[INVESTMENT] MEMO – 21.07.2021

It is very difficult to find some attractive investments in the market at the moment. The market now is a bit heated. This month, I have no plan for any investment or to add any position to my current portfolio. But I am still closely watching over some Chinese tech companies like $03690.HK (Meituan Class B) , $BABA (Alibaba) and $0700.HK (Tencent) because some of them may be a bargain now to add to my current portfolio. ESG Lately I came across a YouTube ( $GOOG (Alphabet)) video talking about ESG. Out of curiosity, I dived into this topic and read a lot about ESG. What is “ESG”? ESG is the acronym for Environmental, Social and Governance where investors used these three (3) broad categories to measure the ethical impact and sustainability of investment in a company.

ENVIRONMENT – Environmental criteria include how companies use energy and manage their waste materials, water pollution or deforestation issues (if any) which would have far-reaching environmental impact and consequences on society and the planet. SOCIAL – Social criteria cover wide range of issues. One of them is how a company fosters its people and culture. Workplace policies regarding diversity prevention of sexual harassment are factors that to be considered. Whether the company has a comprehensive plan on employees’ training and education, engagement of employees and its executive etc. All these will have effects on the community which will pave the way for a sustainable future. GOVERNANCE – Corporate governance has two (2) fold. The first type is more on external governance. Prevention of any violations or tighten of compliance, ensuring transparency and industry best practices, and more dialogue with regulators. The second type is internal governance whereby the implementation of the company own system of controls, practices, and procedures to make effective decisions. WHY ESG IMPORTANT? As many countries have implemented regulations to fight climate change, data security concern and also change of consumer behaviour, instigating carbon emission tax, sugar tax or even pollution tax are the “trend” now. Many companies are experiencing the financial consequences of failing to act on sustainability. Some financial institutions even have their own ESG rules in their funding criteria. All these represent new risks for investors. There were data showed that companies that have successfully implemented ESG strategies tend to outperform in the market. This is why investors nowadays are increasingly considering ESG issues to help manage investment risks. BENEFITS There are benefits for investors to invest in development and implementation of robust ESG strategies. Companies with strong ESG proposition can create values across it businesses. In ENVIRONMENTAL side, they believe good implementation of sustainable practices can have better access to resources, lowers energy and water consumption and therefore also can reduce operational costs. In SOCIAL side, good implementation of sustainable practices can attract talent, boost employee morale, and build stronger industrial relations. In GOVERNANCE side, implementation of sustainable practices can lead to government support, subsidies, overcoming regulatory pressure and better investor relations which ultimately lead to better fund raising position, loan conditions or lower capital costs. CHALLENGES AHEAD Going forward, I believe more and more companies may put sustainability and ESG strategies in place as priority. But, I think it will come at a cost. Companies may need to invest in innovative product development to create new technologies. They also need to implement a strong sustainability and ESG policies which will make them more resilient during crises. Lately, the economic pressure from the Covid-19 pandemic has placed some companies on the blink of collapse and also put companies’ exposure to ESG risk and their ability to manage them. These companies may face complexities and scrutiny if they do not manage their ESG issues efficiently. CONCLUSION Good news is that, there are a lot of companies are creating products that can indirectly help our planet more sustainable, such as BEYOND MEAT, IMPOSSIBLE and NESTLE which produce meat alike products or non-dairy milk, indirectly they are reducing greenhouse gases and energy.

PORTFOLIO PERFORMANCE

This month, I have no plan for any investment or to add any position to my current portfolio. However, I may increase some of the shares in Chinese tech companies to take advantage of its permissive sentiment. Since the inception of our fund in May 2020, we have been up close to 43.93%. We are still able to maintain our risk level at 4 as can be seen from the “average risk score”. Stay safe. Norman Liew MNMLH 21.07.2021