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Francois BourdonThe Globe and Mail

For money manager François Bourdon the markets are made up of “good guys and bad guys,” and it’s his job to weed out the bad ones to help investors make money and sleep better at night.

Mr. Bourdon, managing partner of Montreal-based sustainability-focused firm Nordis Capital, takes a “pragmatic” approach to investing through an environmental, social and governance (ESG) lens.

He doesn’t shy away from energy companies, for instance, instead focusing on those that contribute to the transition to a low-carbon economy. Some of his top holdings in the sector include uranium giant Cameco Corp. and Montauk Renewables Inc., which produces natural gas from landfills.

“We want to take the leaders of the bunch. We’re not going to invest in a company like Exxon Mobil that has been fighting against climate change for years,” says Mr. Bourdon, who oversees $100-million in assets for the firm, which launched nearly a year ago.

It has been a difficult 12 months for ESG investors in particular, given the rise in energy stocks amid Russia’s invasion of Ukraine and broader global market volatility. His firm’s global equity strategy was down 23 per cent year-to-date as of Sept. 30, which was still slightly ahead of the 24-per-cent drop for its benchmark MSCI World Index over the same period. All performance data are based on total returns and net of fees.

Some of his top holdings include Saskatoon-based fertilizer producer Nutrien Ltd., U.K.-listed telecom Airtel Africa PLC and Florida-based Carrier Global Corp., a heating, ventilation and air conditioning company.

“These are three different companies that will benefit from strong growth and are trading at relatively cheap valuations,” he says.

The Globe and Mail recently spoke to Mr. Bourdon about what he’s been buying and selling.

Describe your investing style.

We’ve identified six investable themes: achieving the energy transition, protecting natural capital, making supply chains more resilient, leaving no person behind (a social-economic measure), building better markets, and productivity with purpose. We do our own research through our affiliate firm, Sustainable Market Strategies. We map the MSCI World Index and reduce our investing universe from about 3,000 to about 600 companies – 500 of them on the long side and 100 on the short side. Then we do macro work looking at what the economic scenario is likely to be over the next 12 to 18 months. That influences the relative importance we assign to valuation, growth, leverage and profitability. We then do a fundamental analysis to determine which names will be part of the portfolio.

What’s your economic outlook, including your take on a recession?

We have a defensive outlook. We believe there’s a 60-per-cent probability that we’re headed into a global recession next year. We’re probably in a recession in Europe already and maybe in Canada since the end of September. The U.S. will probably be in a recession next March.

As for our longer-term economic outlook, we’re probably going to have a bit better growth ahead but more volatile growth. We think inflation will remain high, at around 4 per cent, above central bank targets for the foreseeable future.

We think the market is probably headed lower, so in terms of asset allocation, bonds look better than stocks. For equities, we are more focused on defensive names in sectors such as health care and consumer staples. And while it may seem counterintuitive in front of a recession, we like commodities as a longer-term play because of the underinvestment in that sector.

What have you been buying or adding to lately?

Airtel Africa is a name we added to recently after the stock dropped following its latest earnings report. The company provides access to financial services and telecommunication in about 25 countries in Africa. It has very strong growth prospects given the rising population and not much competition. It’s trading at a very low multiple. Its governance is also pretty strong.

We also added to Cameco last month when it announced its investment in Westinghouse Electric with Brookfield Renewable Partners. Cameco’s stock fell on a bought-deal offering it announced to help pay for the transaction, which we saw as an opportunity to pick up more shares.

What have you been selling?

We sold two names on a sustainability basis. The first was Novo Nordisk in the health care sector. We sold it in early October. It has been a darling of the ESG landscape because its insulin products are very impactful. But we did further analysis and realized it’s increasing prices, especially in the U.S. Its egregious pricing practices make it unviable for us to be invested in the company. We also sold CVS Health Corp., the pharmacy chain in the U.S., about a week ago. There’s a lot of inefficient use of capital in the health care sector, which represents 17 per cent of the U.S. economy compared to around 5 per cent for most other developed countries. We think the company is at risk of political backlash and from a regulatory standpoint.

Name a stock you wished you bought.

Tesla. I’ve never owned it. By the time it landed on our radar, it was already too expensive. From a sustainability standpoint, its product is meaningful, but its governance is more problematic. I’d probably be a seller right now. But I wish I had done the ride from $50 to $800 [before the stock splits in 2020 and 2022].

What investing advice do you give friends and family when they ask?

Look forward, don’t look back. Investments that worked last year might not work this year. Bitcoin and technology stocks are examples. The markets are forward-looking. Also, the macro environment is changing. This is not the same environment we’ve had since the 1980s.

This interview has been edited and condensed.

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