Cardano takes a Responsible Investment approach to investing across all of its portfolios and client mandates. Every investment decision is made on a risk-adjusted return basis. We view environmental, social and governmental risk and return drivers as a critical part in making decisions on risk-adjusted return.
While we factor in ESG factors into every investment decision that is made to some degree, we acknowledge that these factors may have more of a material impact on financial return in some circumstances and strategies than others. As such, we deliberately structure our process around decision making to ensure that we focus the most time on these more highly effected areas.
To assist in this process, all invested strategies are given a specific ESG rating based on Cardano's proprietary methodology, to help provide context to how ESG should be taken into account in buy / sell / hold decisions throughout the life-cycle of an investment.
Timing of when strategies are rated:
1. Prior to investment: investment proposals for all new investments tabled at the manager review committee (MRC) must contain a dedicated section setting out (i) the ESG rating ; and (ii) a summary of the rationale used to get to that rating.
2. Post-Investment: (i) all strategies' ESG ratings are formally re-underwritten on an annual basis by the relevant coverage team; and (ii) ESG ratings are updated on an ad-hoc basis: coverage teams speak to all invested managers regularly as part of the overall monitoring process - this will include discussing ESG where relevant.
Where, either before investment or as part of our monitoring process ESG integration within the manager fails to meet the required standard such that it would effect the overall risk-return we would either pass on the relevant strategy or consider redeeming or re-sizing the exposure.
Our ESG ratings are assigned by the investment coverage team with day-to-day responsibility for that investment. We feel this encourages accountability and fully integrates ESG thinking into our investment process.
The information on which ratings are based are as follows:
1. An ESG questionnaire which is circulated to managers annually, this questionnaire is tailored to reflect the differences in our core manager strategies (e.g. equity, fixed income, multi-asset, private equity etc.)
2. All information provided by managers (and which managers make available online)
3. Ad-hoc information gathered by coverage teams as part of the formal day-to-day investment monitoring (involving regular contact, calls and discussions with managers).