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CHOM CAPITAL: Integrating Sustainability Into Every Stage of the Investment Process
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Global Banking & Finance Review®
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Benedikt Kirsch Portfolio Manager and Head of ESG CHOM CAPITAL
Benedikt Kirsch Portfolio Manager and Head of ESG CHOM CAPITAL
Christoph Benner Founder, CEO, and Portfolio Manager CHOM CAPITAL
CHOM CAPITAL GmbH is an owner-operated asset management boutique with a proven track record across European equities. It is comprised of a team of highly qualified specialists who are committed to “delivering entrepreneurial success and serving the best interests of our investors,” as well as to its core values of transparency, responsibility and sustainability.
The name CHOM CAPITAL comes from the first names of its founding members (CHristoph Benner, Oliver Schnatz and Martina Neske). All three founders have been working together successfully in the capital market business for more than 30 years and have personal stakes in the company and the funds issued.
Wanda Rich, editor of Global Banking & Finance Review, spoke to Christoph Benner, who in addition to being a founder also fulfils the roles of CEO and Portfolio Manager, and Benedikt Kirsch, Portfolio Manager and Head of ESG, who joined the team in 2018. They discussed the value propositon offered to investors by CHOM CAPITAL, the competitive advantages that arise from its ESG approach, and the ‘SUSTAINAMENTALS’ that drive its performance.
“As a sustainability fund, we invest with a long-term focus in what we call ‘hidden sustainability champions’ across the European universe,” Christoph Benner said. “Unhampered by rigid corporate guidelines or index affiliation, our success is based on deep fundAMENTAL and SUSTAINability analysis (we refer to this symbiosis as SUSTAINAMENTALS®). In the latter, we see a key value-adding factor and thus have holistically integrated sustainability into all stages of our investment process.”
Christoph revealed that CHOM CAPITAL believes sustainable investing to be the future, and its value proposition centres around this idea. “We offer investors the opportunity to invest in companies that are aligned with their values, while also achieving strong returns,” he said. “Our funds address investors who, like us, are driven by an entrepreneurial mindset, share our enthusiasm for European equity markets, and value a balanced and responsible approach to capital market risk and natural resource management. It is our firm belief that our sustainable investment approach will help our portfolio companies to increase their value and reduce risks in the long run.”
He added that high levels of transparency and communication are also valued at CHOM CAPITAL, allowing investors to stay informed about their investments and the decision-making process. “Our close ties and regular meetings with the upper management of our invested companies enable us to make informed decisions and thus serve our clients in the best possible way.”
Christoph went on to explain that the firm’s investment strategy is active and based on fundamental and sustainable stock picking, meaning that the portfolio companies are selected irrespective of their country, sector or index affiliation. “Our fund products are characterised by a long-term investment horizon and a tightly focused portfolio of investments consisting of 30 to 40 holdings,” he said. “Ideas for the selection of companies are sourced through approximately 600 management meetings each year with company directors, as well as from industry studies, desktop research and various other publications. Through the analysis of the business model, trends and drivers, Porter’s five forces, regulatory value creation and risk, supply chain and product lifecycle, our team seeks out fundamental and sustainable long-term value drivers. Ideally, a strong investment offers the following characteristics: long-term resilience, steady and significant growth, supported by investments that can be financed, with a solid balance sheet, in a market-leading position, positioned in future topics at an attractive valuation, and executed by top management while being mostly undiscovered by the markets.”
At the core of CHOM CAPITAL’s operations is environmental, social and corporate governance (ESG), and Benedikt Kirsch stressed that they view sustainable investing as not only the right thing to do, but also as an opportunity for investors to gain a competitive advantage. “We are strongly convinced that ESG factors increasingly become material out of a fundamental analysis point of view. If one considers a schematic income statement, ESG considerations play a material role from top to bottom – sales potentials, higher willingness to pay, sales risks from policies such as the German supply chain law on the revenue level, to cost advantages and higher valuations at the bottom line. Hence, firms need to be analysed from a holistic point of view.”
Recent macroeconomic and geopolitical events would seem to support this view, considering the carbon emissions and energy mix of a company have become essential factors in assessing investment opportunities. “Water consumption and waste management are further areas that we analyse – all of these will become ever more relevant in the coming years. To put it in a nutshell, by incorporating ESG analysis into our investment process, we are able to identify companies that are not only aligned with our values, but also have the potential to outperform over the long term.”
Benedikt also spoke about the CHOM CAPITAL PURE Sustainability – Small Cap Europe UI investment concept, which focuses on listed European small caps. He revealed that this asset class offers an attractive risk-return profile over the longer term and has historically been able to deliver superior returns. “Oddly enough, analysts and investors tend to devote far less attention to small caps than to big corporations,” he said. “It is this very ‘neglected firm effect’ that opens up attractive investment opportunities for fundamentally driven investors. Moreover, this neglected effect also applies to the sustainability side, with ESG rating agencies systematically neglecting or underrating this market segment. However, it is exactly this segment where one finds the technologies and products necessary for the transformation of our economies and societies to reach our overarching climate and sustainable development goals.”
Clearly there are value potentials, as this systematic neglect results in attractive valuations for many of these ‘hidden sustainability champions’ he discussed. “The CHOM PURE concept offers institutional investors unique access to this difficult-to-access and challenging segment. And the segment is strongly growing – outpacing the overall economic growth by several percentage points over the next decade.”
Christoph concluded by outlining what’s next for CHOM CAPITAL. “We have a great, experienced team that implements an investment process with a proven track record, with deep analysis and great passion,” he said. “The topic of sustainability and positive impact are essential elements. We do not want to – and do not have to – reinvent ourselves, but simply continue on our path consistently. For us, actions always speak louder than words. For example, we donate 10% of our turnover in the CHOM CAPITAL PURE Sustainability – Small Caps Europe UI. Accordingly, we are happy about growing together with our clients while growing our direct impact with various great and sustainable projects that we support.”
ESG stands for Environmental, Social, and Governance. It refers to the three central factors used to measure the sustainability and societal impact of an investment.
Sustainable investing is an investment strategy that seeks to generate financial returns while also considering environmental, social, and governance factors.
Hidden sustainability champions are companies that excel in sustainability practices but may not be widely recognized or valued in the market.
A portfolio manager is a financial professional responsible for making investment decisions and managing a portfolio of assets to achieve specific investment goals.
A long-term investment is an investment strategy that involves holding assets for an extended period, typically years, to achieve significant growth.
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