We Can't Afford Not to Care.
Unlike Socially Responsible Investing (SRI), which is based on ethical and moral criteria and uses mostly negative screens such as not investing in specific taboo stocks, we believe Environmental, Social and Governance (ESG) investing is based on creating shared value which generates greater innovation and growth for both companies and society at large.
The incorporation of ESG analysis into our investment process is not indicative of a change in our process, nor of style shift. Instead, our investment method remains exactly the same. As buy and hold investors, the quality of our long-term analysis and portfolio construction is instead augmented by the inclusion of additional ESG metrics. This, in turn, can help mitigate risk and lead to superior long-term performance, which, as those charged with growing your capital, is important to note is still of paramount importance.
We believe Governance to be the most important of the three ESG pillars and is an aspect of our stewardship we pride ourselves on. Without proper foundations, the building habitually crashes to the ground, and companies with better management are invariably better placed to tackle more varied ‘E’ and ‘S’ related issues. Our investment process specifies that we invest in companies that are well managed with high standards of corporate governance and a sounds management team. We believe that strong governance aligns shareholder and management interests alike. As the adage goes, a rising tide lifts all boats.
What is ESG Investing?
Environmental, Social and Governance (ESG) Investing is an umbrella term for investments that seek both positive performance, but also to have a beneficial long-term impact on society, the environment and the performance of the business. We see ESG Investing to encompass the following elements:
- Climate change – including physical risk and transition risk
- Resource depletion, including water
- Waste and pollution
- Working conditions, including slavery and child labour
- Local communities, including indigenous communities
- Health and safety
- Employee relations and diversity
- Executive pay
- Bribery and corruption
- Political lobbying and donations
- Board diversity and structure
- Tax strategy