Generally speaking, we look for companies that are both driven by sustainability and can demonstrate attractive financial qualities and a clear profit and return trend that is underestimated by the market. We use the UN 2030 Agenda for Sustainable Development as a basis for identifying business models that can benefit structurally by offering a solution to one or more of the 17 Agenda 2030 Goals. We have identified four themes that we believe are potential sources of structural growth and profitability for companies exposed to these themes.
In our view there are a potential hidden risk for companies that don´t handle ESG risks properly. This is especially true for our fixed income investments where the asymmetric return profile obviously turns our attention to the downside. Negative screening is one way to avoid sectors that are more risky from an ESG standpoint. Qualitative analysis of the companies, meeting with the management and discussing relevant risks and opportunities in the companies, beyond the financial statements is an important part of our investment process.
Last but not least, we study the extent to which company financial statements are affected by sustainability. We enhance our understanding of the long-term potential and risks of the business model by integrating sustainability with financial analysis.
In addition to our own assessment of sustainability as a driver of WHAT a company does, we use ESG research from Sustainalytics* as a basis for evaluating HOW companies, regardless of whether they have sustainability profiles, are dealing with their ESG challenges.