Responsible investment is an investment approach that integrates environmental, social and governance (ESG) factors into investment analysis and decisions. It is an important aspect of the service we offer our clients and a key point of differentiation with passive investment strategies and many other active managers. SVM began managing Socially Responsible Investment (SRI) products in 2006. Since then, our engagement principles have evolved to include ESG issues across our range.
As a boutique investment firm we recognise that, because in most cases we will not hold significant positions in investee companies, it can be difficult to encourage changes in management attitudes and behaviour purely by exercising client voting powers alone. Instead, we have adopted a more flexible approach and we engage with company management and boards as and when we believe it will be of most benefit.
Using information derived from a combination of in-house research, dialogue with the company and external sources we identify the key issues and discuss them directly with company management, in order to affect change.
Our ESG team are responsible or completing an ESG template which encompasses a broad range of ESG metrics. This in turn allows us to place an ESG score on each investment which reflects the risk profile of the companies involved. This allows investment managers to incorporate ESG risk or opportunity into their investment process by way of an enhanced discount factor, adjusted valuation multiple and/or portfolio weighting. Furthermore, the data and scores can be aggregated to the portfolio level to give the individual managers a top down view of their portfolio from an ESG perspective.