Our approach as asset managers focusses on preserving the long-term value of our clients’ investments by driving change. We aim to protect short- and medium-term value by integrating environmental, social and governance (ESG) factors into our investment process across all asset classes.
This allows us to better assess and control financial risks that the lens of conventional financial analysis may miss. ESG standards at companies are of increasing importance as regulation, legislation and changing consumer preferences steadily shift to embrace sustainability.
This means that businesses involved in the most unsustainable activities are likely, over time, to be punished. So, our assessment prior to purchase and our subsequent active ownership work is based on four themes:
- climate change, biodiversity and the environment
- good work and human rights
- good health
- corporate governance
For each area, we use data and due-diligence meetings with company management prior to making an investment. We review their policy for managing ESG risks and how effective it is in practice, as well as assessing whether they have been involved in any related controversies.
This analysis allows us to identify and remove the most unsustainable businesses from our investment universe. It also allows us to develop appropriate engagement action plans to help others move forward.
Our analysis does not end once an investment has been made, however. We routinely monitor companies’ ESG characteristics to ensure that standards do not slip and where engagement has been prioritised, we closely review progress.
Because the ability to drive change is central to our criteria, we reconsider investment in companies that are hesitant to engage or do not adequately respond on the most serious issues.
This helps us to control risk, deliver more sustainable investment returns and contributes to our driving change ethos.
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Power generation and hydrocarbon emissions
Our portfolios restrict direct investment in companies that generate more than 10% of their revenue from the extraction and/or refining of oil and gas. It is part of our approach to avoid investing in/profiting from companies that cause the most social and/or environmental harm. It is important to note that this is not an ethical decision. It is a codification of our long-standing position that, due to the likelihood of legislation and regulation impacting negatively upon the business models of these businesses, we are not going to allocate our clients’ capital to them.