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Terra Alpha Investments, LLC

PRI reporting framework 2020

You are in Strategy and Governance » Investment policy

Investment policy

SG 01. RI policy and coverage

New selection options have been added to this indicator. Please review your prefilled responses carefully.

01.1. Indicate if you have an investment policy that covers your responsible investment approach.

01.2. Indicate the components/types and coverage of your policy.

Select all that apply

Policy components/types

Coverage by AUM

01.3. Indicate if the investment policy covers any of the following

01.4. Describe your organisation’s investment principles and overall investment strategy, interpretation of fiduciary (or equivalent) duties,and how they consider ESG factors and real economy impact.

We seek to build a portfolio of exceptional companies that will thrive in an increasingly changing world. We believe that companies that understand and manage their impacts on natural resources and seek to provide enduring value to their customers and employees will bring long-term value to their shareholders. We use our Environmentally Productive analytical framework to identify businesses that are already prepared to deliver value over a long-term investment horizon. 

01.5. Provide a brief description of the key elements, any variations or exceptions to your investment policy that covers your responsible investment approach. [Optional]

Our investment philosophy is founded on four core pillars: Environmental Productivity, Enduring Business Models, Attractive (Growth at a Reasonable Price [GARP]) Valuations, and a Patient Capital (5+ year time horizon) approach. We utilize a multi-stage process to identify companies globally that are environmentally productive, have enduring business models, and are attractively valued.

01.6. Additional information [Optional].

          
        

SG 01 CC. Climate risk

01.6 CC. Indicate whether your organisation has identified transition and physical climate-related risks and opportunities and factored this into the investment strategies and products, within the organisation’s investment time horizon.

Describe the identified transition and physical climate-related risks and opportunities and how they have been factored into the investment strategies/products.

At Terra Alpha Investments, we believe that a portfolio consisting of companies with enduring business models, attractive valuations, and high levels of Environmental Productivity will provide investors with superior long-term, risk-adjusted returns. As part of our approach, we measure a company’s ability to manage risk and seize opportunity in an increasingly natural resource constrained world, which includes the monitoring of thematic trends, such as: decarbonization, technological innovation, electrification of everything, climate change impacts, evolving food/agriculture systems, demographics, and urbanization. As we analyze companies, we consider transition risks related to policy and legal actions, new technology adoption and business model disruptions, and changing customer and market behaviors. Transition risks include: carbon pricing or taxes, regulation of products and services, litigation, competition from newer lower emission products, changing consumer behavior, increased raw material costs, reputational risk from actions or market perceptions, etc. We also consider physical climate-related risks as part of our company analysis. These physical risks can be in the form of quantity issues (either excesses or scarcities), quality issues (e.g., contaminations due to weather events), and even large price fluctuations in materials. Climate-related risks, whether transitional or physical, lead to operational risk exposures that could ultimately determine how, and even if, a company operates. Regarding opportunities, we mainly focus on product and service offerings, energy efficiency, energy sourcing, and resilience. We attempt to identify disruptors or pioneers within various industries that are changing business models that will allow for a more sustainable world. We also focus on identifying enablers whose products or services will aid in the transition to a lower-carbon future. At a minimum, companies must be working to minimize their own footprints by either becoming more efficient at how they operate or switching to more renewable energy sources or both. Companies that are also building out more resilient operations are better positioned to navigate a more volatile environment and capitalize on the opportunities that are already coinciding with our changing world.

01.7 CC. Indicate whether the organisation has assessed the likelihood and impact of these climate risks?

Describe the associated timescales linked to these risks and opportunities.

Our firm has considered the likelihood and impact of climate-related risks, particularly as they relate to a company’s business model, financials, and operations. While we consider several climate-related scenarios, one of our overarching assumptions is that lower greenhouse gas emissions and more climate-resilient development are needed to achieve The Paris Agreement goal of limiting the average global temperature rise. Our planet has already witnessed changing weather patterns and more frequent and intense storms, as a result of the changing climate. These changes are most likely a new norm for our world. In order to limit further change, many potential transition risks will become realities. When we assess a company’s business model, we factor in risks like potential regulation of products and services, the likelihood of legal actions, the potential for disruptors in the industry (e.g, competition from newer lower emission products or the threat of substitute products or services), and the potential opportunities associated with new revenue streams from pioneering or enabling products and services . For the financial analysis of a company, we consider risks like changes in both carbon and water pricing, raw material costs, and demand changes due to reputational risks. Finally, when considering a company’s operations, we analyze the potential physical risks associated with climate change (e.g., manufacturing facility locations) and the opportunities that come with how they operate (e.g., increasing resource efficiencies).

01.8 CC. Indicate whether the organisation publicly supports the TCFD?

01.9 CC. Indicate whether there is an organisation-wide strategy in place to identify and manage material climate-related risks and opportunities.

Describe

Terra Alpha actively manages a global public equities strategy that is focused on identifying material climate-related risks and capitalizing on opportunity. These risks and opportunities are assessed when we analyze both the Environmental Productivity and enduring business models of companies. Beyond our investment research and strategy, we engage with portfolio holdings to encourage corporate disclosure of environmental data and practices, vote proxies in line with our investment strategy, and advocate for Environmental Productivity to be adopted across the economic system through our communications strategy and work.

1.10 CC. Indicate the documents and/or communications the organisation uses to publish TCFD disclosures.

specify

          We consider TCFD disclosures as best practice disclosure. Our ideal disclosure document is available on our website and is part of our engagement with companies.
        

SG 02. Publicly available RI policy or guidance documents

 

02.1. Indicate which of your investment policy documents (if any) are publicly available. Provide a URL and an attachment of the document.

URL/Attachment

URL/Attachment

02.2. Indicate if any of your investment policy components are publicly available. Provide URL and an attachment of the document.

URL/Attachment

URL/Attachment

URL/Attachment

URL/Attachment

URL/Attachment

URL/Attachment

02.3. Additional information [Optional].


SG 03. Conflicts of interest

03.1. Indicate if your organisation has a policy on managing potential conflicts of interest in the investment process.

03.2. Describe your policy on managing potential conflicts of interest in the investment process.

Many of the members of Terra Alpha's investment team are either CFA charter holders or are in the process of obtaining their charters. As such, our organization utilizes the institute's best-in-class standards as it pertains to conflicts of interest in the investment process.  

We also have a strict ethics and code of conduct policy that applies to all employees. Employees are required to review and re-sign our code of ethics on a quarterly basis. 

03.3. Additional information. [Optional]


SG 04. Identifying incidents occurring within portfolios (Private)


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