Cameron Squadrito joined Pendal’s Income & Fixed Interest team as an assistant portfolio manager in March 2026.

Cameron has worked closely with the Pendal team for more than five years, most recently as a senior dealer and brings with him extensive markets experience.

Cameron’s role includes supporting the team in enhancing the models, indicators and frameworks that inform our active investment decisions, as well as the day-to-day management of the portfolios.

Cameron is a CFA Charterholder and holds a Bachelor of Economics from the University of Sydney.

The net-zero movement is driving a ‘circular economy’ which presents opportunities for investors to make money and make the world better, argues Regnan’s MOHSIN AHMAD

• Circular economy crucial to net zero
• Companies with a technology edge are favoured
• Reverse-vending machine maker TOMRA aims to convert trash to cash
• Find out about Regnan Global Equity Impact Solutions fund

BY NOW most people know they need to understand the impact of the “net zero” movement on their investments.

Countries including Australia are pressuring companies to help reduce emissions to zero by 2050 – in order to limit a global temperature rise to 1.5 degrees Celsius above pre-industrial levels.

Science shows that’s the level needed to avert the worst impacts of climate change.

But “impact investors” also believe many activities needed to achieve net zero are an investing opportunity.

“In terms of getting to net zero, energy efficiency and switching to renewables is only going to solve half the problem,” says Mohsin Ahmad, a fund manager with sustainable investing leader Regnan.

“To get the rest of the way, we need to look closely at how we make and use products, and that’s where the circular economy comes in.”

What is the circular economy?

The circular economy is all about moving away from a linear model that we have known since the dawn of the industrial revolution, whereby we extract, we produce and we discard.

“It’s about producing more efficiently, repurposing waste, using more renewable inputs and ultimately that leads to less greenhouse gas emissions” Ahmad says.

It is also an investable trend.

From a portfolio perspective, there are three different angles, says Ahmad:

1. “One is to invest in companies that facilitate a more efficient production of goods and services
2. “Then there are companies that are enabling recycled inputs, renewables and biodegradable type solutions.
3. “And then there are companies that leave the ecosystem in better shape.”

Ahmad says one of the lessons from recent years is that companies that can help reduce natural resource intensity will be winners in the short term.

“These are companies that help others to minimise their input requirements and deal with some of the inflationary pressures currently prevalent.

“They will also be winners longer term because of their contribution to lowering greenhouse gas emissions.

“If we are going to speed up the transition to net zero, these companies play an important role in addressing the systemic challenge of climate change we face,” he says.

Stock story: Dürr

An example of one such company is German engineering firm Dürr, argues Ahmad.

Dürr is held in Regnan Global Equity Impact Solutions fund.

“They provide solutions to automotive and other industrial customers to improve their resource efficiency of production,” Ahmad says.

“One of the main areas they are focused on is paint application in the automotive space which is very energy and water intensive.

“About 70 per cent of the total energy consumption at an automotive assembly facility takes place in the paint shop. What Dürr has done is to significantly reduce the environmental impact of paint shops.

“They’ve been able to achieve a 67 per cent reduction in energy input in paint shops, a 71 per cent reduction in water, a 73 per cent reduction in volatile organic compounds and a 36 per cent reduction in the amount of paint being used,” he says.  

Watch this video to find out more:

Where to start

Investing in circular economy companies starts with understanding the United Nations Sustainable Development Goals, and then finding a company that addresses at least one of the underlying targets in a meaningful way, says Ahmad.

“Then we look for additionality.

“Is the company doing something that’s differentiated? Have they got a technology edge? Are they doing something innovative?

“We also like companies that are in the relatively early stages of adoption of the new technology with large addressable markets.

“Companies where penetration rates are just starting to kick off and there’s a long path of growth ahead.”

Find out more about Regnan Global Equity Impact Solutions fund.

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About Mohsin Ahmad

Mohsin is a fund manager with Regnan’s impact investment team. He focuses on Regnan Global Equity Impact Solutions Fund. Before joining Regnan, Mohsin was a senior analyst working on the Hermes Impact Opportunities Equity Fund. He has worked on thematic equity funds such as water, clean energy and agriculture.

Understanding the downstream impact of a business’s actions is key to sustainable investing. Regnan’s MOHSIN AHMAD explains why

• Watch out for second-order effects of sustainable solutions
• A system-wide view required
• Find out about Regnan Global Equity Impact Solutions fund

YOU may have heard sustainable investors refer to the second or third-order effects associated with a business.

Understanding a business’s downstream impacts — sometimes referred to as “externalities” — is a key concept in sustainable investing. (Pendal CEO Richard Brandweiner explains the idea here).

Sustainability proponents can often fail to account for these effects when promoting a new solution.

That means responsible investors need to take a wide, system-level view when considering challenges like climate change and food security, says Regnan’s Mohsin Ahmad (pictured below).

“It’s not just farm-to-fork,” says Ahmad, who co-manage’s Regnan Global Equity Impact Solutions fund.

“It’s what happens before the farm — with a farm’s suppliers — and what happens after the fork — how a consumer manages recycling and food waste.”

This week London-based Ahmad was in Sydney to address Regnan’s Director Roundtable on Sustainable Agriculture, a meeting of top executives and directors seeking to improve agricultural and food production practices.

Second-order impact

Ahmad uses the example of biodiesel — a renewable and biodegradeable fuel — to illustrate how second-order effects can play out.

“Biodiesel reduces greenhouse gas emissions by 72 per cent versus conventional diesel,” he says.

“On the face of it, that sounds great.

“But when you look at the system-wide effect of everyone moving to biodiesel, there’s a lot more that’s going on when you scratch the surface.”

Land needs to be diverted from food production to produce biodiesel. Often, this requires deforestation and reduces biodiversity.

Forests are often replaced with monoculture which reduces the soil’s ability to sequester carbon. There are also knock-on effects in terms of chemical usage which generates run-off that pollutes waterways.

The net, system-wide result is that climate change is exacerbated, biodiversity reduced and food security risks rise as a result of wide biodiesel adoption, says Ahmad.

Positive impact

Second-order effects are not always negative, however.

Regenerative farming is often criticised as a high-cost approach with lower yields than industrial farming methods.

“That may well be true near-term. But what it doesn’t take into consideration is the system-wide positive effects of regenerative farming practices,” says Ahmad.

“The fact that you’re not using chemicals or you’re using less chemicals means there’s less pollution going into the waterways and less fossil fuel for fuel usage because many of these chemicals are produced based on hydrocarbons.

“There are benefits from a climate mitigation perspective and a biodiversity perspective… but also from the perspective of the soil health as well.

“Those practices, the evidence shows, improve the organic content of the soil which means there’s greater potential for carbon sequestration.

“It also means that there’s more water retention, your crops are healthier and as a result yields over time over the long run will actually improve based on regenerative farming practices.

“So, you can have this positive feedback loop as well.”

Ahmad says this means investors need to take a wide approach and pick solutions that are genuinely going to have a positive effect on whole system.

Read more about sustainable agriculture investing in Regnan’s Catalysing Sustainable Agriculture and Food Production report.

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About Mohsin Ahmad

Mohsin is a fund manager with Regnan’s impact investment team. He focuses on Regnan Global Equity Impact Solutions Fund. Before joining Regnan, Mohsin was a senior analyst working on the Hermes Impact Opportunities Equity Fund. He has worked on thematic equity funds such as water, clean energy and agriculture.

Regnan’s impact investing team looks for companies that are well-placed to solve the world’s biggest problems. This is the story of one of those companies, British battery developer Ilika.

• More efficient batteries will revolutionise transport
• Solid-state batteries are at the cutting edge of technology
• Ilika is one of the few listed players in the sector

A FEW big problems are holding back the mass adoption of electric vehicles — and they’re mainly related to battery technology.

Electric vehicle batteries are slow to charge compared to pumping petrol. And they don’t store enough energy for long drives.

British innovator Ilika is developing solid-state battery technology to address both these problems.

“Innovative technologies are providing a solution to better batteries,” said Regnan’s Mohsin Ahmad. “This is the next big leap.”

Battery technology goes back a long way.

In 150 BC in Mesopotamia, the Parthian culture used a device known as the Baghdad battery, made of copper and iron electrodes with vinegar or citric acid. While they were probably used mainly for religious ceremonies, they were also the first known batteries.

Ever since, society has worked to create more efficient batteries – a race that’s been supercharged in recent decades with the development of renewable energy and electric vehicles.

“Batteries are the Holy Grail,” says Mohsin Ahmad, a fund manager in Regnan’s Equity Impact Solutions team. “It’s why we’ve taken a position in Ilika.” (Find out more about Regnan Global Equity Impact Solutions Fund here.)

British-based Ilika is a pioneer in the development of solid-state battery technology.

Lithium ion batteries commonly found in mobile phones have a liquid electrolyte solution keeping the cathode and anode apart.

On the other hand solid state batteries use a solid electrolyte which plays the role of separator, enabling the delivery of much higher energy density.

The benefits range from sharply faster charging rates and longer life cycle and storage rates, to improved safety and easier recyclability, Ahmad says.

Commercial applications

The potential market for solid state batteries is huge — and Ilika has two main targets.

The first is micro batteries used in medical devices and Internet of Things nodes.

The market for medical devices is huge and growing, and the benefits of long life, tiny batteries are clear. Ilika hopes to be producing micro-batteries for commercial use from next year.

The Internet of Things nodes are the infrastructure that will eventually allow driverless cars and communication between objects. While still further away, the potential is huge.

The second target market is electric vehicles (EVs). As Europe and North America continue to mandate far greater use of EVs, solid state lithium cells have the potential to achieve extended range and faster charging – two of the biggest impediments to sales and usage.

“There’s not many pure-play listed players that are focused on solid state batteries. Ilika has a number of partnerships with OEMs [original equipment manufacturers] including Honda, Jaguar, Land Rover and McLaren,” Ahmad says.

“We don’t think the market is appreciating the potential of micro batteries. These tiny batteries can go into implantable medical devices, they can be used in manufacturing facilities, and they can operate at high temperatures.

“They can enable Industry 4.0. Ilika has relationships with customers already and they are expecting first production next year.”

Making good progress

Production of batteries for EVs is still five or six years away, Ahmad says, but they are making good progress and the potential is huge.

“The battery can be one of the biggest cost components of an electric vehicle, and particularly while EV charging infrastructure is still being built, it would solve the ‘range anxiety’ problem,” he says.

Ilika has a bet on EVs and that is a very big potential market. There are also opportunities in medical devices and the Internet of Things.  Other potential applications could include wind turbine blade testing and wireless automotive sensors.

“That makes it an attractive investment proposition, Ahmad says.

“This is the next big leap, and it’s only a matter of time before the technology provides a commercial solution to better batteries.”

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About Mohsin Ahmad

Mohsin is a fund manager with Regnan’s impact investment team. He focuses on Regnan Global Equity Impact Solutions Fund. Before joining Regnan, Mohsin was a senior analyst working on the Hermes Impact Opportunities Equity Fund. He has worked on thematic equity funds such as water, clean energy and agriculture.

Half of all Australian advisers are expected to offer sustainable investing products by next year as interest in green and social bonds grows. Pendal’s Murray Ackman explains why

• 50% of advisers will offer responsible products next year; two-thirds by mid-2020s
• Green, social and sustainability bonds issues growing rapidly
• Not all bonds are alike — investors should watch ‘bang for buck’

A LITTLE over a decade ago, a group of Swedish pension funds phoned the World Bank looking for a way to lend money to projects fighting climate change. The result was the first ever Green Bond.

Today, it’s a market that is growing rapidly.

The number of green, social and sustainability bonds issued in Australia in the first half of 2021 almost equalled the total for 2020.

The variety of issuers is growing too, with more than 30 different institutions issuing bonds across a wide range of sectors.

“This is a market that is becoming more sophisticated and we’re pleased to be able to participate in this fast-growing market,” says Murray Ackman, a credit ESG analyst at Pendal Group. (ESG stands for Environmental, Social and Governance).

“We believe the future of investing will continue to be directly funding impact to benefit our environment and the less fortunate.”

So what is a green bond? And how can they play a part in a well-constructed portfolio?

Fundamentally, the term green bond refers to a bond issued to raise finance for a climate-related solution such as clean energy or energy efficiency.

Similarly, a social bond raises finance for an initiative that aims to improve social outcomes in the community like affordable housing or support for indigenous people. You can read here about a social bond that helped put a roof over the head of Sam and his family.

Green bonds can form an important part of a responsible investing portfolio. Financial advisers are rapidly turning towards responsible investing, according to industry researcher Wealth Insights.

About 40 per cent of Australian advisers now offer responsible or sustainable investing products to their clients. This is expected to rise to 50 per cent by next year — and two-thirds by the middle of the decade.

Pendal participated in a few different types of bonds this year, including a bond issued by the Asian Development Bank which funds projects that improve gender equality and women’s empowerment, known as a gender bond.

The funds raised will be used in projects including training and financing women entrepreneurs in Sri Lanka and providing vocational training to women in Laos.

Other types of green bonds include the Climate Awareness Bond from the European Investment Bank, the lending arm of the European Union.

This bond funds renewable energy and energy efficiency projects across Europe, including an offshore wind farm near Portugal, a battery factory in Poland and an energy efficient shopping centre and railway station in Finland.

Closer to home, the NSW Treasury Corporation Green Bond funds green projects including low carbon transport and buildings, renewable energy and land conservation.

Elsewhere in Australia, the National Housing Finance and Investment Corporation provides cheaper and longer financing to community housing providers to increase the amount of affordable and social housing in Australia.

How can green, social and impact bonds play a part in a portfolio?

Ackman says the performance of green bonds shows they can take the place of traditional bond allocation in a portfolio – and that many investors are taking a broader look at the market.

“We’re finding more and more clients incorporating funds that invest in green, social and sustainable bonds as part of their normal bond allocation,” he says.

When choosing which bonds to invest in, Ackman cautions against simply investing in any bond that says it will bring about an impact.

“We have a rigorous process where all criteria must be met before we can invest. Our impact goals are to find investments that seek to achieve targeted environmental and social outcomes in addition to financial returns,” he says.

Sometimes, the other activities of an issuer can be a warning sign.

“We won’t even look at an impact bond if we’re not happy with the issuer. A tobacco company with a green bond to recycle packaging would not pass our screens or our sniff-test of a sustainable issuer.

“With use of proceeds bonds, we must be happy with the underlying projects.”

Ackman says he has seen a number of impact bonds that ostensibly would support people who impacted by COVID.

“However, after looking a bit closer, we determined these weren’t the types of bonds we wanted to invest in as there were really just repackaged vanilla bonds.”

The other important thing to consider is how much impact the bond will have, what Ackman calls the ‘bang-for-buck’.

“We have an impact database so we calculate and compare how much impact we are helping to achieve by each bond.”

Read the green, social and sustainability bond full report here

Significant Features: The Pendal Active Long Volatility Fund is managed to generate excess returns from exposure to rising volatility across selected currency, equity and commodity markets. The strategy employs a long volatility approach to achieve this outcome.

Fund Objective: The Fund aims to provide a return (before fees, costs and taxes) that exceeds the RBA Cash Rate by 4-6% per annum over the medium to long term.

Here’s what’s driving Australian equities this week according to Pendal’s head of equities Crispin Murray. Reported by portfolio specialist Chris Adams.

THE FIRST week of reporting season was largely positive, helping Australian equities outperform other markets.

At this point there seems to be surprisingly low levels of concern about the impact of local lockdowns. The S&P/ASX 300 gained 1.33% last week and the S&P 500 was up 0.75%.

Things were quiet on the macro front. US inflation data was strong — but in line with expectations. The focus remains on Delta and the potential implications for economic growth.

Bond yields were stable and there was a small rotation away from growth stocks.

COVID outlook for Australia

The market is grappling with two aspects of the domestic Covid outbreak.

First, the risk that Melbourne also lapses into extended lockdown. This would mean effectively half the nation’s economy was affected by restrictions.

The second issue is speculation on the timing of an easing in restrictions, which is related to vaccine penetration.

Vaccination rates continue to rise — up from 0.74% of the population per day last week to 0.87% now.

NSW is running at more than 1% daily. We could see the rest of the nation reach this point in September as greater supply becomes available. This would be in line with the peak rates of vaccination in other regions.

Simple extrapolation of 1% daily gets us to 70% of the population vaccinated in the first week of October and 80% two weeks later.

The impact of restrictions — combined with the effect vaccinations have on transmission — suggests we could see a reasonable degree of re-opening in October or November.

The question is whether governments will be willing to tolerate a material number of Covid cases, assuming hospital systems are able to handle the pressure.

The link between vaccinations and lower severity of Delta cases — and hence less pressure on medical systems — remains evident in the UK and Israel.

The degree of hospitalisations in these countries equates to 2000 to 2600 hospital patients in Australia, compared to the sub-400 level we see here now. This highlights the policy dilemma we face.

Covid outlook for the US

In the US case numbers and hospitalisations continue to rise.

This reflects a disparity on vaccination rates among the States since fewer than 2% of admissions are fully vaccinated. It also reflects a less systematic approach to protecting vulnerable Americans.

The question is whether the US will follow the Indian and UK path. If so, cases should peak in the next two to three weeks.

This is important given the pressure building on hospital capacity. About a quarter of Americans live in areas where ICU occupancy is running higher than 85%.

Covid outlook for China

The situation in China appears to be stabilising. Seventeen provinces have reported outbreaks — the same as last week — and reported cases are falling.

However the hard measures used to clamp down on the outbreak have come at an economic cost.

The Chinese port of Ningbo-Zhoushan — the world’s biggest by bulk commodity volume — has been largely closed since August 11. Containers are now re-routed through Shanghai, creating greater global supply chain delays. (Ningbo-Zhoushan is the world’s third-busiest container port).

Beijing’s policy response will be important to watch.

Short-term measures include permit renewals for coal mines and extra steel capacity. Priority is placed on supporting activity and economic growth even though the tools are at odds with longer-term policy objectives of more balanced and greener growth.

Economic outlook

There are clear signs that Delta is starting to weigh on business and consumer confidence in the US. Surveys on both measures have turned down recently.

The US CPI print showed year-on-year inflation remains above 5%. While high, this is the first time it did not exceed consensus expectations in recent months.

This signals that some drivers of recent inflation — such as used auto prices — are starting to recede.

On the other hand areas such as shelter — which may drive more persistent inflation — are starting to pick up. 

Market highlights

Concerns over slowing economic growth are reflected in bond yields (which remain well supported) and softness in commodities.

There was an unusual “flash crash” in gold last Monday, when a large seller hit the market during an illiquid Asian time zone. Gold fell 4% before bouncing off the US$1680/ounce support level. This reinforces current scepticism in the metal.

Australian equities outperformed global indices last week after a decent start to reporting season.

Broadly, we are seeing better earnings and higher distributions than expected. Most importantly, a lack of excessive caution among companies regarding the current economic outlook and lockdowns is reassuring the market.

Gold stocks were generally weak following price volatility. Northern Star (NST, -6.5%) was the worst performer in the S&P/ASX 300. Evolution (EVN) was down 4.9%.

REA Group (REA, -6.1%) delivered a reasonable result, though the market focused on management’s note that Sydney listings were down 22% in July due to lockdowns. The fact that lockdowns saw 40-50% falls in Melbourne listings last year shows the industry is getting better at managing this issue.

REAemphasised how quickly the market has consistently bounced back from previous lockdowns. The property website has a number of longer-term growth opportunities, including data and insight services as well offshore ventures in India and the US.

Transurban’s (TCL, -5.8%) revelation of a $3.3 billion cost blow-out on Melbourne’s West Gate project — off an initial cost base of $6.7 billion — disappointed the market. The toll road operator conceded it would have to bear some of the pain in covering these costs to achieve some resolution on the issue. This was despite claiming that the blame lies with the government and contractor.

The market is also wary about the impact of lockdowns on traffic volumes, though this has little impact on longer-term valuation. TCL may need to raise capital if it successfully buys out the remainder of the Westconnex project.

QBE (QBE, +12.1%) was the best performer on the ASX 100 last week. It delivered its first well-received result for some time. Insurance premium growth is driving strong revenue momentum. Costs remain under control, supporting an earnings recovery. QBE is attractively valued in this light — well below historical relative valuations — which helped drive a strong stock price response.

Elsewhere in insurance we saw results from Suncorp (SUN, +8.4%) and IAG (IAG, +8.8%). SUN is enjoying revenue momentum and flagged a constructive outlook for insurance margins. This is allowing strong capital return, with a payout ratio at the top end of expectations, a special dividend and a market buyback.

IAG’s result was less compelling, having pre-announced. It is demonstrating lower revenue growth and less clear cut margin improvement than peers. Nevertheless, the stock reaction reflects more confidence in the insurance sector.

Downer’s (DOW, +12%) result was good. Free cash flow was strong and the company is buying back stock. Markets fears around wage pressure and the impact of lockdowns largely failed to materialise. DOW has successfully shifted from a capital-intensive model with unpredictable earnings and a large exposure to mining service contracts, to a more predictable urban services business with lower capital intensity. We expect this to improve the valuation rating over time.

James Hardie’s (JHX, +6.2%) result for 1Q FY22 demonstrated how a strong, well-managed franchise operating with cyclical tailwinds can deliver more operational leverage than the market expects.

The combination of a supportive cycle, higher pricing, more favourable product mix and gains in market share saw JHX grow revenue 21% versus the same quarter in FY19. Management guided to 20% revenue growth for the full financial year.

The longer term outlook is positive. There is an emphasis on gaining share in the home remodelling market in regions such as the north-east US, where JHX has not previously done as well.

Telstra (TLS, +4.2%) was largely in-line with expectations. The Network Applications and Solutions (NAS) division slightly disappointed. But the clear message was the rebasing of earnings as a result of NBN was over and earnings were now growing.

Mobile is key. It grew 18% in the second half, with average revenues per user increasing. This should continue to flow through, as will more cost-out. Further detail is expected in a September Investor Day. The dividend looks underpinned and may grow. TLS is returning some proceeds of their asset sales via buy-back.

Elsewhere Commonwealth Bank (CBA, +0.3%) beat the market’s earnings expectations, largely due to lower provisioning for bad debts. It is performing better than the other big banks in terms of loan growth, particularly in the small business sector.

Overall this did not translate into much growth in revenue or pre-provision profits due to margins and higher costs as the company invested in its digital shift. Whether this is an opportunity to differentiate itself from the other banks, or more a defensive move in response to competition from other payers, is key area of debate.

CBA’s outlook for margins was subdued, which weighed on the stock. On the plus side, it announced a $6 billion buy-back and flagged no significant concerns from current lockdowns. CBA remains on a punchy valuation despite limited growth opportunities. We continue to prefer other names in the financials space.

National Australia Bank (NAB, +3.8%) provided a quarterly update. There was little new information, but cash earnings were running higher than market expected and margins remained stable. Costs and impairments were both a bit lower than expected.

Goodman Group (GMG, -3.1%) grew EPS 14%, but disappointed a market which was looking for an upgrade to FY22’s guidance of 10% earnings growth. It continues to do well operationally and the development pipeline is strong as are assets under management.

A fall in cap rates has revalued their portfolio upwards. This means an upgrade may only be a matter of time. However a valuation over 30x P/E is factoring in a lot of good news.

Finally, AGL (AGL, +0.3%) reminded the market of the challenges it faces, with earnings guidance for FY22 coming in 15% lower than market expectations. The big issue is the company’s path out of trouble, given earnings declines and excess debt.

A demerger remains planned, but it is clear the company is under-capitalised given the pressure on earnings and remediation costs of future plant closures. Ultimately this will need some form of policy from the government to help underwrite the outlook, but we have no certainty this will occur.

About Crispin Murray and Pendal Focus Australian Share Fund

Crispin Murray is Pendal’s Head of Equities. He has more than 27 years of investment experience and leads one of the largest equities teams in Australia. Crispin’s Pendal Focus Australian Share Fund has beaten the benchmark in 12 years of its 16-year history (after fees), across a range of market conditions.

Pendal is an independent, global investment management business focused on delivering superior investment returns for our clients through active management. 

Find out more about Pendal Focus Australian Share Fund here.  

Contact a Pendal key account manager here.