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Lofoten Asset Management

PRI reporting framework 2020

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ESG incorporation in actively managed listed equities

Implementation processes

LEI 01. Percentage of each incorporation strategy

01.1. Indicate which ESG incorporation strategy and/or combination of strategies you apply to your actively managed listed equities; and the breakdown of your actively managed listed equities by strategy or combination of strategies.

ESG incorporation strategy (select all that apply)

Percentage of active listed equity to which the strategy is applied — you may estimate +/- 5%
90 %
Percentage of active listed equity to which the strategy is applied — you may estimate +/- 5%
10 %
Total actively managed listed equities 100%

01.2. Describe your organisation’s approach to ESG incorporation and the reasons for choosing the particular strategy/strategies.

At Lofoten we strive to incorporate the UN’s Principles for Responsible Investment into our business.  We believe that investing responsibly can be a source of alpha in its own right, as numerous studies have shown that companies with higher governance scores in particular create greater shareholder value over the long term.  In addition, we think that investing in companies which are run more responsibly is simply the right thing to do, as they are more thoughtful about their impact on people and the planet, and their business will be more sustainable over the long term.  We also believe that such companies are likely to be able to take advantage of structural growth opportunities arising from changes. 

We do not have hard targets in place, we are more focused on incorporating ESG considerations into our investment process. On initial review of a stock, we check the ESG risk rating provided by Sustainalytics, as well as key ESG controversies, alongside a view on the company’s competitive position, growth prospects, profitability, return on capital and valuation.  We run a concentrated portfolio focused on only the highest-quality names, and thus we can be very selective as to how we invest.  Once past the initial hurdles, we will spend more time on areas of concern, using our judgement and experience as to what is material, and may not invest if we consider the ESG risks to be too high, just as we may not if we believe the valuation to be an impediment or market forecasts to be too high.  We also maintain an active dialogue with company management on many areas including ESG issues.  

We monitor and score our portfolios every quarter, hoping that these companies improve and/or remain the same, but we try to avoid companies which decline over time. If some specific new news comes out that has an adverse impact on the ESG risk rating of an existing holding, we would investigate the issue and engage with the company and the research provider in order to make an informed decision about the materiality of the risk and the best course of action.  We also have an annual CDP carbon footprint for our portfolio which we intend to monitor.  

01.3. If assets are managed using a combination of ESG incorporation strategies, briefly describe how these combinations are used. [Optional]


LEI 02. Type of ESG information used in investment decision (Private)


LEI 03. Information from engagement and/or voting used in investment decision-making (Private)


(C) Implementation: Integration of ESG factors

LEI 08. Review ESG issues while researching companies/sectors

08.1. Indicate the proportion of actively managed listed equity portfolios where E, S and G factors are systematically researched as part of your investment analysis.

ESG issues

Proportion impacted by analysis
Environmental

Environmental

Social

Social

Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]


LEI 09. Processes to ensure integration is based on robust analysis

09.1. Indicate which processes your organisation uses to ensure ESG integration is based on robust analysis.

09.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your integration strategy.

09.3. Indicate how frequently third party ESG ratings that inform your ESG integration strategy are updated.

09.5. Describe how ESG information is held and used by your portfolio managers.

09.6. Additional information. [Optional]


LEI 10. Aspects of analysis ESG information is integrated into (Private)


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