WHEB Sustainable Impact Fund

Investing in industries of the future, solving sustainability challenges for the world

February 2023 - Monthly REPORT

UK water companies – from hero to zero


Following a strong start to the year in January, global equities ended February with a further 2.0% gain despite investors worrying that interest rates may remain higher for longer than previously thought. The Fund returned 1.4% over the same period.

While investing in water can be an excellent way to make a genuine positive environmental impact, Ty Lee (Associate Fund Manager) explains, in this month’s commentary, how investors need to be cautious and focus on investing in companies that contribute directly to improving water quality and water management.

We are delighted that the FP WHEB Sustainability Fund, which investment strategy the Pengana WHEB Sustainable Impact Fund implements, recently won the award for Best ESG Global Equity Fund from MainStreet Partners, a London-based ESG Advisory and Portfolio Analytics firm. The awards recognise a select number of funds and asset managers that have excelled within the universe of 5,800 Funds, managed by over 300 Asset Managers.


Top Holdings (alphabetically)

Advanced Drainage Systems Inc
United States
Advanced Drainage Systems is a leading provider of stormwater management systems in the US. It is the leading manufacturer of high performance thermoplastic corrugated pipe, providing a comprehensive suite of water management products and superior drainage solutions for use in the underground construction and infrastructure marketplace. The company's products are generally lighter, more durable, more cost effective and easier to install than comparable alternatives made with traditional materials.
Agilent Technologies
United States
Health Care
Agilent Technologies is a specialist in the development and manufacture of bio-analytics for the life sciences and chemical analysis industries. The company's mission is to advance quality of life. Within healthcare, its analytical instruments are used in the development and testing of healthcare products. Agilent also has a chemical analysis business which makes equipment for monitoring levels of pollutants in the ambient environment and or measuring contaminants in food and the human body.
United States
Information Technology
Ansys is a market leader in multiphysics engineering simulation software for product design and optimisation. The company follows a strategy of Pervasive Engineering Simulation to enable innovation. Its software accelerates product time to market, improves engineering and optimises product quality and safety for a variety of products including fuel efficient cars and planes, wind turbines as well as medical technology and consumer products.
United States
Health Care
ICON is a clinical research organisation (CRO) which provides outsourced development services on a global basis to the pharmaceutical, biotechnology and medical device industries. The company's mission is to accelerate the development of drugs and devices that save lives and improve the quality of life. ICON specialises in the strategic development, management and analysis of programmes to support all stages of the of the clinical development process.
United States
Linde Plc produces and distributes industrial gases. The company operates globally supplying oxygen, hydrogen and other gases to a very wide range of downstream markets including into manufacturing industries, petrochemical and electronics industries. The gases are used in a variety of applications including in making manufacturing processes more efficient and in reducing harmful emissions. The company is establishing a strong presence in the green hydrogen market and also sells oxygen and other gases into the healthcare sector.
Power Integrations Inc
United States
Information Technology
Power Integrations is a pure-play manufacturer of integrated power-conversion components. Unlike traditional power conversion solutions requiring dozens of components, the company's integrated solutions reduce the bill of materials and the size of the integrated circuit board. Power Integrations has strong market positions across a range of end markets including industrials and renewable energy, and a leading position in consumer appliances in particular.
United States
Health Care
Steris provides a variety of products and services to the healthcare industry including specifically to hospitals, medical device manufacturers, pharmaceutical and biotechnology businesses as well as for food safety and industrial markets. The company's main areas of activity are in providing hygiene, sterilisation and anti-microbial treatment services to these end markets in order to ensure a safe and hygienic operating environment.
TE Connectivity
United States
Information Technology
TE Connectivity is a US-based manufacturer of electronic components and wireless systems. The company's main market is the automotive industry where its products are used to improve safety and fuel efficiency through increased levels of automation and electrification. The company does also sell products into industrial and telecommunications markets where they are often used in applications to help improve energy efficiency and safety.
Thermo Fisher Scientific
United States
Health Care
Thermo Fisher Scientific is one of the largest suppliers of analytical instrument, equipment, consumables and software for healthcare and environmental research, analysis, discovery and diagnostics. The company offers a very wide range of products and services including the equipment needed to analyse samples as well as the variety of containers and other consumables needed to handle them.
Trane Technologies PLC
United States
Trane is a world leader in air conditioning systems and services. The company serves engineers, contractors and business owners across an array of markets including education, healthcare, government and manufacturing. It also provides climate-controlled transport solutions to the food and medical industries. It also has an offering in the heat pump space which brings a 300% efficiency gain compared with the system it would replace.

Sector Breakdown

Capitalisation Breakdown

Region Breakdown

WHEB Sustainability Themes


Performance Table

WHEB Sustainable Impact Fund 1.4% -2.8% 5.5% 6.6%
Strategy (partial simulation – see below) 5.8%
MSCI World Total Return Index (net, AUD unhedged) 2.0% -0.3% 8.3% 10.0% 6.6%

Swipe horizontally to see all columns

Fund & Strategy Performance


Market Review

Following a strong start to the year in January, global equities ended February with a further 2.0% gain despite investors worrying that interest rates may remain higher for longer than previously thought. A series of economic data throughout the month suggested more persistent inflation, which would support the higher rates. Evidence that the labour market remains tight, especially in the services sector, was particularly challenging.

The European Commission announced the ‘Green Deal Industrial Plan’, which is focused on simplifying the regulatory environment and increasing manufacturing capacity for green technologies and products. These initiatives confirm Europe’s commitment to accelerating the energy transition.

Technology and Industrials were the best performing sectors while Real Estate and Materials were the weakest in the global market.

Fund Review

The Fund returned 1.4% over February.

Ansys and Silicon Labs were the largest positive contributors. Ansys delivered strong FY22 results and a strong outlook implying 11% revenue growth (in constant currency) for the year ahead. The company supplies simulation software that clients use in their R&D budgets. These tend to be resilient even when the economic outlook is uncertain. This is particularly true now as clients invest in more efficient R&D processes and electrification in the automotive industry.

Silicon Labs delivered a very strong set of results, hitting the billion-dollar revenue milestone and significantly beating EPS.  Silicon Lab’s semiconductors enable connectivity and thereby greater efficiency for a wide range of household devices. The strong demand for these products despite weak consumer confidence underlined the shift to more sustainable products.

Globus Medical and Advanced Drainage Systems were the largest negative contributors over the month. Globus Medical announced that it was going ahead with a previously disavowed merger with rival Nuvasive.  Our view is that this combination is likely to face significant challenges so sold our position. Advanced Drainage Systems performed poorly as cyclical weakness in residential construction is expected to dampen the near-term demand outlook.

Health was the weakest theme during the month and the largest detractor from performance, while Resource Efficiency was the strongest.


UK water companies – from hero to zero

Water pollution is an ancient problem in the UK, with sewage spills and other sources of contamination frequently making headlines. UK water quality was one of the worst among European countries in the 1970s and 80s. High levels of contamination were largely due to the discharge of agricultural and industrial waste. Heavily polluted rivers, lakes, and coastal waters, along with filthy power stations, were responsible for the country’s reputation as ‘the dirty man of Europe’.

However, starting in the 1990’s the European Union adopted a series of Directives forcing Member States to improve the quality of fresh and salt water.1 During this period, water quality in the UK improved.This was the time when water companies were seen as ‘environmental champions’. They took the initiative to talk to agricultural and industrial customers to stop pollutants from entering the water systems in the first place.

So why do sewage spills appear to happen more often now? Water companies are presented with greater challenges from issues such as urbanisation and climate change. Urban water runoff is a leading cause of water quality problems. About 18% of water bodies in England were identified as being damaged by pollution from towns, cities, and transport in 2020.3 Climate change also contributes to the problem as increases in the frequency and intensity of extreme weather events raise the risk of flooding. Excessive amounts of rainwater entering sewers can cause sewage spills. According to data from The Environment Agency, sewage was dumped into the ocean and rivers around the UK more than 770,000 times over the course of 2020 and 2021.4 Sewage overflows could also result in new contaminants such as PFAS chemicals and pharmaceutical residues building up in the environment.5

Deregulations and Underinvestment

Deregulation has been another contributing factor to water pollution in the UK. The deregulation of the water industry in England in 2017 removed some of the requirements for water companies to report on their performance and reduced the role of the regulator in setting service standards. In 2021, the nine water and sewerage companies in England delivered the worst environmental performance in years.6 Moreover, the Environmental Agency’s budget has been severely cut in recent years, which has dramatically undercut its ability to monitor the performance of the water companies. Current prosecutions by the Environment Agency are just 6% of the level they were a decade ago.7

This lack of regulatory oversight has resulted in water companies underinvesting in sewage treatment infrastructure over many years. However, it is essential for water companies to embrace their corporate social responsibility and prioritise the protection of our environment, rather than solely focusing on meeting the minimum regulatory requirements. Unfortunately, the issue of greenwashing is not uncommon in the water sector. Water utilities often tout investment plans to reduce storm overflows and improve water quality, but fail to follow through with adequate funding. The Water Services Regulation Authority revealed that many water firms have invested significantly less than what they are capable of spending, indicating a lack of genuine commitment to environmental protection.8 Hence, there is a pressing need for stronger regulatory oversight and increased accountability within the industry to ensure that water companies prioritise the environment and invest adequately in sewage treatment infrastructure.

Investing in Water Solutions

Water utilities used to be seen as change agents which helped improve water quality in the UK. In the early 2000s, companies like South West Water developed innovative schemes to pay farmers to avoid the use of certain pesticides, saving money in the downstream treatment process and reducing environmental contamination. These innovative practices provided a reasonable justification for including these companies in sustainability-oriented investment funds. Pennon, which owns South West Water, was one of the largest holdings in the WHEB strategy back in 2012. However, due to the years of underinvestment and deregulation, this is no longer the case. WHEB sold its position in Pennon in 2012 and has since then been concerned at the downward trend in the environmental performance of water utilities.9

Water companies have literally gone from ‘hero to zero’ over the past couple of decades and today, investors looking to make a positive impact on water quality should turn their attention instead to companies that provide water treatment equipment and solutions. These companies offer a more tangible and quantifiable environmental impact.

For example, Xylem produces a wide range of water technology products and solutions. It provides water and wastewater treatment technologies including advanced filtration and disinfection as well as chemical treatment. It also produces water monitoring and testing equipment to monitor water quality in real-time.

Another example is Advanced Drainage Systems, which specialises in providing solutions for stormwater and wastewater management. It offers biofiltration systems that use natural processes to remove pollutants from stormwater and wastewater. Their solutions are particularly needed in cities to help manage stormwater runoff and prevent flooding.

Investing in water can be an excellent way to make a genuine positive environmental impact. However, investors need to be cautious and focus on investing in companies that contribute directly to improving water quality and water management. It is also important to consider the impact of climate change and urbanisation on water pollution and how these factors can affect investments. By focusing on companies that provide water solutions, investors can make a difference in creating a cleaner and healthier environment for everyone.


1 This legislation covered everything from water quality protecting shellfish, bathing water quality and drink water quality and dealing with discharges of urban waste water, nitrates and industrial pollution.
9 For example work done by the Environmental Rating Agency clearly highlighted this poor performance years before it became a routine media headline (see


  • AMP North
  • ANZ Grow Wrap
  • Asgard eWrap
  • BT Panorama
  • BT Wrap
  • Centric
  • CFS FirstWrap
  • FNZ
  • HUB24
  • IOOF
  • MLC Wrap
  • Macquarie Wrap
  • Netwealth
  • Mason Stevens
  • OneVue
  • Praemium
  • Powerwrap
  • uXchange




  • FEES * Management Fee: 1.35%
  • Minimum initial investment $10,000
  • FUM AT MONTH END A$ 273.03m
  • FUND INCEPTION DATE 31 October 2007

Fund Managers

Ted Franks

Partner, Head of Investment

Seb Beloe

Partner, Head of Research


The Pengana WHEB Sustainable Impact Fund invests in companies with activities providing solutions to sustainability challenges. WHEB have identified critical environmental and social challenges facing the global population over coming decades including a growing and ageing population, increasing resource scarcity, urbanisation and globalisation. The Fund invests in companies providing solutions to these sustainability challenges via nine sustainable investment themes – five of these are environmental (cleaner energy, environmental services, resource efficiency, sustainable transport and water management) and four are social (education, health, safety and well-being). WHEB’s mission is ‘to advance sustainability and create prosperity through positive impact investments.’


Harding Loevner International Fund
Harding Loevner International Fund
Axiom International Ethical Fund
Axiom International Ethical Fund
Axiom International Ethical Fund (Hedged)
Axiom International Ethical Fund (Hedged)
Australian Equities Fund
Australian Equities Fund
High Conviction Property Securities Fund
High Conviction Property Securities Fund
Global Small Companies Fund
Global Small Companies Fund
WHEB Sustainable Impact Fund
WHEB Sustainable Impact Fund
Emerging Companies Fund
Emerging Companies Fund
High Conviction Equities Fund
High Conviction Equities Fund
Pengana International Equities Limited (ASX: PIA)
Pengana International Equities Limited (ASX: PIA)
Private Equity Trust (ASX: PE1)
Private Equity Trust (ASX: PE1)
Alpha Israel Fund
Alpha Israel Fund
Pengana Diversified Private Credit Fund
Pengana Diversified Private Credit Fund

1. From August 2017, performance figures are those of the Pengana WHEB Sustainable Impact Fund’s class A units (net of fees and including reinvestment of distributions). The strategy’s AUD performance between January 2006 and July 2017 has been simulated by Pengana from the monthly net GBP returns of the Henderson Industries of the Future Fund (from 1 January 2006 to 31 December 2011) and the FP WHEB Sustainability Fund (from 30 April 2012 to 31 July 2017). This was done by: 1) converting the GBP denominated net returns to AUD using FactSet’s month-end FX rates (London 4PM); 2) adding back the relevant fund’s monthly ongoing charge figure; then 3) deducting the Pengana WHEB Sustainable Impact Fund’s management fee of 1.35% p.a. The WHEB Listed Equity strategy did not operate between 1 January 2012 and 29 April 2012 – during this period returns are zeroed. The Henderson Industries of the Future Fund’s and the FP WHEB Sustainability Fund’s GBP net track record data is historical. No allowance has been made for buy/sell spreads. Please refer to the PDS for information regarding risks. Past performance is not a reliable indicator of future performance. The value of the investment can go up or down.
2. The Fund incepted on 31 October 2007 as the Hunter Hall Global Deep Green Trust. The Fund was relaunched on 1 August 2017 as the Pengana WHEB Sustainable Impact Fund employing the WHEB Listed Equity strategy. This strategy was first employed on 1 January 2006 by the Henderson Industries of the Future Fund and currently by the FP WHEB Sustainability Fund.
3. Annualised standard deviation since inception.
4. Relative to MSCI World Total Return Index (net, AUD unhedged)
* For further information regarding fees please see the PDS available on our website.