We aspire to invest in businesses which have (or can have) a positive impact and will drive improved performance during our stewardship wherever possible.
We have used our significant experience in listed equity, along with other asset classes expertise and the support of external advisors, to develop a robust approach to Sustainable Investment which aims to drive value within our portfolio, and which minimises risks (reputational, financial or other) for ourselves and our investors. We believe our approach, which combines negative screening with ESG integration, strikes an appropriate balance of rigour and flexibility to deploy our funds in a sensible and pragmatic manner.
Within our Listed Equity division, we have always taken into consideration the implicit and explicit impact that ESG issues could have on the value of our shareholdings. This year, we have taken steps to define this approach more formally such that it can be implemented with consistency, confidence and rigour. This includes: an asset-class specific policy, which sets out in overview our integration approach; expert tools to assess risk, monitor progress and report change; and the establishment of KPIs to track performance.
Our listed equity policy sets out a series of negative screens, including, in the case of certain funds, specific 'no go' areas, and a set of cautionary areas in which investment will only proceed if we are clear on the balance of ESG and financial risks/benefits.
Our system places the principles of ESG integration at its core because we believe it to be intrinsic to driving value within our investment. This year, we have developed an improved set of tools, which the team has been trained to implement, to help our investment executives assess ESG risks and opportunities alongside traditional financial performance metrics. We will apply this approach universally to all investments, irrespective of sector or geography – but guidance within our tools shows how the materiality of issues could change in different activities or parts of the world.
We will use our expert ESG asset management tool, which is content rich and signposts issues for consideration at pre-investment, from deal inception to help guide our decision-making on portfolio composition and weighting. Ultimately all our pre-investment assessment aims to determine how aligned an incumbent management team (and, where relevant, other major shareholders) is likely to be with the Gresham House perspectives on good business. While this is often less tangible than some other performance metrics, it gives us a good indication of how aligned our perspectives will ultimately be, and therefore how successful our involvement as a shareholder might be. Implicit within this is a management team’s attitude to the long-term sustainability of the business model, including macro issues such as climate change, as well as shorter-term or more local issues which could affect business growth e.g. staff retention and stakeholder engagement.
Within our team, all personnel are tasked with responsibility to implement the commitments of our asset class policy, and they have been trained in this policy and the use of our expert tools accordingly.
Our decision-making is reviewed at Investment Committee for each proposed investment, and documented within each Investment Committee paper, and our overall portfolio is reviewed on a regular basis which incorporates tracking of any existing, new or emerging material ESG issues.