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Positive Change Impact ReportFull Year 2020

Investment managers

CM15571 Positive Change Impact Report IC 0521.indd52992 ALL BR 0009

Risk FactorsThe views expressed in this article are those of the Positive Change Team and should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect personal opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.

This communication was produced and approved in June 2021 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.

Potential for Profit and Loss

All investment strategies have the potential for profit and loss, your or your clients’ capital may be at risk. Past performance is not a guide to future returns.

Stock Examples

Any stock examples and images used in this article are not intended to represent recommendations to buy or sell, neither is it implied that they will prove profitable in the future. It is not known whether they will feature in any future portfolio produced by us. Any individual examples will represent only a small part of the overall portfolio and are inserted purely to help illustrate our investment style.

This article contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research, but is classified as advertising under Art 68 of the Financial Services Act (‘FinSA’) and Baillie Gifford and its staff may have dealt in the investments concerned.

All information is sourced from Baillie Gifford & Co and is current unless otherwise stated.

The images used in this report are for illustrative purposes only.

Contents

Our Beliefs

03

Introduction

04

Social Inclusion and Education

08

Environment and Resource Needs

20

Healthcare and Quality of Life

32

Base of the Pyramid

46

Portfolio Snapshots: Significant SDG Contributions

58

Where to From Here?

60

Portfolio Snapshots: Headline Impact Data

56

Contents

01

Positive ChangeImpact Report 2020

02

Businesses and investors have the ability – indeed, the responsibility – to help steer our world onto a more sustainable path. Government funding and philanthropic donations, though hugely welcome, will be insufficient: trillions, not billions, of investment will be required to address the numerous challenges that our world is facing. We believe that inclusive capitalism is part of the solution and can improve lives. In our bid to help our clients make attractive investment returns, we seek to harness the beneficial impact of businesses and of human entrepreneurial spirit, while contributing towards a better world for current and future generations.

Change takes time. Social and environmental challenges such as persistent poverty and climate change cannot be solved with a short-term mindset. If the financial capital required to solve these issues is to be effective, capital will need to be patient. By taking a long-term approach to investing we aim to support companies making decisions and taking actions that will be beneficial for their business, society and the environment in the coming years and decades.

We believe companies whose core business activities are addressing global challenges will experience rising demand for their products and services: they will be growth businesses. We believe that a subset of those companies will enjoy sustainable competitive advantages such as loyal customers and motivated employees: they will be high-quality companies.

Our Beliefs

Our Beliefs

We believe that owning shares of exceptional businesses whose products and services are having a positive impact on society is a more effective way of delivering positive change than avoiding those doing harm: we take a positive and proactive approach.

Based upon these beliefs, the Positive Change strategy has two objectives of equal importance: to deliver attractive long-term investment returns (2 per cent per annum ahead of the MSCI ACWI net of fees over rolling five year periods)1 and to contribute towards a more sustainable and inclusive world. There are no compromises – each holding must be able to deliver on both objectives. We pursue these objectives in line with the active, long-term, growth investment philosophy that has been tried and tested over Baillie Gifford’s history of investing since 1908.

Core to our philosophy is a belief that investment returns and impact are complementary, so both are considered throughout our investment process.

While we would be disappointed if we didn’t enhance our process over time, one thing you can be sure that won’t change is our philosophy. Our team is passionate about our dual objectives and the role that our investment strategy has in helping drive positive change.

1. The performance objective stated is not guaranteed.

03

Introduction

Introduction

Despite this backdrop of uncertainty, our experience during the year has served only to reinforce our belief that investing in high-quality growth companies, that are providing solutions to global challenges, will be rewarded over time. Indeed, the pandemic does appear to be accelerating the long-term progress for which we have been positioned since inception back in 2017: by harnessing technology and innovation, companies in the portfolio have delivered positive change in a range of areas.

Overall, 2020 has reaffirmed our conviction that investing for positive change is more important and more powerful now than ever. With this in mind, we welcome our readers to the fourth Positive Change Impact Report which focuses on the second – and equally important – objective of the Positive Change strategy. In this report, we document the contribution that companies in the portfolio have made during 2020 to solving some of the world’s biggest challenges.

Companies in the portfolio are organised into four themes that represent key global challenges. These themes are: Social Inclusion and Education; Environment and Resource Needs; Healthcare and Quality of Life; and Base of the Pyramid. In this annual report, we highlight the key challenges and opportunities associated with each theme, demonstrating how each individual company in the portfolio is addressing the themes through a ‘Positive Chain’, and include a thematic case study in each section.

At the end of the report are portfolio snapshots, these illustrate overall portfolio impact across some key metrics. We also include the contribution to the UN Sustainable Development Goals based on our holdings at the end of 20202. Data in the report is based on companies’ publicly-reported data for the financial year 2020 or through company engagement, unless indicated otherwise.

The year 2020 has been remarkable in many respects. We began the year facing a pandemic that would snowball into a disaster on a scale unprecedented within most of our lifetimes. As the year wore on, growing awareness of racial injustice sparked social unrest across many parts of the world. With many of the freedoms we have taken for granted curtailed for extended periods of time, many worried about the economic repercussions and whether life as we had known it could, and should, resume.

2. Based on holdings at 31 December 2020, with full year impact reported regardless of time of purchase.

Base of the Pyramid




04

We have, again, sought independent limited assurance over aspects of this report by KPMG LLP, marked with a under assurance standard ISAE (UK) 3000. KPMG has issued an unqualified opinion over the selected information. Please refer to its statement on page 64.

Analysing and Reporting Positive Change

3.TheoryofChangeisaspecifictypeofmethodologyforplanning,participationandevaluationthatisusedtopromotesocialchange.TheoryofChangedefineslong-termgoalsandthenmapsbackwardtoidentifynecessarypreconditions.

We believe that reporting impact is a fundamental part of impact investing. Our approach to impact analysis is based on robust, bottom-up research that is independent from, but complementary to, the investment analysis. We only hold companies in the portfolio for the impact their core products and services can deliver, but we analyse all aspects of a business before making an investment. We summarise the outputs of our impact analysis in this impact report. The Positive Chains, based on the Theory of Change3, show how each company is delivering positive change through its products and services. Further detail about how we analyse and report on our data is included under the ‘Important Notes’ and in our supplementary methodology paper, which forms the Reporting Criteria for the report. For further information on our methodology for analysing and reporting positive change please click here.

05

https://www.bailliegifford.com/literature-library/funds/oeics/positive-change-fund/positive-change-fund-impact-measurement-methodology/

https://www.bailliegifford.com/literature-library/funds/oeics/positive-change-fund/positive-change-fund-impact-measurement-methodology/

Introduction

In September 2015, 193 countries agreed to 17 goals referred to as the Sustainable Development Goals (SDGs) as part of the United Nations 2030 Agenda for Sustainable Development. These goals are milestones that will help steer our world onto a more sustainable path. The ambitious agenda aims to end poverty, build peaceful and inclusive societies, to protect human rights and to ensure protection of the planet. The SDGs are relevant to all stakeholders in society: governments, the private sector and civil society. Significant investment needs to be made to achieve these goals. Owners and allocators of capital should be key participants in this ambitious and important agenda.

All companies in the Positive Change portfolio contribute to the SDGs. We take a rigorous approach to SDG mapping, identifying the SDGs that companies contribute to through the delivery of their products and services at the target level. This ensures that companies are genuinely addressing the changes needed to deliver the goals, rather than merely aligning with a theme at a superficial level. We do not consider alignment to the goals through business practices as this is not the reason companies are held within the portfolio. For robustness and consistency, we make our assessment of SDG mapping independently of how companies report their contributions. The linkage between each company’s impact and the SDGs is shown in Positive Chains, and at aggregate level across the whole portfolio in the portfolio snapshots.

The UN Sustainable Development Goals

As a reminder, our companion report, Positive Conversations, focuses on the business practices (Environmental, Social and Governance factors) of the companies in which we invest. It also details our engagement, or positive conversations, with management teams as we seek to support and influence companies over the long term. Our latest annual Positive Conversations is available on our website here.

Positive Conversations

06

https://magazinebailliegifford.com/Positive-Conversations-2020/

We continue to be ambitious in what we seek to achieve, and through applying our internal expertise, collaborating with others who share our vision and learning from experts, we aim to be industry leaders and to help shape the way impact is monitored over the coming years. We are excited about the possibilities ahead of us and look forward to sharing our progress in subsequent reports.

07

TSMCSemiconductor manufacturing



Over the past few decades, our society has made enormous strides forward, from improving basic living standards to technological breakthroughs that are facilitating innovations across industries. However, the benefits have not been shared universally. Growing inequality and rising unemployment are fuelling discontent, anxiety and mistrust, making our society more polarised. Geopolitical instability, exacerbated in some regions by climate change, is leading to involuntary migration at an unprecedented scale. If our society is to continue advancing, these human rights issues must be tackled head-on. The desire to live in a prosperous, inclusive and peaceful society is almost universal, yet for lots of people it remains a distant dream.

Since the start of the Industrial Revolution over two hundred years ago, the living conditions of the average person have changed beyond recognition. Much of the world is better educated, healthier and live more secure lives. Yet, the benefits have not been shared universally. Significant challenges in overcoming inequality remain, which some of the companies held in the Positive Change portfolio are helping to address.

The ChallengesCountries in which income inequality has grown since 1990 are home to 71 per cent of the world population. The importance of addressing inequality extends beyond the matter of fairness: the United Nation’s World Social Report 2020 finds that “highly unequal societies are less effective at reducing poverty… They also grow more slowly and are less successful at sustaining economic growth… leading to the transmission of disadvantage from one generation to the next.” The coronavirus pandemic has drawn the world’s attention to tackling inequality like never before.

Also, high and sustained levels of inequality can lead to the concentration of political, financial and decision-making power, raising the risk of political and economic instability.

It is important to point out that since the agricultural revolution 12,000 years ago, some form of inequality has always existed. However, as the Organisation for Economic Co-operation and Development (OECD) notes, “when such a large group of the population gains so little from economic growth, the social fabric frays and trust in institutions is weakened.”

Holdings in this theme:


ASMLSemiconductor manufacturing

Alphabet Data company

MercadoLibreEcommerce platform

HDFCIndian mortgage provider

ShopifyEcommerce enabler

FDMEducation and training

Alibaba Ecommerce

NB

NB

2021

NB New Buy 2021 Sold

08

One of the most effective ways to reduce inequality is through education. Although access to education has improved over recent decades, the latest finding from United Nations Educational, Scientific and Cultural Organisation (UNESCO) estimates that 258 million children and youths are still out of school, globally. Disparity in levels of education both within and between countries remain stark. The lack of access to quality education not only diminishes a person’s ability to obtain decent living standards, it also increases the asymmetry of information in society and makes it easier for citizens to be manipulated by those in power. Nobel Peace Prize winner Desmond Tutu wrote that “inclusive, good-quality education is a foundation for dynamic and equitable societies.”

Million258

children and youths are still out of

school globally

71 per cent of the world’s population live in countries in which income inequality has grown since 1990

09


Positive Change – Part of the SolutionWe have long considered the role that companies play in promoting inclusive social development. It is through investing and engaging with companies whose products and services can build a more inclusive world where we believe we can make the greatest contribution.

Two new holdings were added to the Social Inclusion and Education theme in 2020. Both MercadoLibre, the Latin American ecommerce company and Alibaba, the Chinese ecommerce company are enabling millions of micro, small and medium enterprises (MSMEs) to reach a significantly larger number of customers. Importantly, both companies also have online financial service capabilities which have the potential for huge positive change by enabling financial inclusion.

We sold our holding in Tencent, the Chinese technology platform, as its gaming business (which did not contribute to the positive change case) became an increasing portion of revenues, and Pigeon, the Japanese baby-care manufacturer as we felt its positive change potential was becoming less clear.

Across all holdings in the theme, companies address social inclusion and education challenges in three ways:

1. Removing BarriersNobel Laureate Amartya Sen argued that “development can be seen...as a process of expanding the real freedoms that people enjoy.” Ultimately, all forms of inequality can be traced back to the lack of freedom which prevents people from achieving the lives they want. Removing those barriers can help to reduce economic, gender, racial and other forms of inequalities. In what was a very difficult year for India’s poor, HDFC, the Indian mortgage provider, financed around 200,000 housing units for low-income earners, helping to reduce inequality in home ownership, an important social equaliser that contributes to good health and wellbeing. Alphabet’s Android operating system works well on basic mobile devices, and Google Search, Google Maps and YouTube provide access to information, empowering people with knowledge to make informed decisions.

2. Enabling InnovationMany companies are innovative, but the Positive Change strategy looks for two additional qualities. First, we look for innovations that improve access, often through lowering cost. No innovation, no matter how wonderful, will have much of an impact on society if it remains confined to the realm of the privileged. Our investment in Shopify aims to address the inequality in opportunity for businesses on its platform – most of whom are MSMEs. Shopify provides access to services, such as payments, shipping and inventory management, that allow them to compete with bigger players in the increasingly digital retail environment. Our two new holdings, MercardoLibre and Alibaba, also enable millions of MSMEs to reach customers.

Second, we look for innovations that have significant spill-over benefits by facilitating advancements in a number of industries. Both ASML and TSMC play a vital role in lowering the cost of semiconductors and in turn facilitating new technologies across a variety of industries.

10

3. Education and Training“Knowledge is power. Information is liberating. Education is the premise of progress, in every society, in every family.” Kofi Annan, the former Secretary-General of the United Nations, said back in 1997. Education improves people’s prospects and provides the foundation for a vibrant civil society. The Positive Change strategy invests in FDM, which looks to capture the transformative effect of tertiary education by delivering access to rewarding employment opportunities through training and work experience placements regardless of background.

What are we Missing? An ongoing challenge for us is identifying exactly which groups are benefiting from the products and services of companies we analyse. Impact reporting is improving, so we expect this to become easier over time, helping us to identify more companies providing real solutions to reduce inequalities faced by a broader range of often overlooked and disadvantaged groups, such as those with disabilities or the urban poor. We would be naïve to think that none of the companies in the portfolio in some way also contribute to inequality, but we do believe that the scale of inclusivity that they will achieve, will outweigh the negatives. Improving education remains one of the most effective ways to reduce both vertical and horizontal inequality so we continue to research this area.

“development can be seen...as a process of expanding the real freedoms that people enjoy.”

AMARTYA SEN Nobel Laureate

11

The Positive Chain

Alibaba Ecommerce company

R&D: US$6bn

Employees: 117,600

(Y/E Mar 2020)

Alibaba is a Chinese technology company that provides businesses with access to online marketplaces, inclusive financial products and cloud technologies. While the majority of its activities are in China, Alibaba operates in over 190 countries and provides a variety of online services in developing regions, such as Africa, South Asia and South East Asia.

In FY 2020, Alibaba’s marketplace ecosystem had 780 million active consumers in China and over 180 million active consumers outside of China. Alibaba’s ecosystem and its Rural Taobao programme enable commerce and development in China’s rural and underserved regions.

By the end of 2020, Alibaba had established 5,425 Taobao Villages and 1,756 Taobao Towns across China. The number of active online stores reached 2.96 million.

By the end of FY2020, there were 1.3 billion active users on Alibaba’s financial services platform, run by Ant Group.

Alibaba has the goal of creating 100 million jobs, enabling 10 million small businesses to be profitable, and serving 2 billion consumers by 2036.

Through subsidiaries such as MYBank and Ant Group, Alibaba is helping to expand access to financial services (including credit and insurance) to people and small and medium enterprises (SMEs) which have been underserved by the traditional system.

Through AliCloud, Alibaba is helping to digitalise traditional sectors in China, such as garment manufacturing and agriculture, providing businesses with the opportunity to create efficiencies, both economic and environmental, and improve supply chains.

– Enabling widespread innovation– Developing digital infrastructure– Supporting social mobility– Supporting the growth of SMEs– Enabling financial inclusion


R&D: US$27.5bn

Employees: 135,301

(Y/E Dec 2020)

Alphabet’s core activities revolve around the organisation and accessibility of information. Alphabet also conducts a range of long-term research projects, including extending internet connectivity to those living in rural and remote communities through Project Taara, and an early intervention program for chronic diseases through Verily Life Sciences.

Google’s core products and platforms such as Android, Chrome, Gmail, Google Drive, Google Maps, Google Play, Search, and YouTube each have over 1 billion monthly active users.

Its Android operating system powers more than 2.5 billion mobile devices globally, many in emerging markets, enabling people to access the internet for the first time.

Alphabet helps people get online by tailoring digital experience to the needs of emerging markets. For example, its digital payments app in India, now called Google Pay, helps more than 150 million people and businesses in 30 countries easily pay with just a few taps.

The effect of access to information is difficult to quantify and report – there is no single metric that can illustrate the benefits. However, many studies, including from MIT and Harvard Business School, acknowledged that access to information, especially through the internet, is a powerful equalising force in society.

– Providing access to information– Developing digital infrastructure


R&D: US$2.7bn

Employees: 28,073

(Y/E Dec 2020)

ASML develops and manufactures lithography equipment, which is used in the semiconductor manufacturing process. Lithography equipment uses light to print the layout of semiconductors onto semiconductor wafers.

ASML sold 258 lithography systems in 2020, including 31 extreme ultraviolet (EUV) lithography systems. ASML is the world’s only manufacturer of EUV systems, which use a light wavelength 15 times narrower than the industry standard deep ultraviolet lithography systems.

Lithography is one of the most expensive processes in semiconductor manufacturing. By using light of a shorter wavelength – like a finer brush used for painting – ASML lithography equipment can print smaller patterns and reduce the size of the transistors. ASML’s innovation helps to create ever-smaller, more powerful and energy efficient semiconductors, facilitating smaller and faster electronic devices. It is critical in making Moore’s law happen.

– Making technology more affordable– Enabling widespread innovation– Developing digital infrastructure


R&D: N/A

Employees: 5,077

(Y/E Dec 2020 )

FDM provides training and job opportunities for graduates, ex-forces personnel and people returning to the workplace following an extended absence, with a view to promoting social mobility. Its recruits are called Mounties.

1,341 Mounties completed training in 2020. Of the UK consultant intake, 90 per cent attended a non-fee paying school and 44 per cent were the first in their family to go to university.

FDM had 3,580 Mounties in work placements by the end of 2020 and a Mountie utilisation rate (the proportion of Mounties who are in training, or active on client sites on behalf of FDM) of 94.8 per cent.

– Supporting social mobility

InputsResources necessary to operate companies

ActivitiesUse of inputs or other actions to produce outputs

OutputsProduction or delivery of product or service to beneficiaries


NEW

SOLD 2021

12

Alibaba Ecommerce company

R&D: US$6bn

Employees: 117,600

(Y/E Mar 2020)

Alibaba is a Chinese technology company that provides businesses with access to online marketplaces, inclusive financial products and cloud technologies. While the majority of its activities are in China, Alibaba operates in over 190 countries and provides a variety of online services in developing regions, such as Africa, South Asia and South East Asia.

In FY 2020, Alibaba’s marketplace ecosystem had 780 million active consumers in China and over 180 million active consumers outside of China. Alibaba’s ecosystem and its Rural Taobao programme enable commerce and development in China’s rural and underserved regions.

By the end of 2020, Alibaba had established 5,425 Taobao Villages and 1,756 Taobao Towns across China. The number of active online stores reached 2.96 million.

By the end of FY2020, there were 1.3 billion active users on Alibaba’s financial services platform, run by Ant Group.

Alibaba has the goal of creating 100 million jobs, enabling 10 million small businesses to be profitable, and serving 2 billion consumers by 2036.

Through subsidiaries such as MYBank and Ant Group, Alibaba is helping to expand access to financial services (including credit and insurance) to people and small and medium enterprises (SMEs) which have been underserved by the traditional system.

Through AliCloud, Alibaba is helping to digitalise traditional sectors in China, such as garment manufacturing and agriculture, providing businesses with the opportunity to create efficiencies, both economic and environmental, and improve supply chains.

– Enabling widespread innovation– Developing digital infrastructure– Supporting social mobility– Supporting the growth of SMEs– Enabling financial inclusion


R&D: US$27.5bn

Employees: 135,301

(Y/E Dec 2020)

Alphabet’s core activities revolve around the organisation and accessibility of information. Alphabet also conducts a range of long-term research projects, including extending internet connectivity to those living in rural and remote communities through Project Taara, and an early intervention program for chronic diseases through Verily Life Sciences.

Google’s core products and platforms such as Android, Chrome, Gmail, Google Drive, Google Maps, Google Play, Search, and YouTube each have over 1 billion monthly active users.

Its Android operating system powers more than 2.5 billion mobile devices globally, many in emerging markets, enabling people to access the internet for the first time.

Alphabet helps people get online by tailoring digital experience to the needs of emerging markets. For example, its digital payments app in India, now called Google Pay, helps more than 150 million people and businesses in 30 countries easily pay with just a few taps.

The effect of access to information is difficult to quantify and report – there is no single metric that can illustrate the benefits. However, many studies, including from MIT and Harvard Business School, acknowledged that access to information, especially through the internet, is a powerful equalising force in society.

– Providing access to information– Developing digital infrastructure


R&D: US$2.7bn

Employees: 28,073

(Y/E Dec 2020)

ASML develops and manufactures lithography equipment, which is used in the semiconductor manufacturing process. Lithography equipment uses light to print the layout of semiconductors onto semiconductor wafers.

ASML sold 258 lithography systems in 2020, including 31 extreme ultraviolet (EUV) lithography systems. ASML is the world’s only manufacturer of EUV systems, which use a light wavelength 15 times narrower than the industry standard deep ultraviolet lithography systems.

Lithography is one of the most expensive processes in semiconductor manufacturing. By using light of a shorter wavelength – like a finer brush used for painting – ASML lithography equipment can print smaller patterns and reduce the size of the transistors. ASML’s innovation helps to create ever-smaller, more powerful and energy efficient semiconductors, facilitating smaller and faster electronic devices. It is critical in making Moore’s law happen.



R&D: N/A

Employees: 5,077

(Y/E Dec 2020 )

FDM provides training and job opportunities for graduates, ex-forces personnel and people returning to the workplace following an extended absence, with a view to promoting social mobility. Its recruits are called Mounties.

1,341 Mounties completed training in 2020. Of the UK consultant intake, 90 per cent attended a non-fee paying school and 44 per cent were the first in their family to go to university.

FDM had 3,580 Mounties in work placements by the end of 2020 and a Mountie utilisation rate (the proportion of Mounties who are in training, or active on client sites on behalf of FDM) of 94.8 per cent.

– Supporting social mobility

OutcomesShort-term changes occurring as a result of company activities

ImpactLong-term changes expected to occur based on company activities and the contribution products and services make towards the SDGs

13


R&D: N/A

Employees: 3,095

(Y/E Mar 2020)

HDFC is India’s largest provider of mortgages. In HDFC’s financial year 2020, it financed approximately 700,000 housing units.

In support of the government’s flagship affordable housing scheme, ‘Housing For All’, the Corporation continued its efforts towards loans to the economically weaker sections (EWS) and low income group (LIG) where household incomes are up to 3 lakh (US$4,000) and 6 lakh (US$8,000) per annum respectively.

During the year, 36 per cent of home loans approved in volume terms, and 18 per cent in value terms, have been to customers from the EWS and LIG segment. The average home loan to the EWS and LIG segment stood at INR10.3 lakh (US$14,000) and INR17.7 lakh (US$24,000) respectively.

HDFC approved over 9,640 loans monthly to the economically weaker sections and the low income groups, 12 per cent more than in 2019.

HDFC enhances the residential housing stock in India through the provision of housing finance and promotes home ownership.

A 2015 study by the Indian Institute of Management Bangalore acknowledged that India’s future national competitiveness and economic success depends on the comparative efficiency of cities. The quantity, quality and affordability of housing choices impact access to an array of societial indicators. Home ownership can instill a sense of belonging within stable communities.

– Providing access to affordable housing


R&D: N/A

Employees: 15,546

(Y/E Dec 2020)

MercadoLibre is an ecommerce and financial services company which operates across 18 countries in Latin America.

In 2020, MercadoLibre had 132.5 million active users across its platforms.

The number of active sellers on the MercadoLibre online marketplace in 2020 was 11.6 million.

US$1.17bn in loans were granted through Mercado Credito. Since its launch in 2015, it has helped 6 million buyers, entrepreneurs, SMEs and businesses from Argentina, Brazil and Mexico to invest in their livelihoods.

15 million people used Mercado Pago to save. Mercado Pago is available in 7 countries and has over 117 million users, processing financial transactions worth US$49.8bn in 2020.

SMEs are the backbone of the Latin American economy and according to an OECD study represent 99.5 per cent of businesses and 60 per cent of employment across the region. MercadoLibre provides SMEs with access to online marketplaces, payment solutions and credit, supporting livelihoods and productivity.

Access to financial services provided by MercadoLibre promote economic resilience and opportunity, helping to fight poverty and improve well-being for individuals. In 2017, 45 per cent of Latin American adults had no access to a bank or mobile money accounts. MercadoLibre is helping to bridge this gap.

– Financial inclusion – Developing digital infrastructure – Supporting the growth of SMEs


R&D: US$552m

Employees: >7,000

(Y/E Dec 2020)

Shopify is a global commerce company which provides a variety of services that help small businesses to set up and grow.

Shopify’s platform hosts 1,749,000 merchants in 175 countries, the majority of which are SMEs. In 2020, the company’s Gross Merchandise Volume exceeded US$119.6bn and Shopify Capital provided US$794.4m in cash advances and loans to merchants.

Shopify’s enables economic growth though its commerce platform, which provides SMEs with the tools to manage their businesses across an increasingly complicated and fragmented retail environment.

– Developing digital infrastructure– Supporting the growth of SMEs


R&D: US$3.9bn

Employees: 56,831

(Y/E Dec 2020)

TSMC is the world’s largest semiconductor foundry, making semiconductors for a variety of industries ranging from telecommunication to healthcare. TSMC’s scale and innovation have been critical to the continued cost decline of semiconductors.

TSMC manufactures over half of outsourced semiconductors globally. In 2020, the company shipped 12.4 million 12-inch equivalent wafers, as well as 3.8 million 8-inch equivalent wafers using TSMC’s HV/Power technologies.

Cheaper and more powerful semiconductors used in a variety of applications enable greater access to telecommunication (eg access to cheaper mobile devices and access to the internet); new discoveries in healthcare and medicine; and improved energy efficiency.


The Positive ChainInputsResources necessary to operate companies




NEW

14


R&D: N/A

Employees: 3,095

(Y/E Mar 2020)

HDFC is India’s largest provider of mortgages. In HDFC’s financial year 2020, it financed approximately 700,000 housing units.

In support of the government’s flagship affordable housing scheme, ‘Housing For All’, the Corporation continued its efforts towards loans to the economically weaker sections (EWS) and low income group (LIG) where household incomes are up to 3 lakh (US$4,000) and 6 lakh (US$8,000) per annum respectively.

During the year, 36 per cent of home loans approved in volume terms, and 18 per cent in value terms, have been to customers from the EWS and LIG segment. The average home loan to the EWS and LIG segment stood at INR10.3 lakh (US$14,000) and INR17.7 lakh (US$24,000) respectively.

HDFC approved over 9,640 loans monthly to the economically weaker sections and the low income groups, 12 per cent more than in 2019.

HDFC enhances the residential housing stock in India through the provision of housing finance and promotes home ownership.

A 2015 study by the Indian Institute of Management Bangalore acknowledged that India’s future national competitiveness and economic success depends on the comparative efficiency of cities. The quantity, quality and affordability of housing choices impact access to an array of societial indicators. Home ownership can instill a sense of belonging within stable communities.

– Providing access to affordable housing


R&D: N/A

Employees: 15,546

(Y/E Dec 2020)

MercadoLibre is an ecommerce and financial services company which operates across 18 countries in Latin America.

In 2020, MercadoLibre had 132.5 million active users across its platforms.

The number of active sellers on the MercadoLibre online marketplace in 2020 was 11.6 million.

US$1.17bn in loans were granted through Mercado Credito. Since its launch in 2015, it has helped 6 million buyers, entrepreneurs, SMEs and businesses from Argentina, Brazil and Mexico to invest in their livelihoods.

15 million people used Mercado Pago to save. Mercado Pago is available in 7 countries and has over 117 million users, processing financial transactions worth US$49.8bn in 2020.

SMEs are the backbone of the Latin American economy and according to an OECD study represent 99.5 per cent of businesses and 60 per cent of employment across the region. MercadoLibre provides SMEs with access to online marketplaces, payment solutions and credit, supporting livelihoods and productivity.

Access to financial services provided by MercadoLibre promote economic resilience and opportunity, helping to fight poverty and improve well-being for individuals. In 2017, 45 per cent of Latin American adults had no access to a bank or mobile money accounts. MercadoLibre is helping to bridge this gap.

– Financial inclusion – Developing digital infrastructure – Supporting the growth of SMEs


R&D: US$552m

Employees: >7,000

(Y/E Dec 2020)

Shopify is a global commerce company which provides a variety of services that help small businesses to set up and grow.

Shopify’s platform hosts 1,749,000 merchants in 175 countries, the majority of which are SMEs. In 2020, the company’s Gross Merchandise Volume exceeded US$119.6bn and Shopify Capital provided US$794.4m in cash advances and loans to merchants.

Shopify’s enables economic growth though its commerce platform, which provides SMEs with the tools to manage their businesses across an increasingly complicated and fragmented retail environment.

– Developing digital infrastructure– Supporting the growth of SMEs


R&D: US$3.9bn

Employees: 56,831

(Y/E Dec 2020)

TSMC is the world’s largest semiconductor foundry, making semiconductors for a variety of industries ranging from telecommunication to healthcare. TSMC’s scale and innovation have been critical to the continued cost decline of semiconductors.

TSMC manufactures over half of outsourced semiconductors globally. In 2020, the company shipped 12.4 million 12-inch equivalent wafers, as well as 3.8 million 8-inch equivalent wafers using TSMC’s HV/Power technologies.

Cheaper and more powerful semiconductors used in a variety of applications enable greater access to telecommunication (eg access to cheaper mobile devices and access to the internet); new discoveries in healthcare and medicine; and improved energy efficiency.




15

The Positive Change strategy seeks to invest in companies whose products and services are providing solutions to global challenges. So it’s perhaps unsurprising that Tesla, Moderna and

Safaricom are all holdings. But when we say that we own shares in a semiconductor equipment manufacturer (ASML) and semiconductor manufacturer (TSMC), we’re often met with curiosity.

In fact, the change delivered by Tesla, Moderna and Safaricom would largely be impossible without the existence of ASML and TSMC.

We firmly believe that these types of companies are important enablers of what Hans Rosling described as “the secret silent miracle of human progress.” They are also united by being at

the forefront of their areas of expertise with a relentless desire to keep advancing their products and services for the benefit of society. They are the wave makers, not the wave riders,

in their respective fields – we call them ‘the enablers’.

Thematic Case Study: The Tide is High

The wave makers enabling human progress

Social Inclusion and Education16

Enabling Innovation (ASML and TSMC)To say semiconductors are essential to electronic devices is arguably inane; maybe to say they are essential to everyday life is fairer, and perhaps even closer to the truth is that they are responsible for powering phenomenal technological and societal advancement. Semiconductors are at the heart of technology, they are the building blocks of the innovation that powers societal progress, and yet they can be overlooked for their importance in driving positive change.

The EffectThe effects enabled by these companies are far reaching and profound, perhaps most importantly in connectivity. ASML and TSMC have played a crucial, but seldom recognised or lauded, role in reaching the milestone of over half of the global population being connected to the internet. Semiconductors made by TSMC using ASML’s equipment have enabled the rollout of network infrastructure (2G, 3G, 4G and now 5G networks) across the globe and price deflation in mobile devices. Connectivity has many benefits. Crucially, it enables greater access to information that can expand knowledge and aid decision-making; it provides access to vital tools and services such as an ability to make safe payments and means of transferring money; and it brings sellers and buyers together. Connectivity enables inclusivity and productivity, making it a potentially powerful tool in addressing social challenges, such as poverty.

The CauseASML’s incredibly complex lithography machines, software and services play a critical role in the manufacturing of semiconductors, enabling its customers to increase the power of semiconductors and lower their costs, helping power what is known as Moore’s law. By enabling greater processing capability, ASML is contributing to technological advancement; in reducing the cost of computing power, it is helping democratise access to new and life-changing technologies, whether it be mobile computing, medical devices, electric vehicles or quantum computing.

TSMC manufactures semiconductors – using ASML’s equipment – on behalf of its customers, saving them the significant outlay ($10–15bn) of building a semiconductor factory (or ‘fab’ as they are called in the industry). When it was established in 1987, TSMC disrupted the status quo by paving a way for leading chip companies like NEC and Fujitsu to outsource production, thus saving enormous financial investment and time. Today, TSMC’s services allow its customers to focus on their areas of speciality (design) and for the economies of manufacturing at scale to be shared across the industry, hence enabling faster innovation at a lower cost.

© Taiwan Semiconductor Manufacturing Co., Ltd

17


Semiconductors are powering more than universal connectivity – they are enablers of the energy transition, electrification and monumental change in the healthcare sector where genetics, data and machine learning are helping us understand biology and develop novel diagnostic tools and new paradigms of medicine. So, ASML and TSMC are powering positive change in several dimensions and across each of our four positive change themes: Social Inclusion and Education; Environment and Resource Needs; Healthcare and Quality of Life; Base of the Pyramid.




Base of the Pyramid

MercadoLibre depends on connectivity for its ecommerce business and fintech services.

Deere & Co’s See and Spray technology uses sensors, cameras and machine learning to identify what is weed and what is crop, reducing the volume of herbicides used by nearly 80%.

Dexcom’s continuous glucose monitors that help diabetic patients better manage their condition use semiconductors in the transmitters and receiving devices.

Safaricom, Kenya’s largest mobile phone operator, uses semiconductors in its mobile network infrastructure and its mobile payments platform, m-Pesa, depends on affordable mobile devices powered by semiconductors.

Alibaba’s ecommerce infrastructure and digital technologies depend upon semiconductors.

Semiconductor content in Tesla’s electric vehicles is estimated to be twice that of internal combustion engines today, and fully autonomous vehicles of the future could have 8–10x as much semiconductor content by value.

Patients gain access to Teladoc’s virtual healthcare over mobile devices powered by semiconductors.

Semiconductors play a central role in the operation of Bank Rakyat’s 990 ATMs and cash deposit machines and enable its digital banking services.

ASML and TSMC Powering Positive Change

18

Enabling Development (MercadoLibre and Shopify)It is not only the likes of ASML and TSMC that pique the interest of those following Positive Change, but also companies like MercadoLibre and Shopify. Like ASML and TSMC, this is another cluster of companies we would describe as enablers driving positive change.

The Oxford English Dictionary defines an entrepreneur as “a person who sets up a business or businesses, taking on financial risks in the hope of profit.” MercadoLibre, Latin America’s largest ecommerce and budding fintech company, describes the entrepreneur as “the vehicle to achieve an equitable, more democratic economy and to create an authentic transformation in society and on the planet.” As a company aiding entrepreneurs through providing access to customers, the infrastructure to service customers and the financial tools to operate and grow their businesses, MercadoLibre plays an important role in facilitating job creation, raising incomes and social mobility.

Shopify, much like ASML and TSMC, is another company you are unlikely to have heard of but probably engage with regularly and plays a similar role to MercadoLibre. Shopify provides an operating system for online retailers – it works in the background when we purchase goods online, providing merchants with a means to accept and process payments, engage with customers and ship their products. Shopify wants to lower the barriers to business ownership and to make commerce better for everyone; its founder, Tobi Lütke, is passionate about democratising commerce and empowering independent businesses.

By helping small or medium-sized enterprises (SMEs), these companies are helping boost economic growth and a more inclusive world. Around 90 per cent of businesses are ‘formal’ SMEs, which provide more than 50 per cent of jobs worldwide and contribute up to 40 per cent of GDP in emerging economies; if we were to include the informal sector, the figures would be amplified.

Shades of Grey

The impact of these companies is not universally positive. For example, semiconductors are used to power military drones and aircraft; rapid innovation cycles create additional demand and consumption for electronic devices; not all information available is accurate or ‘good’ information; and we are mindful of the environmental impact of increasing consumption facilitated by ecommerce. We are open to these potential negatives but, on balance, we believe technological advancement and inclusive economic growth are inherently positive in driving social progress.

19




Ecolab Water, hygiene and energy solutions


The ChallengesClimate change is the most significant challenge of our time and a major threat to society and the environment: ice is melting fast and sea levels are rising, weather patterns are changing and intensifying, and plant and animal populations are being affected – we are destroying ecosystems which took millions of years to perfect and which we depend on for food, medicine, clean air and raw materials. The Inter-governmental Panel on Climate Change (IPCC) published a report in 2018 which identified the need by 2030 to reduce net CO2 emissions by 45 per cent compared to 2010 levels if we are to limit global warming to 1.5 degrees centigrade, beyond which the risks of climate change become even more extreme. The report states that this “would require rapid and far-reaching transitions in energy, land, urban and infrastructure (including transport and buildings), and industrial systems. These system transitions are unprecedented in terms of scale, but not necessarily in terms of speed and imply deep emissions reductions in all sectors, a wide portfolio of mitigation options and a significant upscaling of investments in those options.” Human activities are creating pollution in numerous forms – from vehicle exhaust fumes, to industrial effluent, to household waste – at the detriment of land, sea and air. For example, air pollution kills an estimated seven million people worldwide every year. World Health Organisation (WHO) data shows that nine out of 10 people breathe air that exceeds WHO guideline limits containing high levels of pollutants.

KingspanInsulation

NIBESustainable energy

NovozymesBiological solutions

ØrstedWind energy

TeslaElectric vehicles and clean energy

UmicoreClean mobility and recycling

XylemWater

We need to reverse the devastating and far-reaching impact we are having on the planet. It is humankind’s responsibility. The human population is growing: there are currently approximately 8 billion people on our planet and the UN projects that this will reach 10 billion by 2050 and more than 11 billion at the turn of the century. Not only are there more of us, but the intensity of our impact on the environment is increasing: we are “a plague on Earth” says eminent natural historian Sir David Attenborough.

Beyond Meat Plant based meat products

Deere & CoHeavy machinery manufacturers

NB

2021

NB New Buy 2021 Sold

NB

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Environmental degradation affects the availability of important and basic resources. Despite the fruits of economic growth and increased agricultural productivity that have enabled the number of undernourished people to drop by more than half over the past two decades, it is estimated that there are still 821 million people globally who are undernourished, water scarcity also affects around 2.3 billion people who live in water-stressed countries, a figure that is projected to rise as a result of climate change.

The challenges are numerous, complex and interlinked: for example, undernourishment can be addressed by the application of industrialised farming techniques which, in turn, consume water, produce emissions and pollutants and lead to a loss of biodiversity. To address this water-food-energy nexus, a thoughtful and integrated approach will be required. For the Positive Change strategy, the complexity and interlinked nature of these challenges requires a truly holistic view of the impact a company is making: our in-depth impact analysis is a crucial part of our investment process.

2.3 billion people live in water-stressed countries

undernourished people

821 million

7 millionpeople worldwide die every year due to air pollution

0

0.5

1

1.5

2

1850 1880 1900 1920 1940 1980 2000 2018

Change in surface air temperature over land (°C)

Change in global (land-ocean) mean surface temperature (GMST) (°C)

Observed temperature change relative to 1850–1900 Since the pre-industrial period (1850–1900) the observed mean land surface air temperature has risen considerably more than the global mean surface (land and ocean) temperature (GMST).

Source: https://www.ipcc.ch/srccl/chapter/summary-for-policymakers/

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Positive Change – Part of the Solution There are three broad ways in which the current holdings in the Positive Change strategy are addressing the acute environmental and resource challenges facing our planet for present and future generations.

We made two new purchases in the portfolio in this area in 2020, Beyond Meat and Deere & Co. These investments were made as a result of our research into sustainable agriculture and the future of food. Our case study on page 28 covers this work in detail.

During the year, we also took the decision to sell the lighting company Signify. Although Signify was showing some success in growing its energy-efficient LED lighting business we felt that was mostly offset by the decline in its legacy incandescent light bulb business. On balance, we felt that Signify would struggle to meet our investment growth hurdle over the next five years so decided to sell the holding.

1. Reducing Inputs and OutputsDecoupling resource use from economic growth will help reverse the unsustainable path we are currently on. For example, Novozymes’s animal feed solutions which help farmers to produce more with less are an alternative to antibiotic growth promoters; its microbial solutions can complement or replace fertilisers and pesticides while improving crop yields.

Ecolab’s wastewater treatment solutions help companies reduce the toxic outputs that result from their processes. Umicore’s catalysts and filters help reduce the toxic pollutants emitted from internal combustion engines. Its recycling plants contribute to a circular economy, through recovering, recycling and reusing precious and speciality metals, which are in finite supply but can be recycled infinitely without losing functionality.

2. TransformationTesla’s electric vehicles (EVs) have the potential to transform the transportation system as we know it, reducing our reliance on fossil fuels, reducing emissions and improving air quality. The impact of EVs extends further, to the shared economy and greater road safety through automation. Other transformations are under way. Renewable energy sources, such as offshore wind farms, constructed and managed by Ørsted; biofuels produced using enzymes supplied by Novozymes; solar roof and battery systems manufactured by Tesla; and ground source heat pumps manufactured by NIBE, will all contribute to a reduced reliance on carbon-intensive energy sources. These companies are contributing to the transformation in how energy is produced and consumed.

3. InfrastructureInvesting in adequate infrastructure is a prerequisite for ensuring universal access to basic and important resources such as safe water. Xylem manufactures equipment that is critical to the transportation, treatment and testing of water.

22

What are we Missing? Our research continues to put a spotlight on the major polluting industries outside of the extractive industries to examine what solutions are available. We continue to research plastics and the potential solutions that will help us move towards a more circular economy. Similarly, we continue to explore sustainable fashion and companies that will help us produce apparel in a more sustainable way and help us to reduce our consumption and improve our recycling of clothing.

We also continue to research what sustainability means for energy and what the future of energy could look like.We hope to unearth exciting companies that will support the growth of renewable energy; that can offer low-cost and long-duration energy storage; and technologies that can support the development of the grid and the electrification of our energy consumption.

All these are areas that could provide interesting companies with excellent growth prospects that will help address the numerous and growing environmental and resource-related challenges our world is facing.

© Getty Images Europe.

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The Positive Chain


R&D: US$31.5m

Employees: 700

(Y/E Dec 2020)

Beyond Meat is one of the leading brands pioneering plant-based meat alternatives.

Beyond Meat has developed plant-based meat alteratives for pork, poultry and beef products, including their flagship Beyond Burger. In 2020, they sold over 72.5 million pounds of of products through their presence in 122,000 outlets in more than 80 countries.

Beyond Meat’s products have a substantially lower environmental footprint compared to their animal-based counterparts. A life-cycle assessment undertaken by the company found that a Beyond Burger used 99 per cent less water, 93 per cent less land, and emitted 90 per cent fewer greenhouse gas emissions than a US produced beef burger.

Replacing animal-based products with Beyond Meat’s may also lead to long-term health benefits. A study by the Stanford Prevention Research Centre found that the consumption of Beyond Meat’s products instead of animal meat improved several cardiovascular disease risk factors.

– Reducing consumption of natural resources– Reducing impact on ecosystems – Contributing to healthy diets


R&D: US$1.6bn

Employees: 69,634

(Y/E Nov 2020)

Deere & Co develops and manufactures precision agriculture technologies.

Precision technologies are built into equipment sold across Deere & Co’s agricultural product portfolio. For example, AUTOTRAC optimises a tractor’s path over a field, reducing fertiliser input and fuel usage; and EXACTAPPLY precisely controls sprayer nozzles, reducing herbicide usage. In 2020. Deere & Co’s agricultural products were engaged on over 230 million acres around the world.

The company estimates that the use of their technologies on a 6,500 acre farm could save 1,600 gallons of diesel, 250,000lbs of fertilizer and 1,000 gallons of herbicide.

– Reducing consumption of natural resources– Reducing impact on ecosystems– Improving the food system


R&D: US$185m

Employees: 44,000

(Y/E Dec 2020)

Ecolab develops, produces and distributes cleaning products and water treatment solutions. It also provides product training and consultancy services to customers.

Every day, Ecolab helps customers address their cleaning, sanitising, food safety, water and energy management needs at nearly 3 million customer locations around the world.

In 2020 Ecolab helped customers save more than 200 billion gallons of water (757 billion litres), more than 25 trillion BTUs (British Thermal Units) of energy (c5.2 million metric tons of CO2e) and by using recycled plastics and reusing packaging, more than 100 million pounds of waste (45,400 metric tons).

– Reducing consumption of natural resources– Creating healthier environments – Greater energy efficiency

KingspanInsulation

R&D: US$40.5m

Employees: 15,424

(Y/E Dec 2020)

Kingspan manufactures insulation boards and panels, alongside other building envelope solutions, which help customers reduce energy consumption.

Kingspan produces high performance insulation materials. 81 per cent of Kingspan’s revenue in 2020 was generated by the sale of products which improve energy efficiency.

The company estimates that over the lifetime of insulation systems sold worldwide in 2020, 716 million MWh of energy, or 164 million metric tons of CO2e, will be saved.

In 2020, Kingspan upcycled the equivalent of 573 million plastic bottles into its manufacturing process, which amounted to approximately 15,900 metric tons of waste diverted from landfill.

– Greater energy efficiency– Improving air quality– Reducing the rate of global warming


R&D: US$105.6m

Employees: 18,700

(Y/E Dec 2020)

NIBE develops and produces renewable energy systems, heating elements and stoves.

55.2 per cent of revenues at NIBE come from products designed for a low carbon economy according to the FTSE LCE classification. These include heat pumps, district heating, boilers and stoves for burning pellets and wood, PV panels, heat exchangers, components for rail, electric and hybrid vehicles and renewable energy production.

Based on the cut in emissions from the type of heating systems NIBE’s heat pumps replaced in the respective markets in 2019 alone, the reduction was 228,000 metric tons of CO2 during 2020.

– Reducing the reliance on fossil fuels– Greater energy efficiency– Reducing the rate of global warming

InputsResources necessary to operate companies




NEW

NEW

SOLD 2021

24


R&D: US$31.5m

Employees: 700

(Y/E Dec 2020)

Beyond Meat is one of the leading brands pioneering plant-based meat alternatives.

Beyond Meat has developed plant-based meat alteratives for pork, poultry and beef products, including their flagship Beyond Burger. In 2020, they sold over 72.5 million pounds of of products through their presence in 122,000 outlets in more than 80 countries.

Beyond Meat’s products have a substantially lower environmental footprint compared to their animal-based counterparts. A life-cycle assessment undertaken by the company found that a Beyond Burger used 99 per cent less water, 93 per cent less land, and emitted 90 per cent fewer greenhouse gas emissions than a US produced beef burger.

Replacing animal-based products with Beyond Meat’s may also lead to long-term health benefits. A study by the Stanford Prevention Research Centre found that the consumption of Beyond Meat’s products instead of animal meat improved several cardiovascular disease risk factors.

– Reducing consumption of natural resources– Reducing impact on ecosystems – Contributing to healthy diets


R&D: US$1.6bn

Employees: 69,634

(Y/E Nov 2020)

Deere & Co develops and manufactures precision agriculture technologies.

Precision technologies are built into equipment sold across Deere & Co’s agricultural product portfolio. For example, AUTOTRAC optimises a tractor’s path over a field, reducing fertiliser input and fuel usage; and EXACTAPPLY precisely controls sprayer nozzles, reducing herbicide usage. In 2020. Deere & Co’s agricultural products were engaged on over 230 million acres around the world.

The company estimates that the use of their technologies on a 6,500 acre farm could save 1,600 gallons of diesel, 250,000lbs of fertilizer and 1,000 gallons of herbicide.

– Reducing consumption of natural resources– Reducing impact on ecosystems– Improving the food system


R&D: US$185m

Employees: 44,000

(Y/E Dec 2020)

Ecolab develops, produces and distributes cleaning products and water treatment solutions. It also provides product training and consultancy services to customers.

Every day, Ecolab helps customers address their cleaning, sanitising, food safety, water and energy management needs at nearly 3 million customer locations around the world.

In 2020 Ecolab helped customers save more than 200 billion gallons of water (757 billion litres), more than 25 trillion BTUs (British Thermal Units) of energy (c5.2 million metric tons of CO2e) and by using recycled plastics and reusing packaging, more than 100 million pounds of waste (45,400 metric tons).

– Reducing consumption of natural resources– Creating healthier environments – Greater energy efficiency

KingspanInsulation

R&D: US$40.5m

Employees: 15,424

(Y/E Dec 2020)

Kingspan manufactures insulation boards and panels, alongside other building envelope solutions, which help customers reduce energy consumption.

Kingspan produces high performance insulation materials. 81 per cent of Kingspan’s revenue in 2020 was generated by the sale of products which improve energy efficiency.

The company estimates that over the lifetime of insulation systems sold worldwide in 2020, 716 million MWh of energy, or 164 million metric tons of CO2e, will be saved.

In 2020, Kingspan upcycled the equivalent of 573 million plastic bottles into its manufacturing process, which amounted to approximately 15,900 metric tons of waste diverted from landfill.

– Greater energy efficiency– Improving air quality– Reducing the rate of global warming


R&D: US$105.6m

Employees: 18,700

(Y/E Dec 2020)

NIBE develops and produces renewable energy systems, heating elements and stoves.

55.2 per cent of revenues at NIBE come from products designed for a low carbon economy according to the FTSE LCE classification. These include heat pumps, district heating, boilers and stoves for burning pellets and wood, PV panels, heat exchangers, components for rail, electric and hybrid vehicles and renewable energy production.

Based on the cut in emissions from the type of heating systems NIBE’s heat pumps replaced in the respective markets in 2019 alone, the reduction was 228,000 metric tons of CO2 during 2020.

– Reducing the reliance on fossil fuels– Greater energy efficiency– Reducing the rate of global warming



25






R&D: US$317.8m

Employees: 6,185

(Y/E Dec 2020)

Novozymes is best known for their production of enzymes although they also offer microbial, yeast and digital solutions within the biotech space for a wide range of consumer, agricultural and industrial applications. Novozymes’ solutions are used in household care products, agriculture, animal health and nutrition, in grain and textile processing, in bioenergy, and in food, beverages and human health-related products.

Novozymes’ industrial enzymes and microbial solutions help its diverse range of customers do more with less. For example, its enzymes help customers reduce waste, energy and chemical usage across a wide range of industries as well as supporting biofuel production and sustainable agriculture.

In 2020, Novozymes enabled savings of 49 million metric tons of CO2 in global transport through their bioenergy solutions

– Reducing consumption of natural resources– Greater energy efficiency– Reducing the rate of global warming– Reducing the reliance on fossil fuels

ØrstedWind energy

R&D: US$318m

Employees: 6,179

(Y/E Dec 2020)

Ørsted develops, constructs, owns and operates wind farms, solar farms, and energy storage facilities and owns and operates bioenergy plants. In addition to its generation activities, Ørsted engages in partnerships and develops projects related to the production of renewable hydrogen. Ørsted is the world leader in offshore wind, with a market share of approx. 30 per cent of global capacity installed, excluding mainland China.

In 2020 Ørsted added 4.4GW of installed renewable capacity to bring its total to 11.3GW. During this year it generated 20.9 TWh of electricity from both onshore and offshore wind. Including wind and biomass, Ørsted currently produce 90 per cent of their energy from renewable sources.

Ørsted’s wind farm and biomass generation avoided 13.1 million metric tons of CO2e emissions in 2020.

– Reducing the reliance on fossil fuels– Reducing the rate of global warming


R&D: US$1.4bn

Employees: 70,757

(Y/E Dec 2020)

Tesla is accelerating the world’s transition to sustainable energy. Tesla design, develop, manufacture, lease and sell high-performance fully electric vehicles, solar energy generation systems and energy storage products. Tesla offer maintenance, installation, operation and other services related to these products.

During 2020 Tesla delivered almost 500,000 electric vehicles, deployed 3GWh of energy storage products and 205MW of solar energy systems.

By advancing the adoption of electric vehicles, which have lower lifecycle emissions compared to conventional cars, Tesla is reducing greenhouse gas emissions of the transportation sector. Based on car deliveries in 2020 alone, the emissions avoided can be calculated to be around 1.7 million metric tons CO2e, based on personal use and grid charging, although this could be an under-estimation.

There is no reported data on carbon savings delivered through the solar business.

By developing and installing battery storage, Tesla is helping to advance renewable energy through addressing challenges of intermittency.

– Improving air quality– Creating healthier environments– Reducing the reliance on fossil fuels– Reducing the rate of global warming


R&D: US$272.8m

Employees: 10,859

(Y/E Dec 2020)

Umicore operates the world’s largest and most complex precious metal recycling plant, capable of processing 200 different types of raw materials and recovering 28 different metals. Umicore also manufactures catalysts and filters to reduce vehicle emissions and produces cathode materials for lithium-ion batteries.

Umicore’s outputs include recycled metals, catalysts, filters and battery cathode materials.

In 2020, clean mobility and recycling accounted for 77 per cent of Umicore’s revenue.

Through recycling, Umicore reduces our need to extract raw materials and contributes towards a circular economy. In 2020, 64 per cent of materials used by Umicore were from end-of-life or secondary origin, while 34 per cent were of primary origin. In 2019, the ratio was 60 per cent to 40 per cent, respectively.

Umicore’s catalysts and filters reduce toxic emissions from vehicles which in turn contributes towards cleaner air and mitigates climate change. Umicore’s cathode materials help to improve battery performance and reduce cost. The company’s innovation is critical to the wider adoption of electric vehicles and energy storage.

– Reducing waste generation– Improving air quality– Reducing the reliance on fossil fuels

XylemWater

R&D: US$187m

Employees: 16,700

(Y/E Dec 2020)

Xylem is a global water technology company which produces equipment and digital solutions to deliver, manage and treat water.

Around 93 per cent of Xylem’s revenue comes from the provision of water equipment and solutions. Those products and services, such as water pumps, filtration and testing equipment and smart meters, are critical to modern water infrastructure, which bring clean, safe and affordable drinking water to citizens.

In 2020, Xylem’s products helped its customers reduce water loss by 456 million cubic meters (456 billion litres), treat 4.3 billion cubic meters of waste water for reuse, and provide access to clean water and sanitation to 4.1 million people at the base of the economic pyramid.

– Improving access to basic resources– Reducing consumption of basic resources– Creating healthier environments

26


R&D: US$317.8m

Employees: 6,185

(Y/E Dec 2020)

Novozymes is best known for their production of enzymes although they also offer microbial, yeast and digital solutions within the biotech space for a wide range of consumer, agricultural and industrial applications. Novozymes’ solutions are used in household care products, agriculture, animal health and nutrition, in grain and textile processing, in bioenergy, and in food, beverages and human health-related products.

Novozymes’ industrial enzymes and microbial solutions help its diverse range of customers do more with less. For example, its enzymes help customers reduce waste, energy and chemical usage across a wide range of industries as well as supporting biofuel production and sustainable agriculture.

In 2020, Novozymes enabled savings of 49 million metric tons of CO2 in global transport through their bioenergy solutions

– Reducing consumption of natural resources– Greater energy efficiency– Reducing the rate of global warming– Reducing the reliance on fossil fuels

ØrstedWind energy

R&D: US$318m

Employees: 6,179

(Y/E Dec 2020)

Ørsted develops, constructs, owns and operates wind farms, solar farms, and energy storage facilities and owns and operates bioenergy plants. In addition to its generation activities, Ørsted engages in partnerships and develops projects related to the production of renewable hydrogen. Ørsted is the world leader in offshore wind, with a market share of approx. 30 per cent of global capacity installed, excluding mainland China.

In 2020 Ørsted added 4.4GW of installed renewable capacity to bring its total to 11.3GW. During this year it generated 20.9 TWh of electricity from both onshore and offshore wind. Including wind and biomass, Ørsted currently produce 90 per cent of their energy from renewable sources.

Ørsted’s wind farm and biomass generation avoided 13.1 million metric tons of CO2e emissions in 2020.

– Reducing the reliance on fossil fuels– Reducing the rate of global warming


R&D: US$1.4bn

Employees: 70,757

(Y/E Dec 2020)

Tesla is accelerating the world’s transition to sustainable energy. Tesla design, develop, manufacture, lease and sell high-performance fully electric vehicles, solar energy generation systems and energy storage products. Tesla offer maintenance, installation, operation and other services related to these products.

During 2020 Tesla delivered almost 500,000 electric vehicles, deployed 3GWh of energy storage products and 205MW of solar energy systems.

By advancing the adoption of electric vehicles, which have lower lifecycle emissions compared to conventional cars, Tesla is reducing greenhouse gas emissions of the transportation sector. Based on car deliveries in 2020 alone, the emissions avoided can be calculated to be around 1.7 million metric tons CO2e, based on personal use and grid charging, although this could be an under-estimation.

There is no reported data on carbon savings delivered through the solar business.

By developing and installing battery storage, Tesla is helping to advance renewable energy through addressing challenges of intermittency.

– Improving air quality– Creating healthier environments– Reducing the reliance on fossil fuels– Reducing the rate of global warming


R&D: US$272.8m

Employees: 10,859

(Y/E Dec 2020)

Umicore operates the world’s largest and most complex precious metal recycling plant, capable of processing 200 different types of raw materials and recovering 28 different metals. Umicore also manufactures catalysts and filters to reduce vehicle emissions and produces cathode materials for lithium-ion batteries.

Umicore’s outputs include recycled metals, catalysts, filters and battery cathode materials.

In 2020, clean mobility and recycling accounted for 77 per cent of Umicore’s revenue.

Through recycling, Umicore reduces our need to extract raw materials and contributes towards a circular economy. In 2020, 64 per cent of materials used by Umicore were from end-of-life or secondary origin, while 34 per cent were of primary origin. In 2019, the ratio was 60 per cent to 40 per cent, respectively.

Umicore’s catalysts and filters reduce toxic emissions from vehicles which in turn contributes towards cleaner air and mitigates climate change. Umicore’s cathode materials help to improve battery performance and reduce cost. The company’s innovation is critical to the wider adoption of electric vehicles and energy storage.

– Reducing waste generation– Improving air quality– Reducing the reliance on fossil fuels

XylemWater

R&D: US$187m

Employees: 16,700

(Y/E Dec 2020)

Xylem is a global water technology company which produces equipment and digital solutions to deliver, manage and treat water.

Around 93 per cent of Xylem’s revenue comes from the provision of water equipment and solutions. Those products and services, such as water pumps, filtration and testing equipment and smart meters, are critical to modern water infrastructure, which bring clean, safe and affordable drinking water to citizens.

In 2020, Xylem’s products helped its customers reduce water loss by 456 million cubic meters (456 billion litres), treat 4.3 billion cubic meters of waste water for reuse, and provide access to clean water and sanitation to 4.1 million people at the base of the economic pyramid.

– Improving access to basic resources– Reducing consumption of basic resources– Creating healthier environments



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Thematic Case Study: Living off the Land

Sustainable solutions to feed the world

Environment and Resource Needs28

A System Under PressureAs a complex global system that comprises a vast web of farmers, traders, food manufacturers and retailers, the food system touches on all themes across the Positive Change strategy. It currently feeds the great majority of the world’s population, yet while food supply per capita has increased more than 30 per cent since 1961, 821 million people remain undernourished. Looking forward, there are a number of challenges ahead:

— Challenge 1: Food Security In 2050, the world’s population is expected to reach 10 billion, from approximately 8 billion today, requiring global food production to increase by somewhere between 24 per cent and 70 per cent.

— Challenge 2: Sustaining Livelihoods The current food system supports the livelihoods of over one billion people making it the largest employer on earth. Yet many of these livelihoods are unsustainable.

— Challenge 3: Resource Degradation and Competition Agriculture occupies 50 per cent of global habitable land, utilises 70 per cent of global freshwater withdrawals and comprises 94 per cent of all mammal biomass on Earth (excluding humans). It is also a key driver in global biodiversity loss, soil erosion, tropical deforestation and water pollution.

— Challenge 4: Climate Change Up to 37 per cent of total greenhouse gas (GHG) emissions are attributable to the food system, with significant contributions from crop and livestock activities, and from land use and land use change. At the same time, agriculture is particularly vulnerable to climatic shifts.

— Challenge 5: Antibiotic Resistance The World Health Organisation (WHO) describes antibiotic resistance as one of the biggest threats to global health, food security and development today. The threat of antibiotic resistance is accelerated by misuse of antibiotics in humans and animals.

© Visual China Group/Getty Images.

29

Rising to the ChallengeThese significant and inter-related challenges offer great opportunities for companies supporting a shift to a more sustainable food system, defined by the Food and Agriculture Organization (FAO) as one that is “profitable throughout, ensuring economic sustainability, [it] has broad-based benefits for society, securing social sustainability, and that [it] has a positive or neutral impact on the natural resource environment, safeguarding the sustainability of the environment.” Indeed, it can be argued that making the shift to such a system is more than an opportunity – it is a necessity.

Just as the challenges are multi-dimensional, so too are the solutions. Looking across the Positive Change portfolio we see contributions from across the different themes all working towards a sustainable agriculture system.

One of Deere & Co’s most famous precision technologies is the ‘See & Spray’ device, which uses computer vision and machine learning to identify weeds and target them with a concentrated burst of herbicide. Xylem is developing smart systems for water, to support more efficient use of this precious resource, alleviating competition for water resources between different uses, as well as providing water treatment options for aquaculture.

Nature’s SolutionsJust as modern technology can offer a sustainable future for farming, so too can an approach rooted in nature. Biologicals, broadly defined as products that derive from natural methods, such as plants, bacteria, fungi or minerals, are becoming an increasingly important part of the solution.


TechnologyAs farming mechanisation and agrochemicals spurred huge increases in agricultural productivity in the past, automation and digital technologies that allow for precision agriculture have huge potential to transform the food system in the coming years.

In 2020 we added Deere & Co to the portfolio, a company that is championing precision agriculture. These innovations support increased yields and a reduction in chemical use, providing benefits for food security, climate change, biodiversity and water quality, as well as supporting farmers in maintaining profitable businesses. For example, self-driving equipment reduces overlap and collateral crop damage; automating the control of sprayers improves sprayer consistency and minimises drift; and, precision planters can plant seeds within half an inch of accuracy.

Challenge 1 Food Security

Challenge 2 Sustaining Livelihoods

Challenge 3 Resource Degradation

and Competition

Challenge 4 Climate Change

Challenge 5 Antibiotic Resistance

Increased Water

EfficiencyXylem

NEW

Beyond Meat

Technology Nature’s Solutions Thinking Differently Financial Support

Novozymes

Novozymes

Chr. HansenChr. Hansen

Chr. Hansen

Deere & Co

NEW

Deere & Co

NEW

Reduced Antibiotic

Use

Bank Rakyat

Safaricom

Novozymes

Chr. Hansen

Reduced Food Waste

Reduced Meat

Consumption

Financial Tools and Services

Reduced Fertiliser

Use

Increased Yields

30

Both Novozymes and Chr. Hansen (in our Healthcare and Quality of Life theme) have developed microbial solutions which can replace or complement traditional fertilisers and pest control solutions, harnessing existing symbiotic relationships between plants and soil microbes. They are also developing enzymatic and probiotic solutions to support animal growth and health. Leveraging the relationship between the animal’s microbiome and its ability to absorb nutrients, these will provide an alternative to using antibiotics to promote growth and treat disease. In addition, Chr. Hansen is also looking to tackle food waste through the development of food cultures with bioprotective properties that can delay spoilage in dairy products.

Thinking DifferentlyThe traditional western diet, high in meat and dairy, has increasingly come under the spotlight as incompatible with efforts to reduce GHG emissions. Yet changing behaviour is hard.

This is where Beyond Meat, a new holding for Positive Change in 2020, steps in. Founded in 2009, Beyond Meat aims to replicate the taste and texture of meat products using vegetable proteins with a view to transitioning eaters to a more plant-based diet. Its products are sold through retail and restaurant channels and following an impressive start in the US, it is starting to widen its markets to Europe and China. What is most compelling from a behavioural change perspective is Beyond Meat’s partnerships with fast food outlets. By catering to mass market audiences, and hence supporting a scale of change that is commensurate with the problem, it is developing a desirability around the brand that can

support this change. Rebalancing diets in favour of plant-based products will reduce the GHG emissions associated with the disproportionately impactful livestock industry. It will also reduce the flow of antibiotics into people and the environment.

Financial SupportIn our Base of the Pyramid theme we see companies serving farming communities, reflecting their importance in the economy of developing countries. For example, DigiFarm is Safaricom’s integrated mobile-based platform for digital services tailored for smallholder farmers to support access to products and services from financial institutions, agri-input providers, and other value-added service firms. In addition, Bank Rakyat offers microloans to farmers. These are a vital source of credit to increase resilience in businesses that are prone to economic and environmental shocks.

On the HorizonTo support further research into the challenges and opportunities associated with a modern food production system, we are sponsoring a three-year fellowship to lead an ambitious climate-positive farming initiative. It is being run by the world-renowned James Hutton Institute (JHI), an interdisciplinary scientific research centre at the forefront of delivering solutions for the sustainable use of land and natural resources.

We will also continue our own research in this area over the coming years as we believe there are many more solutions to be found.

31



“Health is a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity.” – The Constitution of the World Health Organisation (WHO), 1948.

The immense tragedy of the Covid-19 pandemic has brought into sharp focus the importance of health for individuals and society. It illustrates how a health crisis has personal, social and economic consequences impacting us all. Coronavirus has had a devastating impact and, at the time of writing, has claimed over 3.4 million lives globally and affected the daily lives of billions of people. There is understandably much focus on addressing the pandemic, but this focus shouldn’t diminish the importance of tackling longer-term global healthcare challenges. Nor should it blind us to the enormous progress made over the past century.

Advances in medicine have contributed to improving quality and length of life. Since 1870, global life expectancy at birth has increased by 40 years. The discovery and application of the germ theory of disease, which blamed many diseases on microorganisms, was key to these improvements. Simple things, such as washing hands and boiling drinking water, have had a profound effect on public health, while medical practices have advanced beyond recognition. As late as the 19th century, bloodletting was a routine treatment for diseases from smallpox to diabetes. Today, doctors are equipped with advanced diagnostic tools, such as magnetic resonance imaging, and have an arsenal of therapies for many diseases. Healthcare is at a turning point, with new technologies addressing unmet needs and new challenges.

The ChallengesAs the world’s population becomes wealthier and lives longer, new challenges arise. Chronic diseases associated with unhealthy lifestyles, such as type 2 diabetes and hypertension, are on the rise. The prevalence of diabetes is increasing sharply: twenty years ago, there were 151 million adults living with diabetes in the world, at the end of 2019, this figure stood at 463 million and is projected to rise to over 578 million by 2030. Ageing-related diseases, including dementia and cancer, are also increasing sharply. The WHO estimate that around 50 million people have dementia and there are nearly 10 million new cases every year.


Abiomed Heart pumps


AlnylamRNAi therapeutics

Chr. HansenNatural solutions

DexcomDiabetes management

DiscoveryShared value insurance

GlaukosGlaucoma treatment

IlluminaGenetic analysis

M3Medical platform

Sartorius Biopharmaceutical equipment

ModernaBiotechnology

TeladocTelemedicine

10x Genomics Single cell analysis

Berkeley Lights Digital cell biology

NB

NB New Buy

NB

32

While the discovery of antibiotics has revolutionised medicine, their use has created new challenges, and bacteria are fighting back.

Despite huge advances in medicine, health inequality persists in both developed and developing countries. For example, life expectancy in countries such as Japan, Australia, Sweden and Canada is over 25 years longer than countries such as Nigeria, Somalia or South Sudan.

The inequitable distribution and uneven pace of Covid-19 vaccinations also provides a stark illustration of how health inequalities persist between countries. Medical advances should be felt universally, not limited to pockets of the global population.

Heath systems and expenditure are frequently inefficient. In the US, healthcare expenditure accounts for 17 per cent of GDP, the highest proportion in the world (the comparable country average is 12 per cent of GDP). Despite this, the outcome of treatments remains suboptimal for many patients. Late diagnosis, misdiagnosis, inefficient treatments and conflicts of interest result in significant costs both to patients and to the healthcare infrastructure. It’s more a ‘sick system’ than a health system.

The good news is the wide range of promising technologies being developed that can address many of the challenges facing healthcare systems around the world. Better health at a lower cost could become a reality in developed and developing countries. Our Genetics, Genomics and the Future of Healthcare case study on page 42 considers how the decreasing cost of genome sequencing, artificial intelligence (AI) and gene therapy could significantly contribute to better understanding of diseases and allow for more personalised treatment. Advances in the semiconductor industry, cloud computing and AI should enable cheaper and more accurate diagnostic devices. While the germ theory took more than 100 years to reach low-income countries, new technologies might spread much faster.

Million

Million

463diabetes patients in 2019

lives claimed by Coronavirus

3.4

In the US, healthcare expenditure accounts for

of GDP17%

33


Positive Change – Part of the Solution There are currently four major themes through which the Positive Change strategy addresses the main healthcare challenges – understanding of diseases, treatment, prevention and efficiency. Our holdings contribute to the prevention and treatment of five of the top 10 global causes of death which collectively accounted for around 30 million deaths in 2019.

We continue to find new companies with the potential to revolutionise healthcare. For example, during 2020, we invested in Berkeley Lights and 10x Genomics. Berkeley Lights develops equipment that enables the precise control and characterisation of single cells. Its technology could help unlock the huge promise of biologic therapies. 10x Genomics also has the potential to hugely advance our understanding of biology and how we treat diseases through its development of instruments and consumables for the analysis of single cells.

We sold our holding in Sysmex as the initial investment case was based on Sysmex growing into newer areas such as cancer testing. As this becomes an increasingly competitive field, it was difficult to pinpoint Sysmex’s competitive advantage and we decided to sell the holding.

1. Understanding of DiseasesA good understanding of human biology is crucial for the successful prevention and treatment of diseases. Alongside companies such as 10x Genomics and Berkeley Lights, we invest in Illumina whose genome sequencing technology is already benefiting patients with many different diseases including rare cancers and other conditions.

2. TreatmentThe ideal treatment should lead either to a cure or to substantial improvement in patient outcomes, while not compromising on quality of life. Both Alnylam and Moderna are innovative biotech companies. Alnylam’s therapies are based on RNA interference and have the potential to address a range of debilitating diseases with a high unmet medical need. Moderna uses messenger RNA as a basis for new therapies and vaccines. The enormous potential of Moderna’s approach was amply illustrated during 2020 when it was the first company to begin clinical trials for a Covid-19 vaccine just 2 days after the virus was sequenced. It ultimately became one of the earliest and most-effective Covid-19 vaccines and is forecast to supply between 800 million and 1 billion doses in 2021.

Innovative medical devices can transform lives. We invest in Abiomed which provides a minimally-invasive percutaneous heart pump that protects patients during high-risk heart surgeries. Glaukos provides a minimally-invasive implantable device to treat glaucoma. The device can help reduce eye pressure and may reduce patients’ reliance on medication. Finally, Dexcom’s continuous glucose monitoring device enables diabetic patients to better manage their glucose levels, reducing the risk of complications.

3. PreventionDisease prevention rather than cure is better for individuals and society at large. A healthy diet and exercise are important for good health. Chr. Hansen provides products which contribute to healthy food, including probiotics for human and animal health that reduce dependence on antibiotics. Discovery’s insurance plan incentivises healthy lifestyles by rewarding customers for healthy choices, such as exercising, healthy eating and moderating alcohol consumption.

34

4. EfficiencyAs the global population ages, healthcare systems must adapt to rising demand while containing costs. There are many systemic inefficiencies, including lengthy drug development times, inefficient treatments leading to severe side effects, misdiagnosis and long waiting times for treatments.

Both M3 and Teledoc provide technologies that improve healthcare system efficiency and, critically, have allowed healthcare services to pivot to digital provision during the Covid-19 pandemic. Teledoc is the largest telemedicine company in North America. It provides medical care for patients via phone or video consultation and helps ameliorate inefficiencies in healthcare by increasing access to care while reducing costs. M3 also provides telemedicine. Plus, it has technologies that improve the efficiency of information sharing in the medical community, enabling faster recruitment to clinical trials that could, in turn, speed up drug development.

Meanwhile, Sartorius provides single-use equipment for manufacturing biological products such as antibodies and vaccines. It is an enabler of the biotech industry and helps customers operate with greater flexibility, lower costs and a lower environmental impact.

What are we Missing?Accurate and timely diagnostic tests are essential for a well-functioning healthcare system. Following our sale of Sysmex in September 2020, we no longer have direct exposure to a diagnostics company.

While some of our holdings have products tailored to lower-income countries, we are conscious that breakthroughs tend to be more accessible to middle and high-income populations. We hope that the companies that we invest in will expand their reach to help address health inequalities and we aspire to find new companies that can close the gap.

35


R&D: US$123.4m

Employees: 852

(Y/E Dec 2020)

10x Genomics develops machines and software which enable scientists to gain a better understanding of biology through single-cell analysis.

The company has sold 2,412 instruments since 2015, and its customers include the top 100 global research institutions as ranked by Nature in 2019 based on publications, and the top 20 global biopharmaceutical companies measured by 2019 R&D expenditure.

The information gained through the use of 10x Genomic’s products has already expanded our understanding of biology. For example, in 2018 researchers using 10x Genomic’s technology discovered an unknown type of cell which expresses a gene that, when mutated, causes cystic fibrosis, a disease which shortens the lives of 70,000 people around the world. To date, more than 2,200 peer-reviewed articles have been published using data generated by the company’s technology.

– Facilitating scientific research– Potential to improve patient outcomes

Abiomed Heart pumps

R&D: US$98.8m

Employees: 1,536

(Y/E Mar 2020)

Abiomed develops, manufactures and markets Impella® heart pumps, which are used for treating patients experiencing cardiogenic shock following a heart attack or undergoing heart surgery. Abiomed also conducts research and clinical trials to examine the efficacy of using Impella® pumps in different settings.

Abiomed’s Impella® heart pumps have been used to support more than 170,000 patients worldwide.

Clinical studies show that patients treated with Impella® have a more stable recovery and less tissue damage. A 2019 study found that, when combined with best practices, the use of Impella® heart pumps lead to a 34 per cent increase in relative survival rates. A seperate study found that using an Impella® 2.5/CP resulted in a 46 per cent reduction in the rate of major adverse cardiac and cerebrovascular events at 90 days, when compared to the use of an intra-aortic baloon pump.

– Improving patient outcomes– Potential to improve efficiency of the healthcare system


R&D: US$654.8m

Employees: 1,453

(Y/E Dec 2020)

Alnylam produces and develops innovative medicines to treat rare chronic diseases using a technique that switches off the faulty proteins that cause diseases. Alnylam has four drugs on the market with an additional six in late-stage development, across four strategic areas: genetic medicines, cardio-metabolic diseases, hepatic-infectious diseases and CNS/ocular diseases.

In 2020 Alnylam released two new drugs onto the market. OXLUMO™ has receieved regulatory approval in the US and EU for treatment of primary hyperoxaluria type 1. L has received marketing authorisation in the EU for the treatment of hypercholesterolemia. Alnylam’s first product to market, ONPATTRO® for the treatment of hATTR amyloidosis with polyneuropathy, receieved additional regulatory approvals in 2020 in Brazil, Turkey and Taiwan. As at the end of 2020, 1,350 patients worldwide were being treated with ONPATTRO®. Their second product, GIVLAARI® for the treatment of acute hepatic porphyria, receieved additional regulatory aprovals in EU, Brazil and Canada, with patient numbers totalling 200 at the end of 2020.

Alnylam’s drugs have the potential to prevent the symptoms of diseases, improving quality of life for patients as well as reducing the costs associated with treating diseases. OXLUMO™, released in 2020, treats patients suffering from a rare inherited disorder of the liver characterised by over-production of oxalate, which at high levels becomes toxic and accumulates in the kidneys. In clinical trials patients on OXLUMO™ had 53 per cent less oxalate in their urine after 6 months compared to patients given a placebo. In the same trial 84 per cent of patients had normal (52 per cent) or close to normal (32 per cent) oxalate levels in their urine at month 6 compared with 0 per cent of pateints who were treated with the placebo. Alnylam’s second drug release of 2020 (in partnership with Novartis), LEQVIO, demonstrated in trials an ability to reduce low-density lipoprotein cholesterol (LDL-C) by up to 52 per cent in patients with elevated LDL-C, despite maxinally tolerated statins.


Berkeley LightsDigital cell technology

R&D: US$47.2m

Employees: 230

(Y/E Dec 2020)

Berkeley Lights has developed systems which enable the precise control and analysis of single cells. This technology has relevance for healthcare, synthetic biology and agriculture and within each industry has a range of applications.

At the end of 2020, Berkeley Lights had an installed base of 75 machines and 63 biotechnology and pharmaceutical customers, for whom its technology helps to reduce the costs and time required for drug discovery, development and commercialisation. Berkeley Lights added 22 new customers in 2020.

Through reducing the time and costs required for drug discovery and development, Berkeley Lights should help to unlock the promise of new antibody therapeutics and cell therapies. These are increasingly used to treat, and even cure, some of the world’s most common diseases, such as cancer, as well as rarer diseases. Studies suggest that developing a drug currently costs on average $2.6bn and takes 10 years. Berkeley Lights’ technology should help to reduce these figures and to bring more drugs to more people, faster and cheaper.

– Potential to improve efficiency of the healthcare system– Improve patient outcomes– Facilitating scientific research


R&D: US$95.4m

Employees: 3,600

(Y/E Aug 2020)

Chr. Hansen develops and produces cultures, enzymes and probiotics used for the food, nutritional, pharmaceutical and agricultural industries. The company owns one of the world’s largest commercial collections of bacteria with around 40,000 strains.

More than 1 billion people consume a product with Chr. Hansen ingredients every day.

Chr. Hansen’s natural ingredients help shape the taste of food products, the nutritional value and health benefits (eg reduced fat levels and reduced need for sweeteners and preservatives). Its product range can be found in dairy products (yoghurts, cheeses) and includes probiotics for dietary supplements and infant formula. Some specific examples include its cultures and enzymes, such as FRESHQ, which protect fresh dairy in a natural way, and natural plant solutions, such as INTENSE®, used to improve the health of crops such as corn and vegetables.

Chr. Hansen’s wide range of products help to promote good health, more sustainable farming, and less food waste. The company’s range of natural plant solutions, which help farmers reduce the use of pesticides and improve crop yields, were applied on 3.2 million hectares of land in 2019/20 and, by extending the shelf life of dairy products, Chr. Hansen’s products helped reduce 200,000 metric tons of yoghurt waste in 2019/20.

– Improving nutrition– Developing new and alternative therapies– Contributing to more sustainable food systems





NEW

NEW

36


R&D: US$123.4m

Employees: 852

(Y/E Dec 2020)

10x Genomics develops machines and software which enable scientists to gain a better understanding of biology through single-cell analysis.

The company has sold 2,412 instruments since 2015, and its customers include the top 100 global research institutions as ranked by Nature in 2019 based on publications, and the top 20 global biopharmaceutical companies measured by 2019 R&D expenditure.

The information gained through the use of 10x Genomic’s products has already expanded our understanding of biology. For example, in 2018 researchers using 10x Genomic’s technology discovered an unknown type of cell which expresses a gene that, when mutated, causes cystic fibrosis, a disease which shortens the lives of 70,000 people around the world. To date, more than 2,200 peer-reviewed articles have been published using data generated by the company’s technology.

– Facilitating scientific research– Potential to improve patient outcomes

Abiomed Heart pumps

R&D: US$98.8m

Employees: 1,536

(Y/E Mar 2020)

Abiomed develops, manufactures and markets Impella® heart pumps, which are used for treating patients experiencing cardiogenic shock following a heart attack or undergoing heart surgery. Abiomed also conducts research and clinical trials to examine the efficacy of using Impella® pumps in different settings.

Abiomed’s Impella® heart pumps have been used to support more than 170,000 patients worldwide.

Clinical studies show that patients treated with Impella® have a more stable recovery and less tissue damage. A 2019 study found that, when combined with best practices, the use of Impella® heart pumps lead to a 34 per cent increase in relative survival rates. A seperate study found that using an Impella® 2.5/CP resulted in a 46 per cent reduction in the rate of major adverse cardiac and cerebrovascular events at 90 days, when compared to the use of an intra-aortic baloon pump.



R&D: US$654.8m

Employees: 1,453

(Y/E Dec 2020)

Alnylam produces and develops innovative medicines to treat rare chronic diseases using a technique that switches off the faulty proteins that cause diseases. Alnylam has four drugs on the market with an additional six in late-stage development, across four strategic areas: genetic medicines, cardio-metabolic diseases, hepatic-infectious diseases and CNS/ocular diseases.

In 2020 Alnylam released two new drugs onto the market. OXLUMO™ has receieved regulatory approval in the US and EU for treatment of primary hyperoxaluria type 1. L has received marketing authorisation in the EU for the treatment of hypercholesterolemia. Alnylam’s first product to market, ONPATTRO® for the treatment of hATTR amyloidosis with polyneuropathy, receieved additional regulatory approvals in 2020 in Brazil, Turkey and Taiwan. As at the end of 2020, 1,350 patients worldwide were being treated with ONPATTRO®. Their second product, GIVLAARI® for the treatment of acute hepatic porphyria, receieved additional regulatory aprovals in EU, Brazil and Canada, with patient numbers totalling 200 at the end of 2020.

Alnylam’s drugs have the potential to prevent the symptoms of diseases, improving quality of life for patients as well as reducing the costs associated with treating diseases. OXLUMO™, released in 2020, treats patients suffering from a rare inherited disorder of the liver characterised by over-production of oxalate, which at high levels becomes toxic and accumulates in the kidneys. In clinical trials patients on OXLUMO™ had 53 per cent less oxalate in their urine after 6 months compared to patients given a placebo. In the same trial 84 per cent of patients had normal (52 per cent) or close to normal (32 per cent) oxalate levels in their urine at month 6 compared with 0 per cent of pateints who were treated with the placebo. Alnylam’s second drug release of 2020 (in partnership with Novartis), LEQVIO, demonstrated in trials an ability to reduce low-density lipoprotein cholesterol (LDL-C) by up to 52 per cent in patients with elevated LDL-C, despite maxinally tolerated statins.


Berkeley LightsDigital cell technology

R&D: US$47.2m

Employees: 230

(Y/E Dec 2020)

Berkeley Lights has developed systems which enable the precise control and analysis of single cells. This technology has relevance for healthcare, synthetic biology and agriculture and within each industry has a range of applications.

At the end of 2020, Berkeley Lights had an installed base of 75 machines and 63 biotechnology and pharmaceutical customers, for whom its technology helps to reduce the costs and time required for drug discovery, development and commercialisation. Berkeley Lights added 22 new customers in 2020.

Through reducing the time and costs required for drug discovery and development, Berkeley Lights should help to unlock the promise of new antibody therapeutics and cell therapies. These are increasingly used to treat, and even cure, some of the world’s most common diseases, such as cancer, as well as rarer diseases. Studies suggest that developing a drug currently costs on average $2.6bn and takes 10 years. Berkeley Lights’ technology should help to reduce these figures and to bring more drugs to more people, faster and cheaper.

– Potential to improve efficiency of the healthcare system– Improve patient outcomes– Facilitating scientific research


R&D: US$95.4m

Employees: 3,600

(Y/E Aug 2020)

Chr. Hansen develops and produces cultures, enzymes and probiotics used for the food, nutritional, pharmaceutical and agricultural industries. The company owns one of the world’s largest commercial collections of bacteria with around 40,000 strains.

More than 1 billion people consume a product with Chr. Hansen ingredients every day.

Chr. Hansen’s natural ingredients help shape the taste of food products, the nutritional value and health benefits (eg reduced fat levels and reduced need for sweeteners and preservatives). Its product range can be found in dairy products (yoghurts, cheeses) and includes probiotics for dietary supplements and infant formula. Some specific examples include its cultures and enzymes, such as FRESHQ, which protect fresh dairy in a natural way, and natural plant solutions, such as INTENSE®, used to improve the health of crops such as corn and vegetables.

Chr. Hansen’s wide range of products help to promote good health, more sustainable farming, and less food waste. The company’s range of natural plant solutions, which help farmers reduce the use of pesticides and improve crop yields, were applied on 3.2 million hectares of land in 2019/20 and, by extending the shelf life of dairy products, Chr. Hansen’s products helped reduce 200,000 metric tons of yoghurt waste in 2019/20.

– Improving nutrition– Developing new and alternative therapies– Contributing to more sustainable food systems



37


R&D: US$359.9m

Employees: 6,400

(Y/E Dec 2020)

Dexcom designs, manufactures and sells Continuous Glucose Monitoring (CGM) systems that monitor changing glucose levels for diabetes patients.

Dexcom’s systems help more than 900,000 people around the world manage their diabetes more effectively.

The estimated global direct health expenditure on diabetes in 2019 was $760bn and is projected to grow to $825bn by 2030 and $845bn by 2045. It is the fluctuation in glucose levels outside safe parameters that causes health issues associated with diabetes. The Diabetes Control and Complications Trial demonstrated that improving blood glucose control lowers the risk of developing diabetes-related complications by up to 49 per cent. Three studies on different age groups over 2020 demonstrated the benefits of CGM in diabetes management. CGM used consistently over a 6-month period in young children with type 1 diabetes significantly reduced time in hypoglycaemia. In teenagers and young adults, a reduction of at least 1 per cent in HbA1c was observed in 25 per cent of participants in the CGM group vs 6 per cent in the control group and the percentage of time spent in range increased by 4 per cent. A study with a senior’s cohort showed an increased time in range of 2.1 hours for those using a CGM. In addition, CGM was shown to be an important behaviour modification tool, with a study demonstrating 90 per cent of CGM users feeling that it contributed to healthier lifestyles and 87 per cent reporting modification of food choices as a result of CGM use.



R&D: N/A

Employees: 12,980

(Y/E Jun 2020)

Discovery offers medical, health, motor and life insurance products across 22 countries, including South Africa and the UK.

Discovery’s products impact 46 million lives around the world, an increase of 79 per cent compared with 2019. Of these, more than 20 million are members of the shared value range of products, called Vitality.

Discovery’s health insurance offering under the Vitality range encourages customers to adopt a healthier lifestyle by providing rewards and incentives for positive behaviour, such as exercising, eating healthily and going for regular healthcare checks. The company has reported highly engaged Vitality members experienced significantly lower levels of premature mortality and lapses compared with non-Vitality members.

Discovery has a goal of making 100 million people 20 per cent more active by 2025.

A 2018 study into Discovery’s partnership with Apple Watch showed that Vitality members using the Vitality Active Rewards with Apple Watch benefit had an average 34 per cent increase of tracked activity days per month, compared to the population of Vitality members that only participate in the Vitality Active Rewards incentive.

– Potential to improve efficiency of the healthcare system– Encouraging healthy living


R&D: US$85.3m

Employees: 653

(Y/E Dec 2020)

Glaukos is an opthalmic medical technology company which develops surgical devices and pharmaceutical therapies to treat glaucoma, corneal conditions and retinal diseases.

To date, Glaukos’ iStent® products have been implanted in approximately 750,000+ eyes globally.

Glaucoma is a group of eye diseases characterised by elevated levels of intraocular pressure (IOP) which over time leads to nerve damage and vision loss. A two-year US pivotal trial data showed that its iStent inject® Trabecular Micro-Bypass System achieved a statistically significant reduction in unmedicated diurnal IOP in patients undergoing cataract surgery. At 24 months, 75.8 per cent of the iStent inject® cohort achieved a 20 per cent or greater reduction in unmedicated IOP, compared to 61.9 per cent for the cataract-only cohort, significantly reducing patients medication burden.



R&D: US$682m

Employees: 7,800

(Y/E Dec 2020)

Illumina designs, manufactures and markets gene sequencing machines for genetic and genomic analysis, which are used for a variety of applications including healthcare and agriculture. Through partnerships and collaborations Illumina is advancing personalised medicine and early cancer detection.

Illumina has an installed base of more than 15,000 gene sequencing machines.

Illumina has been instrumental to the reduction in the cost of gene sequencing, which helps to improve our understanding of genetics, enables more accurate diagnosis of diseases, and facilitates research into new therapeutics. The cost of sequencing has fallen from US$100m per human genome in 2001 to around US$600 per human genome in 2020, thanks in large part to Illumina’s products. In addition, the sequencing time per gigabase has dropped by a factor of approximately 12,000.

– Improving patient outcomes– Facilitating scientific research– Potential to improve efficiency of the healthcare system– Contributing to more sustainable food system




Healthcare and Quality of Life38


R&D: US$359.9m

Employees: 6,400

(Y/E Dec 2020)

Dexcom designs, manufactures and sells Continuous Glucose Monitoring (CGM) systems that monitor changing glucose levels for diabetes patients.

Dexcom’s systems help more than 900,000 people around the world manage their diabetes more effectively.

The estimated global direct health expenditure on diabetes in 2019 was $760bn and is projected to grow to $825bn by 2030 and $845bn by 2045. It is the fluctuation in glucose levels outside safe parameters that causes health issues associated with diabetes. The Diabetes Control and Complications Trial demonstrated that improving blood glucose control lowers the risk of developing diabetes-related complications by up to 49 per cent. Three studies on different age groups over 2020 demonstrated the benefits of CGM in diabetes management. CGM used consistently over a 6-month period in young children with type 1 diabetes significantly reduced time in hypoglycaemia. In teenagers and young adults, a reduction of at least 1 per cent in HbA1c was observed in 25 per cent of participants in the CGM group vs 6 per cent in the control group and the percentage of time spent in range increased by 4 per cent. A study with a senior’s cohort showed an increased time in range of 2.1 hours for those using a CGM. In addition, CGM was shown to be an important behaviour modification tool, with a study demonstrating 90 per cent of CGM users feeling that it contributed to healthier lifestyles and 87 per cent reporting modification of food choices as a result of CGM use.



R&D: N/A

Employees: 12,980

(Y/E Jun 2020)

Discovery offers medical, health, motor and life insurance products across 22 countries, including South Africa and the UK.

Discovery’s products impact 46 million lives around the world, an increase of 79 per cent compared with 2019. Of these, more than 20 million are members of the shared value range of products, called Vitality.

Discovery’s health insurance offering under the Vitality range encourages customers to adopt a healthier lifestyle by providing rewards and incentives for positive behaviour, such as exercising, eating healthily and going for regular healthcare checks. The company has reported highly engaged Vitality members experienced significantly lower levels of premature mortality and lapses compared with non-Vitality members.

Discovery has a goal of making 100 million people 20 per cent more active by 2025.

A 2018 study into Discovery’s partnership with Apple Watch showed that Vitality members using the Vitality Active Rewards with Apple Watch benefit had an average 34 per cent increase of tracked activity days per month, compared to the population of Vitality members that only participate in the Vitality Active Rewards incentive.

– Potential to improve efficiency of the healthcare system– Encouraging healthy living


R&D: US$85.3m

Employees: 653

(Y/E Dec 2020)

Glaukos is an opthalmic medical technology company which develops surgical devices and pharmaceutical therapies to treat glaucoma, corneal conditions and retinal diseases.

To date, Glaukos’ iStent® products have been implanted in approximately 750,000+ eyes globally.

Glaucoma is a group of eye diseases characterised by elevated levels of intraocular pressure (IOP) which over time leads to nerve damage and vision loss. A two-year US pivotal trial data showed that its iStent inject® Trabecular Micro-Bypass System achieved a statistically significant reduction in unmedicated diurnal IOP in patients undergoing cataract surgery. At 24 months, 75.8 per cent of the iStent inject® cohort achieved a 20 per cent or greater reduction in unmedicated IOP, compared to 61.9 per cent for the cataract-only cohort, significantly reducing patients medication burden.



R&D: US$682m

Employees: 7,800

(Y/E Dec 2020)

Illumina designs, manufactures and markets gene sequencing machines for genetic and genomic analysis, which are used for a variety of applications including healthcare and agriculture. Through partnerships and collaborations Illumina is advancing personalised medicine and early cancer detection.

Illumina has an installed base of more than 15,000 gene sequencing machines.

Illumina has been instrumental to the reduction in the cost of gene sequencing, which helps to improve our understanding of genetics, enables more accurate diagnosis of diseases, and facilitates research into new therapeutics. The cost of sequencing has fallen from US$100m per human genome in 2001 to around US$600 per human genome in 2020, thanks in large part to Illumina’s products. In addition, the sequencing time per gigabase has dropped by a factor of approximately 12,000.

– Improving patient outcomes– Facilitating scientific research– Potential to improve efficiency of the healthcare system– Contributing to more sustainable food system



39

M3Medical platform

R&D: N/A

Employees: 473

(Y/E Mar 2020)

M3 operates medical portals predominantly in Japan, the US, China and India. The portals aim to improve the efficiency of the healthcare sector by providing a range of contents and services online. Those include access to medical research and academic journals, recruiting patients for clinical trials, marketing medicines and appointment reservations for patients. M3 supports and invests in early stage medical technologies such as genome diagnostics, cancer tests and AI medical technologies.

M3 portals connect over 6 million physicians globally. By leveraging technology, M3 improves efficiency for those involved in the healthcare sector and also for patients. For example, M3 launched LINE Healthcare in 2019, a joint venture with the Japanese communications app to provide LINE’s 84 million users with access to online medical appointments from M3’s over 300,000 member physicians in Japan. By August 2020, this service had enabled 300,000 online medical consultations and had established online treatment awareness communities for diseases such as Psoriasis and hay fever, which have 28,000 and c2.4 million members respectively.

– Reducing healthcare costs– Facilitating scientific research


R&D: US$1.3bn

Employees: 1,300

(Y/E Dec 2020)

Moderna develops vaccines and treatments for a wide range of diseases including cardiovascular conditions, cancer and rare diseases. It uses a technique which synthesises molecules that can be injected into patients to help their bodies create their own therapies. Moderna has 24 development programs, of which 13 have entered clinical studies.

Moderna’s primary output is the development of its platform and drug pipeline which includes vaccines for cancers, Zika, influenza; and treatments for Chikungunya, autoimmune disorders, cancerous tumours.

In 2020, Moderna commercialised its first vaccine – mRNA-1273 for Covid-19. By the end of the year, Moderna had signed supply agreeements for 520 million doses of mRNA-1273.

Moderna’s vaccines and drugs have the potential to prevent the symptoms of diseases, improving the quality of life of patients as well as reducing the costs associated with treating disease symptoms. Many of its programs have the potential to target diseases where there are no treatments currently available.

– Potential to improve patient outcomes– Potential to improve efficiency of the healthcare system


R&D: US$132.6m

Employees: 10,637

(Y/E Dec 2020)

Sartorius supplies equipment and software to biopharmaceutical companies and research laboratories, with the goal of making the development and production of biopharmaceuticals safer and more efficient. Sartorius is among the first biopharmaceutical suppliers to specialise in single-use technologies.

Sartorius’ portfolio of single-use technologies, which accounts for approximately 57 per cent of revenues, includes a wide selection of equipment ranging from bioreactors to storage bags. Among its other products, Sartorius offers data analytics software for modeling and optimising biopharmaceutical development and production processes.

The biopharmaceutical industry is increasingly adopting single-use technologies due to the cost advantages and greater flexibility compared to reusable technologies. Studies have found that single-use bioreactors could potentially increase productivity by 15–20 per cent due to shorter set-up and processing times, and provide a saving of 22 per cent in total operating costs per batch. These benefits also enable innovation by lowering up front capital costs for smaller biotech innovators. Over a lifetime of use, single-use products use 30 per cent less electricity and 87 per cent less water than stainless steel products.

– Facilitating scientific research– Potential to improve efficiency of the healthcare system

TeladocTelemedicine

R&D: US$164.9m

Employees: 4,400

(Y/E Dec 2020)

Teladoc is the largest telemedicine company in the US, providing hundreds of medical services, such as primary care appointments, expert second opinions, behavioural health support and chronic care management via phone, online and through apps.

Teladoc completed approximately 10.6 million telehealth visits in 2020 in over 175 countries, an increase of 159 per cent from 2019.

Over 73 million people have access to Teladoc’s more than 50,000 registered physiciansin 450 sub-specialities.

Teladoc is transforming the way people access healthcare. Through providing remote healthcare services via phone or video consultations it increases accessibility to healthcare services and helps lower healthcare costs. A 2016 study found that on average, Teladoc’s clients saved US$472 per general medical visit compared to receiving healthcare in other settings for the same diagnosis.

– Reducing healthcare costs– Improving access to healthcare– Potential to improve efficiency of the healthcare system





M3Medical platform

R&D: N/A

Employees: 473

(Y/E Mar 2020)

M3 operates medical portals predominantly in Japan, the US, China and India. The portals aim to improve the efficiency of the healthcare sector by providing a range of contents and services online. Those include access to medical research and academic journals, recruiting patients for clinical trials, marketing medicines and appointment reservations for patients. M3 supports and invests in early stage medical technologies such as genome diagnostics, cancer tests and AI medical technologies.

M3 portals connect over 6 million physicians globally. By leveraging technology, M3 improves efficiency for those involved in the healthcare sector and also for patients. For example, M3 launched LINE Healthcare in 2019, a joint venture with the Japanese communications app to provide LINE’s 84 million users with access to online medical appointments from M3’s over 300,000 member physicians in Japan. By August 2020, this service had enabled 300,000 online medical consultations and had established online treatment awareness communities for diseases such as Psoriasis and hay fever, which have 28,000 and c2.4 million members respectively.

– Reducing healthcare costs– Facilitating scientific research


R&D: US$1.3bn

Employees: 1,300

(Y/E Dec 2020)

Moderna develops vaccines and treatments for a wide range of diseases including cardiovascular conditions, cancer and rare diseases. It uses a technique which synthesises molecules that can be injected into patients to help their bodies create their own therapies. Moderna has 24 development programs, of which 13 have entered clinical studies.

Moderna’s primary output is the development of its platform and drug pipeline which includes vaccines for cancers, Zika, influenza; and treatments for Chikungunya, autoimmune disorders, cancerous tumours.

In 2020, Moderna commercialised its first vaccine – mRNA-1273 for Covid-19. By the end of the year, Moderna had signed supply agreeements for 520 million doses of mRNA-1273.

Moderna’s vaccines and drugs have the potential to prevent the symptoms of diseases, improving the quality of life of patients as well as reducing the costs associated with treating disease symptoms. Many of its programs have the potential to target diseases where there are no treatments currently available.

– Potential to improve patient outcomes– Potential to improve efficiency of the healthcare system


R&D: US$132.6m

Employees: 10,637

(Y/E Dec 2020)

Sartorius supplies equipment and software to biopharmaceutical companies and research laboratories, with the goal of making the development and production of biopharmaceuticals safer and more efficient. Sartorius is among the first biopharmaceutical suppliers to specialise in single-use technologies.

Sartorius’ portfolio of single-use technologies, which accounts for approximately 57 per cent of revenues, includes a wide selection of equipment ranging from bioreactors to storage bags. Among its other products, Sartorius offers data analytics software for modeling and optimising biopharmaceutical development and production processes.

The biopharmaceutical industry is increasingly adopting single-use technologies due to the cost advantages and greater flexibility compared to reusable technologies. Studies have found that single-use bioreactors could potentially increase productivity by 15–20 per cent due to shorter set-up and processing times, and provide a saving of 22 per cent in total operating costs per batch. These benefits also enable innovation by lowering up front capital costs for smaller biotech innovators. Over a lifetime of use, single-use products use 30 per cent less electricity and 87 per cent less water than stainless steel products.

– Facilitating scientific research– Potential to improve efficiency of the healthcare system

TeladocTelemedicine

R&D: US$164.9m

Employees: 4,400

(Y/E Dec 2020)

Teladoc is the largest telemedicine company in the US, providing hundreds of medical services, such as primary care appointments, expert second opinions, behavioural health support and chronic care management via phone, online and through apps.

Teladoc completed approximately 10.6 million telehealth visits in 2020 in over 175 countries, an increase of 159 per cent from 2019.

Over 73 million people have access to Teladoc’s more than 50,000 registered physiciansin 450 sub-specialities.

Teladoc is transforming the way people access healthcare. Through providing remote healthcare services via phone or video consultations it increases accessibility to healthcare services and helps lower healthcare costs. A 2016 study found that on average, Teladoc’s clients saved US$472 per general medical visit compared to receiving healthcare in other settings for the same diagnosis.

– Reducing healthcare costs– Improving access to healthcare– Potential to improve efficiency of the healthcare system



41


DNA is the fundamental building block of life, encoded with all the information needed for an organism to develop, survive and reproduce. Over the past few decades, scientists have been slowly unravelling the mysteries of DNA, genes and genetics. We now have a much better understanding of what they are, the roles they play within our bodies, their effect upon our health and how we can apply that knowledge to improve health and longevity. With technical advances in DNA sequencing

and computational biology continuing to drive new discoveries, genomic technologies have enormous potential to revolutionise all aspects of healthcare.

Thematic Case Study: Genetics, Genomics and the Future of Healthcare

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Know Your Genomics From Your GeneticsThe iconic double helix of DNA is comprised of strands of paired nucleotide bases labelled G, C, A and T. Regions of DNA contain sequences of these base pairs called genes, which contain the information to produce macromolecules, such as proteins and functional RNAs, that direct all cellular function. The process of creating these macromolecules is called gene expression: a portion of the gene is ‘read’ and a copy of the DNA sequence called messenger RNA (mRNA) is used to code the production of a particular protein.

In humans, the expression of different genes dictates what that cell’s role in the body is. Variations in DNA sequences and gene expression can affect the role and functions of cells and have adverse medical implications, such as causing genetic disorders, increasing susceptibility to certain diseases or affecting drug responses.

Whereas genetics is the study of single genes, genomics is the study of an organism’s complete genetic makeup, its genome. Genomics, the newer of the two fields, has only become possible in the past couple of decades thanks to technical advances in DNA sequencing and computational biology. With genomics, researchers can study more complex diseases, such as heart disease, diabetes and cancer, where the disease is typically caused by a combination of genetic and environmental factors, rather than by individual genes.

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Laying The FoundationIllumina is the global leader in sequencing technologies and has been an enabling force in the field of genomics for over a decade. Its approach to sequencing DNA is the most widely used next-generation sequencing (NGS) technology, which enables millions of DNA strands, and billions of bases, to be sequenced at the same time. Since the company launched its first NGS sequencing system in 2007, the cost of sequencing has dropped by a factor greater than 10,000, and the time to sequence a billion bases has dropped by a factor of approximately 12,000.

As a result, the sequencing and analysis of DNA and RNA has become substantially more accessible to hundreds of thousands of researchers across the world. This has fuelled the discovery of new genes; expanded our understanding of viruses and microbes; provided new insights in how gene variations relate to health, disease and drug response; and helped to unlock new technologies with a range of medical applications.

Combating DiseaseIllumina’s technology helped lay the groundwork for two of our other holdings, Alnylam and Moderna, to develop new and more effective approaches to treat and prevent diseases.

Alnylam is a global biopharmaceutical company which develops therapeutics based on the science of RNA interference (RNAi). This approach utilises a natural process within cells which regulates the expression of mRNAs, which can help reduce the expression of proteins that could adversely impact human health.

The company has four commercially available therapies for rare genetic diseases, such as hereditary ATTR amyloidosis which affects 50,000 individuals across the world, and has six more treatments in late-stage development. Diseases such as these are often too rare for other pharmaceutical companies to target and, as such, Alnylam is helping many thousands of people to lead better lives than they could have before. However, this novel approach to treatments can also be applied to widespread diseases as well. Alnylam has already developed a therapeutic for high cholesterol in partnership with Novartis, and is developing treatments for high-blood pressure, hepatitis B and Covid-19.

Moderna rose to prominence in 2020 after designing a vaccine for Covid-19 within 2 days of receiving the genetic sequence of the coronavirus. Its approach to creating vaccines and therapeutics is to engineer mRNAs outside the human body and then introduce them into patients, where they are translated into proteins that can be recognised by the immune system.

This approach has a wide range of applications. Moderna’s development pipeline includes 27 candidates across 24 different programs. Its Covid-19 vaccine is already commercial, but they have 13 treatments in clinical trials, including vaccines for the Zika and influenza H7N9 viruses and two cancer vaccines which use mRNA to stimulate an immune response against the tumour.

Single-cell Analysis In 2020, we took holdings in two companies revolutionising the field of single-cell analysis and helping to unlock the enormous potential contained within the approach. While conventional sequencing reads the genome of the ‘average’ cell in a sample, single-cell analysis can capture information on the level of individual cells, providing researchers with far greater insight into their nature.


10x Genomics develops machines and software for single-cell analysis. The company’s technology can capture the DNA, RNA, protein and immunological information of each individual cell in the sample and can even spatially map gene expression in 2D across a tissue sample.

This technology has implications across a broad range of research areas, including immunology, developmental biology and cancer research. In a ground-breaking study in 2018, 10x Genomics technology led to the discovery of a previously unknown cell which makes up 1 per cent of the lung cell population, but which produces 50 per cent of the protein and which, when absent, leads to the disease cystic fibrosis. While the location and function of the gene that produced this protein was identified in 1989, it took the advent of single cell sequencing technology to identify those cells where it is expressed.

Berkley Lights develops technologies which enable the analysis and manipulation of individual cells. Using light, their machines manipulate individual cells into their own ‘nanopen’, where they can grow and proliferate. Within these pens, genetic and functional information for tens of thousands of different cells can be captured at the same time, enabling researchers to identify those that perform the best according to their specifications. The cells of the best quality can then be removed, once again using light, for further analysis.

Berkeley Lights’ customer base includes several of the world’s largest biopharmaceutical companies, as well as biotechnology companies, contract research organisation and academic research organisations. This technology is already being used to accelerate antibody discovery and cell line development for the production of new treatments for cancers and autoimmune, metabolic and infectious diseases. The company’s technology holds further potential to reduce the time and cost of developing cell therapies, particularly for the treatment of cancers, and in the field of synthetic biology, where its impact could extend outside of healthcare applications.

While conventional sequencing reads the genome of the ‘average’ cell in a sample, single-cell analysis can capture information on the level of individual cells, providing researchers with far greater insight into their nature.

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Over the last two hundred years, the percentage of the world’s population living in poverty has declined significantly. Yet, progress has slowed in recent years and is at further risk because of the health and economic shock in the wake of the Covid-19 pandemic.

Efforts to define the population still trapped in poverty estimate that around four billion people, more than half of the world’s population, live on incomes of less than US$3,000 per year when measured using Purchasing Power Parity (PPP). This cohort forms a category that’s frequently defined as the Base of the Pyramid. Improving the living standards and prospects of those people is vital to building a prosperous and inclusive world.

Base of the Pyramid

Base of the Pyramid


Bank Rakyat Microfinance

Base of the Pyramid

SafaricomTelecommunication and payments

The ChallengesThe challenges facing the least fortunate in our society are complex and numerous. One common feature, almost by definition, is the absence of economic growth in countries where less fortunate people live. Although economic growth might not be an end in itself, “it makes it possible to achieve other important objectives of individuals and societies. It can spare people en masse from poverty and drudgery.” (Yale Centre for the Study of Globalization). Nowhere is this more clearly illustrated than in China, where economic growth has helped to lift 800 million people out of poverty since the country launched its economic reforms and began opening-up in 1978.

In contrast, countries with persistent poverty often fail to grow. The reasons for this slow economic growth include poor governance, lack of basic infrastructure such as roads and telecommunication, limited financial inclusion, barriers to education and poor access to healthcare. Global economic growth has slowed over the past year, as a result of Covid-19, which has had a disproportionate impact on the poor through job loss, loss of remittances, rising prices and disruptions in already lacking services.

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The impact of geography and the environment on development has been recognised by many researchers. In the 21st century, a new dynamic is added: climate change. The release of greenhouse gases has resulted in rising temperatures and increasing frequency of extreme weather events, such as droughts and floods. The consequences of climate change will be felt most heavily by low-income populations as they lack the resources to prepare for shocks caused by natural disasters. In addition, extreme weather is likely to affect countries that are already poor. Forecasts show that water stress will be most severe in nations in Africa and Asia and rising sea levels will threaten low-lying islands and coastal regions.

Author James Baldwin wrote: “Anyone who has ever struggled with poverty knows how extremely expensive it is to be poor.” This refers to one of the greatest injustices in society – that people on a low-income pay more to access basic resources and services. For example, people on a low-income often face higher credit costs as banks deem them to be riskier or they need to rely on loan sharks.

We are the first to highlight the difficulty we have had in identifying investable opportunities within this category. The lack of new investments in 2020 is in no way reflective of a lack of focus this year. We have continued to research opportunities across Africa, India and other developing regions of the world, as well as in sectors and themes which will be crucial for supporting the poor. One of the areas we continue to look at is financial services and the potential for digital connectivity to unlock positive change at the Base of the Pyramid.

4 billion people, live on incomes of less than US$3,000 per year

People on a low-income pay more to access basic

resources and services

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Positive Change: Part of the SolutionAlthough currently there are only two companies in the Base of the Pyramid theme, many companies in the rest of the portfolio also provide products and services to improve the lives of people on low income. Together, they address the Base of the Pyramid challenges in the following ways:

1. Access to Basic ServicesMany basic services which we take for granted in developed countries remain inaccessible or too costly for low-income populations. Through new technologies and business models, companies are improving access to those services.

— Xylem, in the Environment and Resource Needs theme, manufactures pumps, filters and testing equipment used in modern water infrastructure in developing countries and its step pumps are specifically designed to improve irrigation for smallholder farmers.

— Moderna, in the Healthcare and Quality of Life theme, will provide treatments and vaccines for diseases which disproportionately affect the poor, such as Zika, Chikungunya and HIV.

2. Financial InclusionEnormous progress has been made in increasing access to formal financial services in recent years. Between 2011 and 2017, 1.2 billion people newly-gained access to a basic transaction account. Yet 1.7 billion people remain excluded from any form of formal financial services. Internet connectivity and access to mobile phones will be part of the solution for providing first-time access and expanding the range of financial services available to those living on low incomes. Of course, there remains huge gaps around the world in terms of digital access, affordability and skills. Influencing many of these barriers may be out of our scope but supporting companies that design products to be as inclusive as possible is central to our ambition to see the great promise of digital financial services work for all.

Business practices, including fees and interest rates, must be taken into account as part of the analysis. Within the Positive Change strategy, five companies are selected for their contribution towards improving financial inclusion.

— Bank Rakyat is the largest microfinance provider in Indonesia, where half of the adults remain unbanked. It provides saving, borrowing, insurance and payment services to millions of low-income individuals at a reasonable cost and interest rate.

— Safaricom is Kenya’s largest telecom provider. Its mobile money ecosystem, M-Pesa, has 24.9 million subscribers.

— MercadoLibre and Alibaba, in the Social Inclusion and Education theme, enable access to financial services that build resilience and create opportunities for those living at the Base of the Pyramid.

— HDFC, in the Social Inclusion and Education theme, provides affordable mortgages for lower-income earners, a small portion of which are those living at the Base of the Pyramid.

Base of the Pyramid

© xxx.

© Shutterstock/Rizal Ariawan.

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What are we Missing?We continue to look for more investment ideas in the Base of Pyramid theme. A key challenge is to ensure that companies genuinely target the worst off in society, rather than just operating in countries where poverty is commonplace, and that they can build a strong and defendable business, hence meet both of our objectives. Infrastructure remains an interesting area to explore and there are many overlaps with our work looking at sustainable agriculture. We are seeing some exciting opportunities emerging in the private space and will continue to monitor these companies should they enter the publicly-listed domain.

© xxx.

© Shutterstock/Rizal Ariawan.

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Base of the Pyramid


R&D: US$1.6m

Employees: 88,184

(Y/E Dec 2020)

Bank Rakyat Indonesia (BRI) provides saving, lending, insurance and payment services in Indonesia. It is the largest microfinance provider in the country, where half of adults don’t have access to formal financial services.

Over half of the loans are provided to low-income individuals and small and medium enterprises.

Microloans: 11.8 million borrowers, IDR351tn (US$25bn) of loans underwritten.

In 2020, 83 million people had a Simpedes Account (microsavings account) with BRI.

Microdeposits: IDR336tn (US$24bn).

MSME loans: IDR484.4tn (US$34bn) of loans underwritten.

Microinsurance: 5.7 million people insured.

BRILink processed 728 million transactions worth IDR843tn (US$60bn).

Evidence can be mixed regarding the linkage between microfinance and poverty reduction however studies show that access to financial services can reduce poverty. With the exception of these individual case studies provided by BRI, there is limited data on outcomes. One concern is the use of predatory lending. To this extent, we are comfortable with BRI’s practice as evident by the reasonableness of its interest rate and transaction fees. The fact that nonperforming loans for microbusinesses are consistently low, and in 2020 less than 1 per cent, suggests good affordability.

– Financial inclusion


R&D: N/A

Employees: 6,185

(Y/E Mar 2020)

Safaricom is the largest telecommunication company in Kenya and provides various mobile, financing and connectivity services, with the most well known being M-Pesa, a mobile money ecosystem.

In FY2020, Safaricom had 35.61 million mobile customers, and provided 2G, 3G and 4G coverage to 96 per cent, 94 per cent and 77 per cent of the population respectively.

There were 24.91 million monthly active users of M-Pesa in 2020. In the same year, M-Pesa supported 173,000 merchants and processed KES13.9tn (US$127bn) of transactions.

Safaricom’s Fuliza M-Pesa facility, which enables small short-term loans for customers, is available to 20.8 million users and has dispersed KES245bn (US$2bn) in loans since its launch in 2019.

4.8 million people were able to send, save and spend money on healthcare through M-Tiba.

5 million students have now accessed information and services through Safaricom’s unstructured supplementary service data-based education platform, Shupavu 291.

1.4 million farmers are now users of DigiFarm, a 40 per cent increase since it was established last year, enabling them to conveniently source, transact, learn, and grow their farms.

Safaricom has contributed to greater financial inclusion in Kenya. Since the introduction of M-Pesa in 2007, the percentage of Kenyans with access to formal financial services has increased from 27 per cent to 83 per cent in 2019.

In a 2016 study undertaken by researchers from MIT, it was found that M-Pesa helped households maintain their consumption in the event of an income shock. The study also found that M-Pesa helped to lift 194,000 households (2 per cent of Kenyan households) out of poverty. This effect was more pronounced for female-headed households.

Using KPMG’s True Value Assessment Methodology, Safaricom has estimated that its impact on society in FY2020 has been nine times its profit, contributing 6 per cent to Kenyan GDP and sustaining 1,013,728 jobs.

– Improving access to healthcare – Promoting access to education– Connectivity– Financial inclusion

50


R&D: US$1.6m

Employees: 88,184

(Y/E Dec 2020)

Bank Rakyat Indonesia (BRI) provides saving, lending, insurance and payment services in Indonesia. It is the largest microfinance provider in the country, where half of adults don’t have access to formal financial services.

Over half of the loans are provided to low-income individuals and small and medium enterprises.

Microloans: 11.8 million borrowers, IDR351tn (US$25bn) of loans underwritten.

In 2020, 83 million people had a Simpedes Account (microsavings account) with BRI.

Microdeposits: IDR336tn (US$24bn).

MSME loans: IDR484.4tn (US$34bn) of loans underwritten.

Microinsurance: 5.7 million people insured.

BRILink processed 728 million transactions worth IDR843tn (US$60bn).

Evidence can be mixed regarding the linkage between microfinance and poverty reduction however studies show that access to financial services can reduce poverty. With the exception of these individual case studies provided by BRI, there is limited data on outcomes. One concern is the use of predatory lending. To this extent, we are comfortable with BRI’s practice as evident by the reasonableness of its interest rate and transaction fees. The fact that nonperforming loans for microbusinesses are consistently low, and in 2020 less than 1 per cent, suggests good affordability.

– Financial inclusion


R&D: N/A

Employees: 6,185

(Y/E Mar 2020)

Safaricom is the largest telecommunication company in Kenya and provides various mobile, financing and connectivity services, with the most well known being M-Pesa, a mobile money ecosystem.

In FY2020, Safaricom had 35.61 million mobile customers, and provided 2G, 3G and 4G coverage to 96 per cent, 94 per cent and 77 per cent of the population respectively.

There were 24.91 million monthly active users of M-Pesa in 2020. In the same year, M-Pesa supported 173,000 merchants and processed KES13.9tn (US$127bn) of transactions.

Safaricom’s Fuliza M-Pesa facility, which enables small short-term loans for customers, is available to 20.8 million users and has dispersed KES245bn (US$2bn) in loans since its launch in 2019.

4.8 million people were able to send, save and spend money on healthcare through M-Tiba.

5 million students have now accessed information and services through Safaricom’s unstructured supplementary service data-based education platform, Shupavu 291.

1.4 million farmers are now users of DigiFarm, a 40 per cent increase since it was established last year, enabling them to conveniently source, transact, learn, and grow their farms.

Safaricom has contributed to greater financial inclusion in Kenya. Since the introduction of M-Pesa in 2007, the percentage of Kenyans with access to formal financial services has increased from 27 per cent to 83 per cent in 2019.

In a 2016 study undertaken by researchers from MIT, it was found that M-Pesa helped households maintain their consumption in the event of an income shock. The study also found that M-Pesa helped to lift 194,000 households (2 per cent of Kenyan households) out of poverty. This effect was more pronounced for female-headed households.

Using KPMG’s True Value Assessment Methodology, Safaricom has estimated that its impact on society in FY2020 has been nine times its profit, contributing 6 per cent to Kenyan GDP and sustaining 1,013,728 jobs.

– Improving access to healthcare – Promoting access to education– Connectivity– Financial inclusion



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Base of the Pyramid

Thematic Case Study: Making Financial Services

Work For The PoorFinancial exclusion perpetuates the cycle of poverty and leads to greater economic precarity for those with no access to tools for saving or borrowing. Recognising this, the World Bank

identifies financial inclusion as a key enabler of seven of the 17 SDGs.

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Safaricom and Bank Rakyat, our two investments in the Base of the Pyramid theme, enable financial inclusion in Kenya and Indonesia respectively. Both companies design and deliver products that are specifically appropriate for low-income earners and the poorest in society. Conversations with Safaricom’s Head of Social Impact last year helped us better understand its ‘Tech for Development’ team, which incubates financial service products designed for the poor, often partnering with non-governmental organisations (NGOs) and development organisations. Several of these products have ‘graduated’ from this team and are now used by millions of low-income customers in Kenya.

We are acutely aware that financial inclusion is not a silver bullet for poverty reduction. It is therefore crucial that we look to leading research to help us better assess how a company might serve those at the Base of the Pyramid. One organisation pioneering research into financial inclusion is the Consultative Group to Assist the Poorest (CGAP) whose members include the World Bank and the United Nations Development Programme (UNDP). CGAP has identified a framework for financial inclusion centred around the two intersecting impacts of building resilience and creating opportunity.

Building Resilience

119–124 million The World Bank estimates that

people fell into extreme poverty in 2020

as a result of the economic shock of the

Covid-19 pandemic

Disease, injury, natural disasters, climate impacts and conflict are examples of some economic shocks which cause millions to fall into poverty every year and constrain economic development. Access to certain inclusive financial products can encourage saving and enable financial flows to support people in times of need.

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Savings Accounts

For the 1.7 billion people in the world without access to a bank account, storing additional funds, where available, will be physically in cash or in insecure or depreciating assets, neither of which provides the relative security of a bank account.

Bank Rakyat provides 83 million people with access to its Simpedes accounts, a number which has grown at an average of 13 per cent year-on-year over the time of our investment. Simpedes accounts, which only require a deposit of around US$3.50 to open, can be managed online, offline or using SMS, and are designed to be as accessible and inclusive as possible.

Safaricom’s M-Pesa has pioneered account ownership in Kenya; increasing from 27 per cent in 2006 – at the time of M-Pesa’s launch – to 83 percent of the adult population in 2019. A recent study found a positive association between account ownership and financial resilience among Kenyans. Safaricom has also sought to encourage saving behaviour. Funds saved by 4.8 million people through M-Tiba, can only be spent at registered health clinics, thereby supporting households in times of medical crisis.

Microinsurance

The number of people covered by Bank Rakyat’s microinsurance reached 5.7 million in 2020, increasing by almost 24 per cent in a year. Insurance, through formal risk sharing, has an obvious financial benefit in supporting the resilience of individuals and businesses following certain economic shocks. Safaricom’s DigiFarm platform helps Kenya’s smallholder farmers access production insurance and government subsidies to support this. With East Africa facing an increasingly unstable climate, agri-insurance will help protect livelihoods within an industry that employs over half of Kenya’s population.

Creating OpportunitySustained financial resilience can encourage individuals and businesses to capitalise on economic opportunities, thereby supporting livelihoods and creating jobs. McKinsey estimates that digital financial services have the potential to increase the GDP of all emerging economies by 6 per cent and create 95 million new jobs by 2025. The growth of micro, small and medium enterprises (MSMEs) are at the heart of this and both Safaricom and Bank Rakyat provide services which can support their success.

Mobile Money Payments

Safaricom’s M-Pesa is one of the world’s leading mobile money platforms and in its fifteen years has transformed the way money changes hands in Kenya, particularly for women. For almost 25 million individuals, M-Pesa is much more than a store of funds. It enables people to securely receive and spend money at low cost, including facilitating vital remittances for rural households. In sub-Saharan Africa, 53 per cent of mobile money payments are used for utility bills, incentivising companies to provide

Base of the Pyramid

fourth highest Indonesia has the

unbanked population in the world with around

adults (15+) without access to a bank or mobile money account

50 percentof its

200 million

Safaricom’s Lipa Na M-Pesa is now used by over 170,000 merchants in Kenya, a 40 per cent increase on 2020. Transactions onBank Rakyat’s BRILink also grew by 40 percent in 2020.

54

services to previously underserved areas where fee collection was unavailable. For businesses, digital points of service and mobile money help them to manage accounts and enable commerce, expanding the geographic reach of products and services. Safaricom’s Lipa Na M-Pesa is now used by over 170,000 merchants in Kenya, a 40 per cent increase on 2020. Transactions on Bank Rakyat’s BRILink also grew by 40 per cent in 2020.

Microcredit

Microfinance has long been thought to create opportunities for the poor to invest and grow businesses, but recent evidence and research suggest the reality is much more complex. For those with an entrepreneurial mindset and with existing businesses, small loans spent on assets and working capital have been shown to help people moderately grow companies and increase employment. These MSMEs, which might have previously been considered unbankable, are increasingly able to access loans through digital platforms, such as Bank Rakyat’s BRILink and Safaricom’s M-Shwari and KCB M-Pesa. Not everyone wants to be an

entrepreneur, though, and small amounts of credit can also help people maintain stable access to basic services and can give them the freedom to invest in income-generating assets, such as education.

Safaricom and Bank Rakyat provide many different types of lending, but both have recognised the value and opportunity for impact in the small and short-term loan category. Bank Rakyat’s Super Mikro KUR facility allows almost one million customers to borrow up to around US$700, and Safaricom’s Fuliza provides almost 21 million people with access to credit of up to around US$650. Fuliza has been designed for market sellers requiring very short-term working capital loans of a day or two. These types of loans are not without risk, with relatively high interest rates and the potential for encouraging over indebtedness. However, when compared with traditional bank loans, both are more accessible and more appropriate for the small, short-term borrowing requirements that can allow Base of the Pyramid customers to capitalise on opportunities to improve their lives and livelihoods.

© REUTERS/Thomas Mukoya.

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In Portfolio Snapshots we present aggregated data for the portfolio, represented in two ways:

Headline Impact Data

For those companies that report (either through company reports or via our engagement) the impact of their products and services, we have aggregated data to illustrate how the portfolio holdings are contributing towards delivering positive change.

Significant SDG Contributions

Overleaf we show which companies in our portfolio contribute to the UN Sustainable Development Goals (SDGs).

Important Notes

— Contributions are based on the full year impact of portfolio holdings as at 31 December 2020. For those holdings that have been in the portfolio for less than the full year, no attempt has been made to pro-rate the contribution. Where this applies, it is indicated in the Positive Chains. However, as we have a long time horizon and aim to invest in our holdings for 5–10 years or longer, portfolio turnover will be low.

— Headline Impact Data, while providing an indication of the impact of the portfolio holdings, is susceptible to inconsistencies. These can be caused by underlying assumptions. How companies measure and report is not always uniform and, in some cases, requires conversion to allow for aggregation across the portfolio.

— Where information is not available, we do not include a company’s contribution within the Headline Impact Data snapshot; as such, we believe this provides a conservative estimate. In time we hope to be able to encourage companies to increase their reporting.

the average yearly consumption of drinking water for over 1.6 billion adults

1.2 trillionAllowed customers to save a total of

litres of water E

CO

LA

B /

XY

LEM

In 2020, through provision of products and services, companies are estimated to have:

approximately the population of North and South America at the end of 2020

1 billionDelivered mobile and digital services to at least

people

ALP

HA

BE

T

more than 10 times the population of Kenya in 2020

540 millionContributed to disease prevention for around

DIS

CO

VE

RY

/ M

OD

ER

NA

people

56

EC

OL

AB

/ N

OVO

ZY

ME

S /

NIB

E

ØR

STE

D /

TES

LA

equal to taking 15 million passenger cars off the road per annum

70 millionAllowed customers to save close to

metric tons of CO2e

EC

OL

AB

/ C

HR

. HA

NS

EN

/

KIN

GS

PA

N

a year’s waste for 248,000 UK households

260,000Allowed customers to save over

metric tons of waste

CH

R. H

AN

SE

N /

DE

ER

E &

CO

almost 10 times the land area of the United Kingdom

233 millionHelped farmers engage in better farming practices on

hectares of land

Data for CO2e saved is based on company reporting which is either in CO2 or CO2e; the aggregate data is presented as CO2e as this is the most conservative approach.Data related to money spent on healthcare services, and prevention and treatment of disease is presented to date, covering multiple years.

For Tesla’s CO2e saving, we use the most recent company reported data to calculate outcomes. Further detail can be found in our methodology paper.

AB

IOM

ED

/ A

LNY

LA

M /

DE

XC

OM

/

GL

AU

KO

S /

close to two times the population of San Francisco in 2020

1.7 millionProvided treatment and disease management solutions to approximately

people

approximately one visit every 3 seconds during 2020

M3

/ TE

LA

DO

C

10.9 millionFacilitated

telehealth visits

ME

RC

AD

OLI

BR

E /

SH

OP

IFY

approximately the population of Rio De Janeiro in 2020

13 millionProvided access to online marketplaces for over

merchants

approximately the population of China in 2020

1.5 billionProvided access to financial services to over

people

ALI

BA

BA

/ B

AN

K R

AK

YAT

/ M

ER

CA

DO

LIB

RE

/ SA

FAR

ICO

M

approximately the GDP of Portugal in 2019

US$237 billion

Processed financial transactions worth over

BA

NK

RA

KYA

T /

ME

RC

AD

OLI

BR

E/ S

AFA

RIC

OM

close to the population of New Zealand in 2020

Enabled

SA

FAR

ICO

M

4.8 millionpeople to send, save and spend money on healthcare services

57



Alphabet

Bank Rakyat

HDFC

MercadoLibre

Safaricom

Beyond Meat

Chr. Hansen

Deere & Co

Ecolab

Illumina

Novozymes Ørsted

Safaricom

Sartorius

Teladoc

Tesla

Umicore

10x Genomics

Abiomed

Alphabet

Alnylam

Berkeley Lights

Beyond Meat

Chr. Hansen

Dexcom

Discovery

Ecolab

Glaukos

Illumina

Kingspan

Moderna

NIBE

Safaricom Beyond Meat

Ecolab

Novozymes

Xylem

FDM

Safaricom

Ecolab

Kingspan

NIBE

Novozymes

Ørsted

TeslaAlibaba

ASML

FDM

MercadoLibre

Shopify

TSMC

10x Genomics

Alibaba

Alphabet

ASML

Bank Rakyat

Berkeley Lights

Illumina

Kingspan

M3

MercadoLibre

NIBE

Ørsted

Safaricom

TSMC

Xylem

Bank Rakyat

Safaricom

Alibaba

HDFC

Kingspan

NIBE

Tesla

Umicore

Chr. Hansen

Ecolab

Novozymes

Umicore

Xylem

Beyond Meat

Deere & Co

Ecolab

Kingspan

NIBE

Novozymes

Ørsted

Tesla

Umicore

Positive Contributions

We analyse each holding in the portfolio and map significant contributions from products and services to the SDGs. This allows us to represent the overall contribution of the portfolio to the SDGs.

Beyond Meat

Deere & Co

Beyond Meat

Deere & Co

Alibaba

58

Ørsted

While the forward-looking goals of the business are wholly positive, Ørsted still operate some fossil fuel facilities as its transition to renewable power is underway. These fossil fuel sources have a negative effect on climate change and on air quality. The green share of energy generation is currently at 90 per cent, and Ørsted has a target to eliminate coal-fired power generation by 2023, at which point its green share of energy generation will be equal to or above 95 per cent of generation. Given the progress that Ørsted have already made, their strong targets for decarbonisation of their energy generation, and the small contribution to revenues that fossil fuel fired power generation makes, we are comfortable that Ørsted’s overall contribution to the SDGs is positive.

Kingspan

Kingspan’s insulation has been shown to improve housing conditions through better heat retention. However, when insulation is installed, it is done so in a system that comprises the building frame, cladding and insulation. When that system is not in line with the specifications of Kingspan’s product it can, in extreme circumstances, have negative effects on fire safety which can have disastrous consequences as evidenced by the Grenfell Tower fire disaster in 2017.

Ecolab

As of 2020, Ecolab no longer provides services for customers in energy exploration and production, or any other upstream hydrocarbon processes. However, approximately 50 per cent of Ecolab’s revenues come from its Global Industrial segment which includes serving customers in the downstream energy, refining and petrochemical industries. In many cases Ecolab’s contribution to these industries is to improve energy and water management, improve sustainability and minimise pollution, therefore providing a positive environmental contribution. In some cases, products are process aids that enable customers to profitably and reliably refine fuels and process petrochemicals. It can therefore be argued as having a negative contribution to climate change by supporting the fossil fuel industry. The breadth of positive impact that Ecolab has across the remainder of industries that it works with is considered to more than compensate for the proportion of activities within the energy industry that could be considered to be negative.

NIBE

NIBE Industrier’s Stoves segment, which accounts for 9 per cent of revenue, sells wood and gas-fired stoves for residential and commercial properties. Gas is a fossil fuel and wood, although renewable, does release particulates resulting in negative effects on air pollution and climate change. NIBE claim that its good combustion technology limits these emissions, and the company have state of the art technology, producing optimum combustion, and its stoves products already meet the latest eco-design requirements that will be introduced in 2022. Overall, we are confident that the negative aspects of wood and gas-fired stoves are not sufficiently significant to detract from the positive change case of the other, much larger, segments of the business that are providing a positive contribution to addressing climate change through sustainable energy products.

Bank Rakyat

Bank Rakyat have been criticised by NGOs in recent years for their involvement in financing palm oil plantations and coal fired power plants with negative effects on climate change and biodiversity. However, it must be acknowledged that the extractives and agricultural sectors in Indonesia are extremely large and therefore it is perhaps unrealistic to expect that they would not have any exposure given their role as a state-owned enterprise. We have engaged with Bank Rakyat regarding its approach to environmental and social due diligence and the company have confirmed that it will follow government guidelines regarding sustainable banking which include avoiding companies who are on various government ‘black lists’, ensuring environmental permitting is in place, and ensuring companies engaged in palm oil activities have an Indonesian Sustainable Palm Oil or a Roundtable on Sustainable Palm Oil certificate. The corporate loan book is much smaller than that for the micro segment and it is the latter that drives the positive change case for the company.

Deere & Co

Modern agricultural practices have been linked to climate change and biodiversity loss on land and in watercourses through the use of chemical fertilisers, pesticides, and equipment emissions. As a producer of agricultural equipment, Deere & Co is complicit in enabling these impacts. However, industrial agricultural systems are central to feeding the world and we acknowledge the positive change Deere & Co is bringing through its new technologies which limit these impacts, and commend the company for the direction it is taking.

Negative Contributions

Important Notes

— Our SDG mapping is underpinned by using the 169 targets that sit below the 17 SDGs. SDG mapping is the output of our philosophy and process and will change as the composition of the portfolio changes. The portfolio currently addresses 16 SDGs.

— Our SDG mapping incorporates significant contributions that companies are making via their products and services only. It does not encompass the business practices of our holdings.

— Our explicit aim is to identify and hold companies for their positive contributions. Accordingly, the number of holdings we found to be making a significant negative contribution to the SDGs through their products and services is less than those holdings making positive contributions.

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Where to From Here?As we look ahead, next year will mark five years of Positive Change. For such an occasion, we plan to provide readers with a progress report, detailing the continued positive change companies within the portfolio have had during our time as impact investors. We are confident in our approach and continue to push the boundaries of expectations for impact reporting. As ever, feedback is welcomed so we do hope you will contact us with your thoughts at [email protected]

We strive for continual evolution (not revolution) and our customary bid for patience feels a fitting end note. In an age when many of us have had to endure rapid change in the way we live our lives, and injustice rages around us, it becomes easy to slip into impatience. Tackling the global sustainable development challenges is complex and will take years, if not decades, so we would urge you to maintain a long-time horizon when assessing impact. Change takes time and we still firmly believe that over the long run purpose complements profits.

Next Steps60

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South Africa

Baillie Gifford Overseas Limited is registered as a Foreign Financial Services Provider with the Financial Sector Conduct Authority in South Africa.

62

Canada

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No transactions will be concluded in your jurisdiction and any inquiries regarding the strategy should be made to Baillie Gifford.

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Baillie Gifford Overseas is not licensed under Israel’s Regulation of Investment Advising, Investment Marketing and Portfolio Management Law, 5755-1995 (the Advice Law) and does not carry insurance pursuant to the Advice Law. This document is only intended for those categories of Israeli residents who are qualified clients listed on the First Addendum to the Advice Law.

63

Independent Limited Assurance Report to Baillie Gifford & Co KPMG LLP (‘KPMG’ or ‘we’) were engaged by Baillie Gifford & Co (‘Baillie Gifford’) to provide limited assurance over the Selected Information described below for the year ended 31 December 2020. Our conclusion Based on the work we have performed and the evidence we have obtained, nothing has come to our attention that causes us to believe that the Selected Information has not been properly prepared, in all material respects, in accordance with the Reporting Criteria. This conclusion is to be read in the context of the remainder of this report, in particular the inherent limitations explained below and this report’s intended use. Selected Information The scope of our work includes only the information included within the Baillie Gifford Positive Change Impact Report and the online version of the Positive Change Impact Report, found at https://magazine.bailliegifford.com/PositiveChangeImpactReport2020/ (together, ‘the Reports’) for the year ended 31 December 2020, and consists of the four ‘The Positive Chain’ sections, the ‘Portfolio Snapshots: Headline Impact Data’ section, and the ‘Portfolio Snapshots: Significant SDG Contributions’ section (collectively ‘the Selected Information’). These sections are marked with the symbol ⵠ within the Reports. We have not performed any work, and do not express any conclusion, over any other information that may be included in the Reports or displayed on Baillie Gifford’s website for the current year or for previous periods unless otherwise indicated. Reporting Criteria The Reporting Criteria we used to form our judgements is set out in the Baillie Gifford Positive Change Fund Impact Measurement Methodology, which can be found at https://www.bailliegifford.com/literature-library/funds/oeics/positivechange-fund/positive-change-fund-impact-measurement-methodology. The Selected Information needs to be read together with the Reporting Criteria. Inherent limitations The nature of non-financial information; the absence of a significant body of established practice on which to draw; and the methods and precision used to determine non-financial information, allow for different, but acceptable evaluation and measurement techniques and can result in materially different measurements, affecting comparability between entities and over time. Partners’ responsibilities The Partners of Baillie Gifford are responsible for:

• designing, implementing and maintaining internal controls relevant to the preparation and presentation of the Selected Information that is free from material misstatement, whether due to fraud or error;

• selecting and/or developing objective Reporting Criteria; • measuring and reporting the Selected Information in accordance with the

Reporting Criteria; and • the contents and statements contained within the Reports and the

Reporting Criteria.

Our responsibilities Our responsibility is to plan and perform our work to obtain limited assurance about whether the Selected Information has been prepared in accordance with the Reporting Criteria and to report to Baillie Gifford in the form of an independent limited assurance conclusion based on the work performed and the evidence obtained. Assurance standards applied We performed our work in accordance with International Standard on Assurance Engagements (UK) 3000 – ‘Assurance Engagements other than Audits or Reviews of Historical Financial Information’ (‘ISAE (UK) 3000’) issued by the Financial Reporting Council. That Standard requires that we obtain sufficient, appropriate evidence on which to base our conclusion. The work performed in a limited assurance engagement varies in nature and timing from, and is less in extent than for, a reasonable assurance engagement. Consequently, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would

have been obtained had a reasonable assurance engagement been performed. Independence, professional standards and quality control We comply with the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants and we apply International Standard on Quality Control (UK) 1, ‘Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements’. Accordingly, we maintain a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements and professional standards (including independence, and other requirements founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour) as well as applicable legal and regulatory requirements. Summary of work performed Considering the level of assurance and our assessment of the risk of material misstatement of the Selected Information, whether due to fraud or error, our work included, but was not restricted to:

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• reading the Reports and narrative accompanying the Selected Information in the Reports with regard to the Reporting Criteria, and checking consistency with our findings.

This report’s intended use

This assurance report is made solely to Baillie Gifford in accordance with the terms of the engagement contract between us. Those terms permit disclosure to other parties, solely for the purpose of Baillie Gifford showing that it has obtained an independent assurance report in connection with the Selected Information. We have not considered the interest of any other party in the Selected Information. To the fullest extent permitted by law, we accept no responsibility and deny any liability to any party other than Baillie Gifford for our work, for this assurance report or for the conclusions we have reached.

KPMG LLP Chartered Accountants London 30 June 2021 The maintenance and integrity of Baillie Gifford’s website is the responsibility of the Partners of Baillie Gifford; the work carried out by us does not involve consideration of these matters and, accordingly, we accept no responsibility for any changes that may have occurred to the reported Selected Information, the Reporting Criteria or the Reports when presented on Baillie Gifford’s website.

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