GAM believes that each of our investment teams has the duty to explore all aspects that could potentially impact their investment decision-making in the best interest of our clients, including the consideration of environmental, social and governance ("ESG") aspects and active ownership practices. These can potentially have a material impact on investment risk and investment opportunities and therefore on long term investment returns.
Our approach has been to lay the foundation for working with our investment teams to encourage and explore the most appropriate ways for them to integrate ESG considerations into their investment processes. Our overarching aims are to ensure we fulfil our fiduciary duty and meet the evolving requirements of our clients.
GAM's heritage as an independent, pure play asset manager is built on a foundation of high conviction investing. Although GAM has a common distribution platform, we actively foster a broad range of independent investment teams who are accorded an extraordinary degree of latitude in their investment philosophies and processes. We do not, for example, hold a ‘house’ view – each team has the freedom to invest as they wish. Therefore we formulated our ESG incorporation strategy to take account of diversity while building a framework that is robust, systematic and scaleable over time.
In the first phase of our ESG integration, we treat ESG issues as potential risk factors. Poorly managed ESG risks may lead to negative investment returns. Based on data and research from our appointed ESG specialist data provider, Sustainalytics, we identify the worst ESG rated companies globally from their universe coverage and, if we hold any of these companies in our portfolios, our investment managers provide us with their investment rationale on whether those ESG factors represent a material risk to the investment case. We eschew pure negative screens; based on our philosophy, we believe it is best practice to combine the initial quantitative negative screens with the qualitative judgement of our expert investment managers. If, however, screens are specifically required by our clients, we are happy to accommodate such requests. We already do this for some of our clients who invest via segregated mandates. Over time, as we carry out more research into how ESG factors can help improve investment performance, we will evolve our responsible investment framework to reflect our thinking.