Tantallon Asia Impact Fund

The Tantallon Asia Impact Fund is a long-only, Asia focused, total return opportunity fund.  The fund invests with a 3-5 year horizon in a concentrated portfolio (30-35 unlevered positions), market cap/sector/capital structure agnostic, but with strong conviction on the structural opportunity, scalable business models, and in management’s ability to execute.

The seeds of the Tantallon Asia Impact Fund were sown as we focused on the energy surrounding ‘mandated’ fossil fuel portfolio divestment strategies, the implications of grid-parity renewable energy pricing, and the real-world constraints of the electric vehicle supply chain as global OEMs reluctantly started to accept the electrification of their fleets. 

Recognizing the limitations of a ‘check-the-boxes’ SRI/ESG approach, we spent three years back-testing data, and evolving an intentional Impact Investment Strategy incorporating our goal of delivering superior long-term investment results by investing in  growth opportunities in Asia, embracing data-driven analysis of sustainability, innovation, societal trends, and material environmental and governance initiatives in order to drive competitive product/service differentiation, and sustained profitability.

• We have actively sought to integrate an awareness of societal issues into our investment process, mapping rigorous financial analysis and an evaluation of sustainably profitable businesses, alongside a proprietary assessment of corporate commitment and capital allocation discipline to effect positive societal change.
• Our goal is to identify and invest in profitable businesses that intentionally re-invest in  sustainability, new product innovation, employee welfare, and product safety and efficacy standards, while fostering equity, financial inclusion, diversity, and a commitment to corporate governance and accountability.
• We wish to identify and avoid investing in companies that extract rents in socially destructive ways, who seek to maximize short-term returns at the expense of the environment, or by putting customers at risk, or by exploiting employees or minority investors.

Our ‘time in the markets’ and the data we have systematically evaluated would suggest that a consistent Impact Investment Strategy:

1. Incorporates thorough analysis of products and services, competitive strategies, barriers to entry, supply/demand driven determinants of pricing, profit margins, and sustainable growth – otherwise it simply cannot be sustainable, or yield consistently sound business/investment outcomes.
   1. Traditional investment analysis has generally ignored ‘social impact,’ or at best, treated it as a ‘cost-item.’
   1. On the other hand, Socially Responsible Investment (SRI) and Environmental, Social and Governance (ESG) focused investors have historically eschewed a rigorous evaluation of business economics, free cash flows, and valuations, while prioritizing nominal SRI/ESG compliance and impact.
2. Intentionally looks beyond a corporate SRI/ESG presentation or superficial compliance with a long checklist of SRI/ESG factors (that in any case, tend to converge over time in any given industry) that does not yield sustainable competitive advantages. 
   1. We look to identify innovative and profitable businesses, with structural cost competitiveness underpinning profitability and the ability to (re)invest in sustainability, employee welfare, new product innovation, product safety and efficacy standards, while encouraging equity, diversity, inclusion, and a commitment to corporate governance and accountability.
3. Evaluates more than just regulatory, business, or reputational risk.  Our investment framework anchors us to a sub-set of companies that: 
   1. Diligently assess (and respond to) societal trends with real-time data.
   1. Innovate relevant and differentiated products and services.
   1. Intentionally (re)evaluate the commitments to all stakeholders, the environmental footprint, the impact on industry structure, the competitive environment, and evolving regulatory oversight.
4. Systematically identifies and avoids investing in companies that extract rents in socially destructive ways. 
   1. We believe that the court of public opinion, intense political and regulatory scrutiny, and eventually, penalties for corporations who have sought to maximize short-term returns at the expense of the environment, or by putting customers at risk, or by exploiting employees, customers, or minority investors, will pose existential business risks and result in sustained stock de-rating.

Our Impact Investment Framework specifically evaluates and tracks Board Engagement, Oversight and Accountability for:

1. Measuring the economic value of, and intentionally re-investing in Sustainability
2. Identifying, evaluating and remediating any adverse Environmental Impacts
3. Encouraging positive Societal Change by actively fostering Equity, Inclusion, Diversity, and Access
4. Active Employee Engagement ensuring equity, diversity, safety and wellbeing
5. Audit, Governance, and Disclosure
6. Capital Discipline
7. Innovation of products and services to build/grow sustainable moats

Our Impact Investment Stock Selection process identifies and calibrates:

• Durable Sector Tailwinds + Scalable business opportunity = Long Runway
• Sustainable Moats: Invest in Enduring Franchise or Brands with pricing power
• Robust audit procedures and financial disclosure
• Management track-record, and Board Oversight of Sustainability, material Social and Environmental issues, and Innovation to drive competitive differentiation, growth, and profitability
  • Evaluating the linkage between Societal Impact and Sustainable Profitability => Strategy + Social Purpose = Economic Value
  • Assessing capital allocation discipline to improve the welfare of customers, employees, the supply and distribution channels, and communities
  • Commitment to minority shareholders and the alignment of shareholder interests
• Valuation Cushion

The Tantallon Asia Impact Fund is invested in an under-researched pool of Asian companies with robust financial disclosure and audit standards, which are attractively priced relative to the long term structural opportunity.

• After a decade of disappointment, on growth, on earnings, on ill-conceived tariff barriers and policy uncertainty, and on equity market flows, we would make the case that Asia, post Pandemic, is inflecting positively with a modest reflationary impulse. 
• We have confidence in our Impact Investment Strategy, incorporating our goal of delivering superior long-term investment results by investing in  growth opportunities in Asia, embracing data-driven analysis of sustainability, innovation, societal trends, and material environmental and governance initiatives to drive sustained profitability.
• We are invested in sustainable growth opportunities across Asia, underpinned by favorable demographics, improving education, industrialization, rising disposable incomes and propensity to consume, domestic brands, the dis-intermediation of the China-centric supply chains, the democratization of credit, the continued resilience in e-commerce, fin-tech, and electronic gaming, affordable healthcare, and the significant opportunity in infrastructure, logistics, electrification and renewable energy.