Alpha-Centric ESG Research

Kyle Rudden

The collective carbon footprint of global freight transportation and logistics is utterly massive, and growing. Freight and logistics accounts for 10-15% of the world's greenhouse gas (GHG) emissions, or 3.4-5.1 billion tonnes of carbon dioxide (CO2) per year of the world's 34 billion-tonne total. Current GHG mitigation and decarbonisation policies will be enough to fully offset GHG emissions from expected growth in freight transportation and logistics. Projections suggest a 60-80% increase in emissions by 2050, when a decrease of 55-80% is needed to meet the Paris Agreement goals.Climate impacts of trade growth are compounded by how it will shift freight movement from North Atlantic to Indian Ocean corridors, increasing average distances 12%. More critical is the local leg; 10% by tonne-kilometres but 30% of GHGs (inland modes like trucking are more GHG-intensive).On a company level, carbon footprint – present and future – depends on several things. Aside from macro issues like regional fuel mix and climate policies, two big factors are: 1) a company's specific function (e.g., freight trains vs. logistics software), and 2) its decarbonisation initiatives.The collective carbon footprint is a major ESG issue but we should not apply a broad-brush. Freight and logistics companies are vital to the economy and deliver life-critical goods like medication and food. Moreover, companies like <a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (JDL HK)</a> – are leading a "greening" of supply chains.This is an important ESG issue to watch, but not an "exclusionary screen" by any means.

The collective carbon footprint of global freight transportation and logistics is utterly massive, and growing. Freight and logistics accounts for 10-15% of the world's greenhouse gas (GHG) emissions, or 3.4-5.1 billion tonnes of carbon dioxide (CO2) per year of the world's 34 billion-tonne total. Current GHG mitigation and decarbonisation policies will be enough to fully offset GHG emissions from expected growth in freight transportation and logistics. Projections suggest a 60-80% increase in emissions by 2050, when a decrease of 55-80% is needed to meet the Paris Agreement goals.Climate impacts of trade growth are compounded by how it will shift freight movement from North Atlantic to Indian Ocean corridors, increasing average distances 12%. More critical is the local leg; 10% by tonne-kilometres but 30% of GHGs (inland modes like trucking are more GHG-intensive).On a company level, carbon footprint – present and future – depends on several things. Aside from macro issues like regional fuel mix and climate policies, two big factors are: 1) a company's specific function (e.g., freight trains vs. logistics software), and 2) its decarbonisation initiatives.The collective carbon footprint is a major ESG issue but we should not apply a broad-brush. Freight and logistics companies are vital to the economy and deliver life-critical goods like medication and food. Moreover, companies like JD Logistics (JDL HK) – are leading a "greening" of supply chains.This is an important ESG issue to watch, but not an "exclusionary screen" by any means.

Carbon Footprint of Freight Transportation and Logistics and Other ESG Issues

Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

Thematic (Sector/Industry)

<ul>
<li>The investor rotation into value focusing in on EM and DM banks; our key picks are <a href="https://www.smartkarma.com/entities/credicorp-ltd" target="_blank" data-smartkarma-citation="entities:25963:1" rel="noopener">Credicorp Ltd (BAP US)</a>, <a href="https://www.smartkarma.com/entities/turkiye-garanti-bankasi-as" target="_blank" data-smartkarma-citation="entities:25026:1" rel="noopener">Turkiye Garanti Bankasi As (GARAN TI)</a>, <a href="https://www.smartkarma.com/entities/commercial-international-bank" target="_blank" data-smartkarma-citation="entities:27625:1" rel="noopener">Commercial International Bank (COMI EY)</a> in EM banks, and <a href="https://www.smartkarma.com/entities/unicredit-spa" target="_blank" data-smartkarma-citation="entities:21234:1" rel="noopener">UniCredit SpA (UCG IM)</a>, <a href="https://www.smartkarma.com/entities/caixabank-sa" target="_blank" data-smartkarma-citation="entities:21255:1" rel="noopener">CaixaBank SA (CABK SM)</a>, and <a href="https://www.smartkarma.com/entities/bper-banca-s-p-a" target="_blank" data-smartkarma-citation="entities:21165:1" rel="noopener">BPER Banca S.p.A (BPE IM)</a> in Southern Europe banks</li>
<li>Exchanges and Big Data, the convergence; <a href="https://www.smartkarma.com/entities/intercontinental-exchange-inc" target="_blank" data-smartkarma-citation="entities:10221:1" rel="noopener">Intercontinental Exchange (ICE US)</a> is strong on recurring revenues, and both ICE and <a href="https://www.smartkarma.com/entities/s-p-global-inc" target="_blank" data-smartkarma-citation="entities:9735:1" rel="noopener">S&amp;P Global Inc. (SPGI US)</a> should deliver shareholder value creation from transformative M&amp;A</li>
<li>Potential for premium growth and returns in digital payments; we like <a href="https://www.smartkarma.com/entities/nexi-spa" target="_blank" data-smartkarma-citation="entities:28921:1" rel="noopener">Nexi SpA (NEXI IM)</a>, where we see clear benefits from its M&amp;A, and we see <a href="https://www.smartkarma.com/entities/paypal-holdings-inc" target="_blank" data-smartkarma-citation="entities:4747:1" rel="noopener">Paypal Holdings (PYPL US)</a> as a core holding</li>
<li>Digital wealth managers focus on the mass affluent; <a href="https://www.smartkarma.com/entities/finecobank-banca-fineco-spa" target="_blank" data-smartkarma-citation="entities:21188:1" rel="noopener">Finecobank Banca Fineco (FBK IM)</a> stands out in Europe, <a href="https://www.smartkarma.com/entities/xp-inc" target="_blank" data-smartkarma-citation="entities:28619:1" rel="noopener">XP Inc (XP US)</a> is the leader in Brazil but looks over-valued and exposed to increased competition, in our view</li>
<li>Risks to our positive views on our themes includes slower than expected growth in digital payments, transactions and increased regulation on big data; a slower than expected global GDP recovery also could adversely impact bank fundamentals</li>
</ul>


The investor rotation into value focusing in on EM and DM banks; our key picks are Credicorp Ltd (BAP US), Turkiye Garanti Bankasi As (GARAN TI), Commercial International Bank (COMI EY) in EM banks, and UniCredit SpA (UCG IM), CaixaBank SA (CABK SM), and BPER Banca S.p.A (BPE IM) in Southern Europe banks
Exchanges and Big Data, the convergence; Intercontinental Exchange (ICE US) is strong on recurring revenues, and both ICE and S&amp;P Global Inc. (SPGI US) should deliver shareholder value creation from transformative M&amp;A
Potential for premium growth and returns in digital payments; we like Nexi SpA (NEXI IM), where we see clear benefits from its M&amp;A, and we see Paypal Holdings (PYPL US) as a core holding
Digital wealth managers focus on the mass affluent; Finecobank Banca Fineco (FBK IM) stands out in Europe, XP Inc (XP US) is the leader in Brazil but looks over-valued and exposed to increased competition, in our view
Risks to our positive views on our themes includes slower than expected growth in digital payments, transactions and increased regulation on big data; a slower than expected global GDP recovery also could adversely impact bank fundamentals


FinTech & Financial Investment Themes 2021

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

New York-based <a href="https://www.smartkarma.com/entities/s-p-global-inc" target="_blank" data-smartkarma-citation="entities:9735:1" rel="noopener">S&amp;P Global Inc. (SPGI US)</a> has agreed to acquire London-based <a href="https://www.smartkarma.com/entities/ihs-markit-ltd" target="_blank" data-smartkarma-citation="entities:26496:1" rel="noopener">IHS Markit Ltd (INFO US)</a>, at an EV of $44.5 bn, including $4.8 bn of net debt.
<ul>
<li>The operation, advanced on 30 November by The Wall Street Journal, was later confirmed by the parties involved.</li>
<li>
All-stock deal: 0.2838 SPGI x 1 INFO.
<ul>
<li>equivalent to $96.94 per share of INFO upon announcement; this values the equity of INFO at $39.3 bn.</li>
<li>This represents 9.9x EV/ Forward Revenue, 22.8x EV/ Forward EBITDA and 32.8x P/Forward E.</li>
</ul>
</li>
<li>This deal is one of the biggest deals of the year in M&amp;A. It will have a huge impact in the financial sector: it will create a financial information giant capable of competing with Bloomberg and Refinitiv. Wall Street does not believe that the end of the coronavirus pandemic will cause subscriptions to data providers to plummet. Shares of S&amp;P Global and IHS Markit have risen between 78% and 100% from their respective lows in March.</li>
<li>The decline in the number of companies in the data market should be of concern to both customers and regulators. That said, management did not contemplate significant regulatory hurdles to the deal.</li>
</ul>
S&amp;P, whose businesses include credit rating, financial markets data, Platts energy data and its famous indices, has an operating margin of 56%. IHS Markit is less profitable, but its EBITDA margin is quite good, 40%.
Pro-forma M&amp;A model suggests acquisition may be accretive to EPS since as early as 2021.
I believe the deal should enhance SPGI's position as a proprietary data and solutions provider, while also reducing the company's sensitivity to Ratings.
<ul>
<li>The timing seems positive as Capital IQ consensus forecasts organic growth at IHS Market to accelerate in 2021 (6.8% revenue growth in 2121 and 6.3% in 2022), while SPGI faces a softer issuance outlook (3% revenue growth in 2021 and 5.8% in 2022, according to Capital IQ consensus).</li>
<li>Overall, while there is a strong strategic rationale behind the deal, there is also increased complexity which may weigh on SPGI.</li>
</ul>
The gross spread is currently 2.7% for a deal that it is highly likely to close. I recommend setting up the spread in the usual way.

New York-based S&amp;P Global Inc. (SPGI US) has agreed to acquire London-based IHS Markit Ltd (INFO US), at an EV of $44.5 bn, including $4.8 bn of net debt.

The operation, advanced on 30 November by The Wall Street Journal, was later confirmed by the parties involved.

All-stock deal: 0.2838 SPGI x 1 INFO.

equivalent to $96.94 per share of INFO upon announcement; this values the equity of INFO at $39.3 bn.
This represents 9.9x EV/ Forward Revenue, 22.8x EV/ Forward EBITDA and 32.8x P/Forward E.


This deal is one of the biggest deals of the year in M&amp;A. It will have a huge impact in the financial sector: it will create a financial information giant capable of competing with Bloomberg and Refinitiv. Wall Street does not believe that the end of the coronavirus pandemic will cause subscriptions to data providers to plummet. Shares of S&amp;P Global and IHS Markit have risen between 78% and 100% from their respective lows in March.
The decline in the number of companies in the data market should be of concern to both customers and regulators. That said, management did not contemplate significant regulatory hurdles to the deal.

S&amp;P, whose businesses include credit rating, financial markets data, Platts energy data and its famous indices, has an operating margin of 56%. IHS Markit is less profitable, but its EBITDA margin is quite good, 40%.
Pro-forma M&amp;A model suggests acquisition may be accretive to EPS since as early as 2021.
I believe the deal should enhance SPGI's position as a proprietary data and solutions provider, while also reducing the company's sensitivity to Ratings.

The timing seems positive as Capital IQ consensus forecasts organic growth at IHS Market to accelerate in 2021 (6.8% revenue growth in 2121 and 6.3% in 2022), while SPGI faces a softer issuance outlook (3% revenue growth in 2021 and 5.8% in 2022, according to Capital IQ consensus).
Overall, while there is a strong strategic rationale behind the deal, there is also increased complexity which may weigh on SPGI.

The gross spread is currently 2.7% for a deal that it is highly likely to close. I recommend setting up the spread in the usual way.

<ul>
<li>S&amp;P Global <a href="https://www.smartkarma.com/entities/s-p-global-inc" target="_blank" data-smartkarma-citation="entities:9735:1" rel="noopener">Mcgraw Hill Financial (SPGI US)</a> is offering USD44bn for <a href="https://www.smartkarma.com/entities/ihs-markit-ltd" target="_blank" data-smartkarma-citation="entities:26496:1" rel="noopener">IHS Markit Ltd (INFO US)</a>, in an all share deal, equivalent to 10x IHS revenues</li>
<li>The offer represents, in our view, M&amp;A with clear economies of scale in the data provider space that we estimate would create the largest player by revenue, bigger than Bloomberg, and provide big potential for cost synergies</li>
<li>We believe that there are three core hurdles to this M&amp;A deal; we see the revenue synergies as ambitious, that the premium offered to IHS's pre-offer market value seems modest and potential regulatory hurdles to the S&amp;P-IHS combination</li>
<li>In our view, this deal reflects that data providers are looking to protect their turf from other potential acquisitive “big data” players, as we see in earlier deals by exchanges ICE and LSE</li>
<li>On the back of synergy gains and market growth, we would recommend investors to go long SPGI; we believe that the cost synergies plus partial revenue synergies are deliverable</li>
<li>Key risks to the deal and our positive view include; A higher bid for IHS from a competitor to SPGI or another big data player in the exchange sector, for example; A major regulatory hurdle, in the form of a lengthy review on anti-competition grounds; The deal goes through, but the extraction of synergies is more modest than anticipated leading to limited returns uplift</li>
</ul>


S&amp;P Global Mcgraw Hill Financial (SPGI US) is offering USD44bn for IHS Markit Ltd (INFO US), in an all share deal, equivalent to 10x IHS revenues
The offer represents, in our view, M&amp;A with clear economies of scale in the data provider space that we estimate would create the largest player by revenue, bigger than Bloomberg, and provide big potential for cost synergies
We believe that there are three core hurdles to this M&amp;A deal; we see the revenue synergies as ambitious, that the premium offered to IHS's pre-offer market value seems modest and potential regulatory hurdles to the S&amp;P-IHS combination
In our view, this deal reflects that data providers are looking to protect their turf from other potential acquisitive “big data” players, as we see in earlier deals by exchanges ICE and LSE
On the back of synergy gains and market growth, we would recommend investors to go long SPGI; we believe that the cost synergies plus partial revenue synergies are deliverable
Key risks to the deal and our positive view include; A higher bid for IHS from a competitor to SPGI or another big data player in the exchange sector, for example; A major regulatory hurdle, in the form of a lengthy review on anti-competition grounds; The deal goes through, but the extraction of synergies is more modest than anticipated leading to limited returns uplift


S&P Global (NYSE SPGI) & IHS Markit (NYSE:INFO) – Challenges and Potential Big Data Deal Structure

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Cross Asset Strategy

In our Macro Overview of Global fund positioning, we cover the following: <ul>
<li>Managers raise EMEA Overweight, hit max underweight in US.</li>
<li>Taiwan key beneficiary of COVID rebalance, India sees outflows.</li>
<li>Cross country exodus seen in Financials/Energy.  Materials reverse long-term decline.</li>
<li>Active managers move towards defensive and secular growth sectors and out of cyclicals.</li>
<li>UK Energy stocks see decline, Dutch Tech stocks continue to attract new investment.</li>
</ul>Taken from our Global fund analysis, covering 391 active global funds with combined AUM of $800bn.

In our Macro Overview of Global fund positioning, we cover the following: 
Managers raise EMEA Overweight, hit max underweight in US.
Taiwan key beneficiary of COVID rebalance, India sees outflows.
Cross country exodus seen in Financials/Energy.  Materials reverse long-term decline.
Active managers move towards defensive and secular growth sectors and out of cyclicals.
UK Energy stocks see decline, Dutch Tech stocks continue to attract new investment.
Taken from our Global fund analysis, covering 391 active global funds with combined AUM of $800bn.

Global Equity Positioning:  Macro Overview.  Raising EU Overweights, Taiwan Vs India, UK Decouples

United States

S&P Global Inc. provides clients with financial information services. The Company offers information regarding ratings, benchmarks, and analytics in the global capital and commodity markets. S&P Global operates worldwide.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

S&P Global (SPGI US)

Carbon Footprint of Freight Transportation and Logistics and Other ESG Issues

The carbon footprint of global freight and logistics is large, growing, and a source of ESG risk for investors. Fortunately, firms like JD...

Kyle Rudden

FinTech & Financial Investment Themes 2021

Our key 2021 investment themes and ideas in EM and S Europe banks, exchanges and data providers, digital payments companies and digital wealth...

Victor Galliano

Financial Data Juggernaut

The deal should enhance SPGI's position as a proprietary data and solutions provider. Gross spread is currently 2.7%. I recommend setting up the...

Jesus Rodriguez Aguilar

S&P Global (NYSE SPGI) & IHS Markit (NYSE:INFO) – Challenges and Potential Big Data Deal Structure

In a climate of “big data” mergers, the rationale for the SPGI-IHS merger is strong, with a relatively low overlap on product offerings whilst...

Victor Galliano

Global Equity Positioning: Macro Overview. Raising EU Overweights, Taiwan Vs India, UK Decouples

In our Macro Overview of Global fund positioning, we cover the following: Managers raise EMEA Overweight, hit max underweight in US. Taiwan key...

Steven Holden

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)