Marathon's investment framework is focused on an assessment of the capital cycle, management and valuation. As a long-term investor, Marathon must critically assess issues of sustainability alongside a variety of other factors, in determining the quality of an investment. Indeed, it is arguable that Environmental, Social and Governance issues have a greater bearing on the long-term outcome than they do over the next 6-12 months, the average investor time-frame.
Marathon’s portfolio managers aim to consider all material issues and weigh them against what is reflected in the current market price of a stock. It is important to note that portfolio managers make the decision, integrating assessment of ESG within their overall analysis of a stock, rather than treating it as a stand-alone issue, or outsourcing to a separate team. A company with ESG concerns could still be an attractive investment, if the issues are outweighed by other considerations. After all, our fiduciary duty is to add value within clients’ agreed risk parameters. Consideration of ESG is one of a number of factors in this process.
With that said, Marathon's investment philosophy places particular importance on corporate governance issues, specifically through the detailed analysis of the behavioural aspects of management. Marathon's close and continuous engagement directly with investee companies helps to foster long-term relationships. Oversight of company management includes objective assessments and analysis of strategy, financial performance and capital planning alongside consideration of a range of applicable corporate governance issues. Similarly, when Marathon seeks to understand a company’s future strategy, consideration of material environmental and social issues will also be included. As part of this assessment, Marathon aims to observe how a company engages with environmental factors like climate change in order to assess the potential future risks to the business and management’s responsiveness to these issues. Companies that are not sustainable over the longer term are unlikely to pass muster.