ESG considerations are an important part of our overall investment process. ESG integration into the investment process includes quantitative analysis of material ESG factors and inclusion of those in the valuation process. Incorporating ESG is a dynamic process that often requires a different approach for each company. We therefore spend a lot of time understanding the specific ESG issues a company faces and how we can best incorporate it into our investment thesis.
Once we own a company we become active owners by voting responsibly and engaging with companies on material ESG risk factors that impact valuation where we can have the most impact for our clients.
We typically do this in three phases:
- We conduct detailed fundamental research with a strong focus on cash flows and risks related to those cash flows, and we would incorporate ESG risks in that process. We evaluated material ESG risks through in house designed ESG scorecards and our management scorecards.
- Once we hold a company on behalf of our clients we become active shareholders by voting on our proxies and actively engaging on material ESG issues, we leverage off our expertise and where we can deliver the most value for our clients
- ESG considerations is one of several factors that we consider during portfolio construction. Under portfolio construction we manage specific risks through limiting our ownership in each company and we diversify across key drivers, sectors and companies.
We use various techniques to escalate our engagement efforts, from voting against certain board members or reconstitution of the board to collaborating with our peers to make a better impact or create a large voting pool.
We have previously called for proxy meetings to put ceratin ESG matters up for a vote, which requires collaborating or engaging with our peers.