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Longview Partners

PRI reporting framework 2017

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Implementation processes

LEI 03. Percentage of each incorporation strategy

New selection options have been added to this indicator. Please review your prefilled responses carefully.

03.1. Indicate (1) which ESG incorporation strategy and/or combination of strategies you apply to your actively managed listed equities and (2) the breakdown of your actively managed listed equities by strategy or combination of strategies (+/- 5%)

ESG incorporation strategy (select all that apply)

Percentage of active listed equity to which the strategy is applied
100 %
Total actively managed listed equities 100%

03.2. Describe your organisation’s approach to incorporation and the reasons for choosing the particular ESG incorporation strategy/strategies.

Assessing the significance of ESG related risks and opportunities is an integral part of our bottom-up research process.  Governance issues are considered within our Quality rating.  The key element of this analysis is the company’s treatment of shareholders and its use of capital.   On environmental matters, we believe that a lack of consideration for environmental issues can negatively impact the growth of a business and its long and short term profitability.  However, we consider social issues to be moral judgments and therefore a matter of opinion and, as such, we rely on our client’s direction.

We encourage high standards of ESG when we meet with senior management of a company.  In our company meetings we will discuss strategy and corporate responsibility issues with company board directors and executives, as we believe that these factors affect the potential for a company to deliver long-term sustainable value to shareholders.  Such factors include remuneration, finance, climate change, reputation and litigation risks, deployment of capital and energy efficiency. 

The primary focus of Longview’s investment process is to understand the quality of a company and the value of the cash-flows that it can generate.  Within our analysis of quality, a large focus is on understanding management’s approach to the reinvestment of cash generated and balance sheet management.  We do not seek to prescribe a specific approach, rather we ask management to be thoughtful of their actions and to show that due consideration has been given to all options, with an aim of maximising shareholder returns.  If we believe management has a poor track record of doing this or inappropriate plans for the future, we will not invest in a company, even if it has other positive investment merits. Where we have concerns that the company’s management is not acting in shareholders’ interests, our investment team will make clear our concerns to the company.  As a concentrated long-term investor we often find company management appreciative of our input. 

03.3. Where assets are managed using a combination of ESG incorporation strategies, briefly describe how these combinations are used. [Optional]


LEI 04. Type of ESG information used in investment decision (Private)


LEI 05. Information from engagement and/or voting used in investment decision-making (Private)


(C) Implementation: Integration of ESG issues

LEI 10. Review ESG issues while researching companies/sectors

10.1. Indicate if E, S and G issues are reviewed while researching companies and/or sectors in active strategies.

ESG issues

Coverage/extent of review on these issues

Environmental

Environmental

Social

Social

Corporate Governance

Corporate Governance

10.2. Additional information. [Optional]

Environmental

Our consideration of Environmental factors is ingrained in our analysis of long term growth and stability, analysed during discussions on Quality.  Our Research Team has done considerable work on energy demand, as well as the sources of energy production.  Whilst we are unlikely to own energy and coal mining stocks, from a philosophical perspective, our research also uncovered implications for a number of businesses in the utilities, industrial and consumer space.  

Social

One area we have specifically avoided exposure to, is the specialty drug industry.  These companies have been growing earnings through substantial price increases, which are now coming to an end.  As one would expect, in our opinion, buyers and regulators have moved against such companies indulging in aggressive price action to grow earnings.  

We manage a number of client mandates with specific restrictions, relating to social matters that they choose to exclude.

Governance

Governance issues are considered within our Quality rating.  The key element of this analysis is the company’s treatment of shareholders and its use of capital.   


LEI 11. Processes to ensure integration is based on robust analysis (Private)


LEI 12. Aspects of analysis ESG information is integrated into (Private)


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