There are distinctive features of our approach that also make it innovative:
There is clear support from the top with a firm-wide commitment to integration of stewardship and ESG as standard
Our process has oversight from an experienced senior practitioner who reports to the Head of Investment (CIO)
We fully integrate ESG / sustainability into our investment process; we don’t have a separate team
The analysis and integration is owned by the portfolio manager and analysts - the people who know the companies best
We make ‘sustainability’ real by considering the impact on revenues, costs, cost of capital
We choose to engage thoughtfully with different stakeholders
We use this analysis to gain insight into the culture of the companies that we invest in
Stewardship is central to the way we approach investment management. Our approach has full support of the board, the executive and the CIO and they are regularly appraised on the work the investment team are doing in this area.
Assessing governance and sustainability factors is complex. It requires resource, sophisticated qualitative analytical skills and subsequent application of this knowledge. At Martin Currie we provide a broad spectrum of responsible investment training to our investment team. We have a dedicated resource in David Sheasby, our Head of Stewardship and ESG who works with individual analysts on how to incorporate responsible investment more explicitly into analysis. David Sheasby is a practitioner with more than 32 years experience as a global portfolio manager so is able to bring perspective to the analysis. We also believe that the best people to perform the governance and sustainability analysis are those who know the companies the best - namely the analysts and portfolio managers - under the guidance of the Head of Stewardship and ESG.
Our approach is innovative in regards to the extent in which ESG factors are embedded in our investment process. ESG is not an 'optional added extra' for specific clients but is fundamental to our understanding of the companies in which we invest. Responsible investment forms a key part of our investment process. As fundamental active investment managers, we consider a variety of ESG factors to better understand their impact on companies we research. All analysts producing stock research are required to consider the material and relevant ESG factors that could influence the ability of the company to generate sustainable returns. These factors are essentially those that can have a material impact on a company's cash flows, balance sheet, reputation and ultimately, corporate value.
Our deep fundamental approach allows integration of these factors - we are able to model specific outcomes or can readily incorporate more general factors into the cost of capital, revenue growth or costs.
We not only engage with the management of companies, but also with other stakeholders for particular businesses. These include government agencies focusing on areas that are material to a particular region and company. In recent years. for example, we have engaged with the Ministry of Environmental Protection in China - we understand we were the only asset manager to do so at the time. In Colombia we met with ANLA, the Colombian government agency responsible for extractive industries and infrastructure.
We also engage with some of the organisations that are looking to encourage change on ESG issues. For example, in Russia we were the first investors to engage with Greenpeace. We discussed energy policy and focused on the regulatory monitoring of oil and gas companies and the concerns about a lack of knowledge and experience in these companies to deal with environmental issues.
In India we have engaged with the Minister of Petroleum and Natural Gas to understand the priority being ascribed to gas in the energy mix, the potential use of unconventional hydrocarbons and to what extent this is balanced with regard for the environmental, safety, technological and economic aspects of petroleum activity. In Japan we have engaged with the Tokyo Stock Exchange owners who set the listing standards for the Japanese market and in the UK we have engaged with the Financial Reporting Council on both stewardship and corporate governance which both fall under their remit.
We use the local academic network and the CFA Institute to identify key areas of new research and to engage with them on potential new approaches. As well as our own in-house research, our investment team integrates sustainability and governance research from a range of external resources. We also use our external data providers to provide some input and training for the investment team - this has focused on ESG rating methodology as well as on industry and company-specific research. The data and research from our external providers are used in assessing which factors are relevant and material to a particular company. This is combined with our own research, which includes extensive engagement with companies. This first-hand insight allows us to obtain relevant and material data and ascertain the key sustainability factors that will have an impact on a company's performance.