Robeco Circular Economy D USD

Natalie Falkman is Portfolio Manager of the Robeco Circular Economy strategy and member of the Thematic Investing team. Before joining Robeco in 2022, she was a portfolio manager for Kapitalinvest, a global equity, 5-star rated by Morningstar and AAA-rated by Citywire (Global blend-category) fund at Swedbank Robur in Stockholm. Prior to that, she worked at Carnegie (largest independent investment bank in the Nordics), first as the Head of Emerging Markets Research and thereafter with Nordic Capital Goods Equity Research. She started her career in 2002 as an equity research analyst at Deutsche Bank in Moscow covering utility and shipping sectors. Natalie holds a Master’s in Finance from Stockholm School of Economics.

The fund is established in Luxembourg and is subject to the Luxembourg tax laws and regulations. The fund is not liable to pay any corporation, income, dividend or capital gains tax in Luxembourg. The fund is subject to an annual subscription tax ('tax d'abonnement') in Luxembourg, which amounts to 0.05% of the net asset value of the fund. This tax is included in the net asset value of the fund. The fund can in principle use the Luxembourg treaty network to partially recover any withholding tax on its income.

The fiscal consequences of investing in this fund depend on the investor's personal situation. For private investors in the Netherlands real interest and dividend income or capital gains received on their investments are not relevant for tax purposes. Each year investors pay income tax on the value of their net assets as at 1 January if and inasmuch as such net assets exceed the investor’s tax-free allowance. Any amount invested in the fund forms part of the investor's net assets. Private investors who are resident outside the Netherlands will not be taxed in the Netherlands on their investments in the fund. However, such investors may be taxed in their country of residence on any income from an investment in this fund based on the applicable national fiscal laws. Other fiscal rules apply to legal entities or professional investors. We advise investors to consult their financial or tax adviser about the tax consequences of an investment in this fund in their specific circumstances before deciding to invest in the fund.

The fund's sustainable investment objective is to finance solutions that support the transition from traditional production and consumption patterns toward a circular economy. Circular economy and sustainability considerations are incorporated in the investment process by the means of a target universe definition, exclusions, ESG integration, and voting. The fund only invests in companies that have a significant thematic fit as per Robeco's thematic universe methodology. Through screening on both Robeco's internally developed SDG Framework and Robeco’s exclusion policy, the fund does not invest in issuers that have a negative impact on the SDGs, are in breach of international norms or where products have been deemed controversial. Financially material ESG factors are integrated in the bottom-up fundamental investment analysis to assess existing and potential ESG risks and opportunities. In addition, where a stock issuer is flagged for breaching international standards in the ongoing monitoring, the issuer will become subject to exclusion. Lastly, the fund makes use of shareholder rights and applies proxy voting in accordance with Robeco's proxy voting policy.The following sections display the ESG-metrics for this fund along with short descriptions. For more information please visit the sustainability-related disclosures.The index used for all sustainability visuals is based on MSCI World Index TRN.

In September, the investor focus shifted towards interest rate sensitive sectors, such as construction. The technology sector lost some of its appeal. To be clear, we have not seen much demand improvement within construction. However, hope for improved activity as interest rates continue to slide lower were ignited by the Fed's generous interest rate cut. China's stimulus, which unexpectedly rounded off the quarter, was interpreted by many investors as a 'whatever it takes' commitment to set the Chinese economy on a path of economic recovery. The key question is whether these efforts (not all are known yet) will be efficient enough to drive overall economic confidence in the right direction. To be faithful to our habit of finishing monthly letters with comments on AI demand, we can report that there is still no apparent weakness in sight. The discussion about ROI on AI investments continues, but has become less vocal. Comments from the early adopters point to either investments already generating returns or being vital for companies' moats and growth.

Based on transaction prices, the fund's return was 1.47%. In September, the fund slightly underperformed versus the MSCI World. Sector-wise, the underperformance was driven by the consumer discretionary and communication sectors, and the fund not owning Tesla, Meta and Amazon. When it comes to specific stocks, the main performance detractors were Addtech and Novo Nordisk. As for the positive contributors, the stocks that stood out were Oracle, Comfort Systems and Sterling Infrastructure. The strategy underperformed versus its internal benchmark. Apart from Novo Nordisk and Roche, the main performance detractors were concentrated in the industrial sector. The positive contributors were the same stocks as for the MSCI World.

As the market rejoiced over the first interest rates cuts, the US elections were less of a focus. However, as the closely fought election with its uncertainties approaches, and as upcoming Q3 reports are still unlikely to show significant signs of stronger demand in the cyclical parts of the economy, investors might revisit areas with more structural growth. Historical patterns indicate that when close elections can be viewed in the rearview mirror, markets perform well. This time around, we also have an interest rate cut cycle amid a soft landing. However, what makes it harder to gauge confidence is the already very strong performance YTD. Nevertheless, if labor markets do not deteriorate while businesses gain more confidence in future demand as financing costs come down, the market might follow the pattern of least resistance. We maintain a balanced approach combining exposures to strong structural tailwinds such as data center investments, to tactical plays such as labor shortages and reshoring, and to defensive areas such as environmental services and suppliers to mission-critical infrastructure.