ClariVest’s commitment to Responsible Investment begins with our investment process, and identifying companies with Environmental, Social and Governance (ESG) issues that we believe have the potential to negatively impact expectations around the company in keeping with our typical expectations horizon (i.e., 6 to 24 months). We identify these companies by obtaining ratings information for a universe of 10,000 stocks with respect to (1) Norms-Based Analysis and (2) Controversial Weapons Analysis.
The Norms-Based Analysis focuses on a company’s adherence to global norms on environmental protection, human rights, labor standards and anti-corruption. The Controversial Weapons Analysis focuses on companies that are involved in the production of weapons banned under international legal instruments, or those that are particularly controversial due to their indiscriminate effects and the disproportionate harm they cause.
The ratings information described above is pushed to Portfolio Managers (PM) at each stage of the investment process, including initial idea screening, investment thesis development, at time of trade and during ongoing portfolio monitoring. We task our investment professionals with making the inherently subjective decision as to whether to invest in a company for which an ESG issue exists. The PM must evaluate the decision from a number of different aspects involving both risk and reward. From a reward aspect, the PM centers his evaluation on the potential impact of the ESG related issue on near to mid-term expectations about the future of the firm being evaluated. From a risk perspective, the PM must consider the risk to the stock-specific investment case, as well as to the systematic risk ramifications of investing (or not investing) in the stock.
With respect to certain accounts, we also apply Screening at the request of the client.