Responsible Investment can be differentiated from traditional approaches to investment in four ways:
1) We believe that time horizons are critical; the ultimate objective is the creation of sustainable, long-term investment returns not just short-term returns. The long term has been the cornerstone of our investment philosophy since the beginning.
2) Responsible Investment requires that we monitor changes happening at the level of social ecosystems so as to link extra-financial analysis to financial outcomes and investment decisions. We believe in the ability of companies to transform social problems into economic opportunities. The long-term success of a company depends on the health of economic and environmental systems as well as evolving societal values and expectations.
3) Being an active investor is not only about selecting a few companies as measured by an active share, it also means facilitating positive impacts for civil society and the environment through our support to companies whose activities lead to positive outcomes (e.g. job creation, energy efficiency), including when the ESG profile of a company is in recovery.
4) We recognise that being a shareholder of a company implies that we share with it what we think is a good way of conducting its business and what is not. To become a responsible investor in a company is to accept this association, sharing in its good fortunes but also indirectly bearing some of its responsibilities and reputational risks.
To be responsible, an investor needs to think like an owner. Just like an owner, he or she needs to care about the strategic intent of the company as well as the impact of the company on its customers and employees. A responsible investor should try to answer some basic questions: What solutions does this company want to provide to what type of problems? What are the costs (direct and indirect) that will result from such actions? How should the benefits and costs be aggregated to assess the net social utility of the company? Do I want to invest in this business and with these people? And finally how should the value created be monetised and made as sustainable as possible?