It is our firm belief that ESG considerations is essential in order to be able to assess the risks and opportunities which could impact a company both in the short- and long-term. For this reason, we have decided to take a systematic approach to ESG incorporation. Integrating ESG factors into the investment process contributes to better risk management and mitigation, and is a strategy to capture greater investment opportunities and long-term growth trends. As of this year, all of our funds are managed according to our highest sustainability level (ESG integration). Each investment team determines how the sustainability factors are material to the investment, depending on their investment strategy, universe and mandate.
We only invest in companies that live up to our high standards for sustainable business conduct. Hence, we exclude companies that according to our criterias are engaged in unethical behavior or are in breach of international norms and conventions. We do so by conducting quarterly screenings, to ensure that our investments are compliant with our standards and client demands.
ESG integration strategy:
- If it is a new company which have not been assessed before: portfolio manager inform the ESG team. An ESG Due Diligence is conducted to ensure that it meets our minimum requirements.
- The ESG team makes a qualitative assessment of the company's ESG profile and gives a recommendation/ESG outlook (positive / neutral / negative outlook). The ESG score from the external service provider, which is a more quantitative score (ESG risk rating), is thus complemented by our own internal and qualitative assessment. The company's ESG profile is taken into account in the fundamental analysis and could hence impact the valuation and investment decision.
- We also apply a thematic strategy, to identify specific investment themes and value drivers. We strive to invest in companies that, due to their exposure to certain themes or specific Sustainable Development Goals (SDG), are deemed to have the potential to increase their long-term growth opportunities.
- We have developed an ESG Risk Monitor, to identify portfolio holdings with high or heightened ESG risk, or companies with an improving ESG profile. The results from the monitoring process is discussed at regular meetings with the portfolio management teams.
- If a company has been identified as having high ESG risk, and if the ESG team has a negative outlook for the company, this is discussed at the regular meetings. If we continue to have a negative view of the company's ESG profile, and do not see the necessary improvements from engagement, we can choose to divest.