Responsible Investment
ESG in Focus
Considering environmental, social and governance issues is central to our Investment Philosophy.
Environmental
Environmental issues are increasingly economic realities.
Climate change is the environmental issue which applies most consistently across our Fund. We see climate transition as an economic theme – resulting in meaningful opportunities, as well as risks.
Our research, engagement and voting are informed by climate indicators such as corporate climate targets and alignment with the Paris Agreement, among other issues. We have joined the Net Zero Asset Managers Initiative, and encourage our companies to adopt science-based climate targets.
We have exclusions on investment in companies deriving more than 10% of revenue from: coal fired power and coal mining or oil sands. These activities are among the most damaging to the environment, and entail financial risk.
Social
Social factors help support a business’ long-term prospects.
Businesses rely on their stakeholders, including employees, customers, and regulators. We seek companies with great purposes and cultures, and avoid those where we have concerns around their societal value. We closely monitor and engage on social factors such as employee engagement.
We pay attention to corporate controversies, particularly those that risk companies breaching international norms such as the UN Global Compact and OECD guidelines. Controversial companies tend to score poorly against our Investment Philosophy.
We exclude companies deriving more than 10% of revenue from tobacco production and distribution, and those likely in breach of international conventions against controversial weapons. These areas cause significant social harm, leading to financial or reputational risk.
Governance
Governance underpins financial value.
While there is no one single form of “good” governance, consideration of governance and management is crucial to our approach. Without quality management teams, we can have little confidence in a business’ prospects.
Our focus on governance is reflected in having five questions within our Investment Philosophy checklist currently relating to management quality, remuneration, purpose, and culture.
We want companies with management teams we can trust. We believe remuneration should be aligned with shareholder interest, and that firms should understand the importance of considering wider stakeholders to long-term returns.
ESG Engagement
We engage with businesses to help them improve their impact on people and the planet. Helping companies to mitigate business risk helps to lower risks in our portfolios.
Investment Philosophy Checklist
We evaluate companies using a 29-question checklist, to clearly identify risks and to gain a greater understanding of a business’ competitive potential.
Do we like the corporate purpose and culture?
What a company stands for and how it treats its people and partners is a good indicator of how likely it can develop a sustainable business over time.
Is it a net beneficiary of climate economics?
We believe climate is an enduring theme; companies which can take advantage of this may benefit over time.
Is management compensation aligned with shareholders?
We want management incentivised to drive value for shareholders, and other key stakeholders.