Lennox recognises that ESG encompasses a broad range of issues which may have material impact on the risk and return of our investments. As such, Lennox believes that ESG considerations are integral to the investment decision process in order to manage investments for the long term. ESG is explicitly considered and assessed as part of Lennox’s investment decision-making process.
All companies that Lennox considers for in-depth fundamental research must first pass a qualitative screening process that specifically measures and assesses a company’s governance structure and the Environmental and Social consequences of its business.
Lennox recognises that ESG issues are not necessarily static and are likely to change over time. Lennox aims to integrate the following material ESG issues into its qualitative assessment of a company:
- Environmental factors: Impact on local environment and risk management, carbon intensity andconsequent exposure to carbon pricing, climate change, water supply and management, wastedisposal, pollution and contamination, natural resource use and degradation, and energy use andrenewal energy generation.
- Social factors: Corporate culture and conduct, occupational health and safety, human rights andchild labour, workplace relations and working conditions, community impact and engagement,workplace diversity and supply chain management.
- Governance structure: Board independence and diversity, employee remuneration, bribery andcorruption, shareholder’s rights, conflicts of interest, corporate accountability and compliance.
Lennox’s investment focus is not confined to the short term financial performance of a company. We believe over the long term a company’s operations are unsustainable if they cause irreparable damage to the environment, workplace or end consumers, and will not knowingly invest in such companies.
It is the responsibility for all Lennox employees to consider whether a company and the industry in which it operates passes the ESG qualitative screening before presenting the idea to the Investment Committee. At the Investment Committee meeting, ESG factors are discussed in detail and the portfolio managers have to unanimously agree that the prospective investment passes the ESG qualitative screening process before the investment is made.