We apply ESG information both from a top-down as well as a bottom-up perspective.
Top-down: we assess how material ESG trends and general longer-term trends are providing risks and opportunities in terms of financial and non-financial performance (themes such as changing climate, rising urbanization, emerging middle class, ageing population, health and wellbeing, rising cyber dependency, and SDGs).
Bottom-up: in our bottom-up analysis - which is typically conducted by our in-house team of dedicated equity analysts - we analyse the absolute and relative ESG performance of companies and whether we believe the market is underestimating or overestimating ESG risks and/or opportunities. We focus on the material, longer-term issues to the value creation of investee companies.
Four steps are important in this:
Identify the material issues
Assess the performance on the material issues
Integrate the material issues into the financial analysis
Have an active dialogue with the companies in which we are invested.
Based on these different viewpoints, our portfolio weighting differs from our benchmark as we apply and integrate ESG information to strengthen our conviction. The central question for us is: how sustainable is a company's value creation longer term?
Controversies: we specifically eliminate companies with the highest ESG controversies.