into Latin America in the firm’s history. Orlando Bravo, founder and Managing Partner at Thoma Bravo, will be visiting Mexico City on April 28th and 29th to meet with local investors and share his vision on the software industry and its future.

Orlando Bravo told Funds Society: “Growing up in Puerto Rico, Latin America is near and dear to my heart. It’s a vibrant, dynamic market with an ever-expanding technology scene. We have been fortunate to have the confidence of several institutional and private investors in the region and are impressed by their investment programs. As the region grows, we are looking to create enduring partnerships with leading local investors which will allow us to further immerse ourselves into the region’s software and technology ecosystem. First on the list is Mexico City”.

Thoma Bravo has a more than 20-year track record of partnering with existing management teams of market leading, positive cash flowing and high margin software businesses. Leveraging the firm’s deep sector expertise and proven strategic and operational capabilities, Thoma Bravo helps to accelerate the company’s growth and innovation. The firm has acquired more than 375 software companies across a range of industries, including healthcare IT, security, financial technology, infrastructure and applications.

“The acceleration in digital transformation across all industries has underscored how essential software is for commerce and business continuity as well as its continued resilience,” said Jennifer James, Managing Director, Head of Investor Relations and Marketing at Thoma Bravo. “With our proven operational expertise, we see a tremendous opportunity to invest in profitable software companies with high revenue retention.”

Thoma Bravo is entering Latin America in partnership with Alpine Capital Advisors, a leading fundraising and advisory firm across the Americas with offices in New York, Santiago, Mexico City and Sao Paulo.

Venture Capital AUMs at Record High of $2 trillions

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Venture Capital assets under management (AUM) have experienced double digit annual growth in the 20-30% range over the past four years and now stand at a record high of $2trillions, according Q1 2022 Venture Capital Report by Preqin.

As the venture capital market matures, 14% of institutional investors are planning to commit $600 millions or more over the next 12 months, up from 10% during the same period last year and the only category that recorded more than 1% year-on-year growth, the report said.

Confidence remains highest in the North American and European markets. There has been a noticeable uptick in the proportion of investors targeting these regions, increasing from 53% to 59%, and 52% to 60%, respectively.

Investor interest shifts and dry powder grows

Experts highlight that amid market uncertainties and elevated asset valuations, investor interest has shifted to seed, startup and early-stage focused funds in search of opportunities, with nearly half (48%) of investors aiming to place capital in the early-stage strategy in the next 12 months, up from 40% in Q1 2021.

Venture capital dry powder has grown by $43.1 billions during the first quarter of 2022 to $478.5 billions. Early-stage funds’ dry powder increased by 24% during the first quarter of 2022. Now, early-stage funds make up around a third, or $168.6 billions, of total Venture Capital dry powder, making this the most significant specialized strategy in the risk world. Expansion/late-stage funds’ dry powder level, however, fell by 6% between Q1 2022 and FY 2021.

Kebelyn Lee, Associate Vice President, Research Insights at Preqin, says: “In spite of the sell-off in some of the more speculative technology stocks in the public equity market so far this year, there does not appear to be any immediate impact on venture capital activity. Fundraising came in slightly lower year on year but is still at a strong level given a strong base of comparison from 2021. Deal volume in APAC has been notably strong compared to North America and Europe in the last few quarters.” 

Larger funds pull ahead  

Venture Capital fundraising continued at a strong pace in Q1 2022. $54billions was raised by global Venture Capital funds in the quarter, an 11.1% rise on Q4 2021, but an 8.8% decline on the same period last year. The year-on-year decline is not a bad result given the strength of activity in late 2020 and going into 2021.

Despite a strong fundraising record, VC investors’ concerns over asset valuations, competition for assets, and the Russia-Ukraine conflict remain relevant.

In Q1 2022, just 202 funds were raised—the lowest number of funds raised since 2017—implying that investors are putting their trust and capital in larger and more experienced VC managers.   

Given the global average venture capital fund size in Q1 2022 jumped from $126.9 millions to $267.3 millions quarter-on-quarter, investors are clearly demonstrating a preference in larger funds. 

This trend is especially obvious in North America and Europe, which saw a 190% and 48% increase in average fund size during Q1 2022. Globally, there has also been a drop in planned commitment below $50 millions.