Orcadia AM wants to meet our clients’ needs for a risk/return profile similar to the one offered by so called “traditional” (= non responsible) asset managers using a responsible investment approach. As such we exclude the “impact first” approach unless the client specifically demands to have it included.
We use a holistic approach in the investment process including certain economic sectors which can be considered as inherently unsustainable or ESG-unfriendly, such as metals, mining energy to name a few. Not only are those sectors often necessary for economic development but we also strongly believe that through his investments an investor can nudge companies and countries to make efforts. This explains the choice for the “best in class” approach since it is a positive approach by selecting the leaders versus the laggards both sector and country wise. This pushes countries and companies to improve in order to become (or stay) investable. In our view exclusion of complete sectors would take away the carrot for improvement (why improve if independently of your efforts you will not become investable anyway).
Nevertheless, some subsectors, which are widely considered to be controversial, are automatically excluded. Being majoritarian active in one of these subsectors is a reason for automatic exclusion from the investable universe and thus the investment manager is not allowed to invest in these companies.
Additionally, to the subsector exclusion factors we have a negative screening on companies which are considered to be involved in (very) severe controversies. While for equities and corporate bonds we can – at least for part of the universe – rely on external sources in order to assess the extra-financial ESG-criteria, this is not the case in sovereign bonds. As such we have developed an in-house ESG-methodology for this kind of investments.
In order to attribute a sustainability rating for a country we start from the notion that “sustainable development is a development that meets the need of the present without compromising the ability of future generations to meet their own needs”. In our view this is not limited to the protection of the environment but should also allow the population to thrive and advance both socially (i.e. education) and governance wise (i.e. freedom of speech). We attribute to each of those elements (E, S & G) a similar weight.