Andrew Graham, Portfolio Manager of Martin Currie Asia Unconstrained Trust
Examples of ESG investing in practice
Mark Whitehead, Portfolio Manager of Securities Trust of Scotland, said: "We believe well-managed companies that exhibit strong corporate governance are more likely to be successful long-term investments. This sentiment isn’t driven by idealism, but simply by the reality that companies exhibiting strong governance tend to outperform over time. Take Dutch science company DSM for example. Having engaged with the company, we were able to better understand the most material benefits that the company experiences from its well-regarded sustainability programme. In particular, we noted the positive impact its sustainability credentials had on its ability to attract workers, as well as the importance of supply-chain transparency and sustainability for its customers. This increased our confidence in the long-term outlook for the company as well as reducing the overall risk profile of the business.”
Andrew Graham, Portfolio Manager of Martin Currie Asia Unconstrained Trust, said: "Establishing a dialogue with companies enables us to engage on areas where we need further assurance or clarification, often with quite technical questions. Recently we have had a very successful engagement with one of the portfolio’s holdings, Hong Kong-based insurer AIA, around issues of disclosure, governance and remuneration. The clarifications we received from the company helped resolve some of the questions we had, but crucially the process reconfirmed our assessment that the company scores highly in terms of disclosure and indicated where improvement is still possible.”
Zehrid Osmani, Portfolio Manager of Martin Currie Global Portfolio Trust, said: "With a global movement to reduce the human impact on the environment and preserve our precious resources, the development of electric vehicles is a key theme for us. This trend will be driven by both regulations – as governments legislate to enforce the switch away from the internal combustion engine – and consumer demand, as more environmentally-aware customers seek out cleaner forms of transportation. ESG analysis therefore provides the crucial lens for understanding the impact these changes have at a company level.”
"With a global movement to reduce the human impact on the environment and preserve our precious resources, the development of electric vehicles is a key theme for us.”
Zehrid Osmani, Portfolio Manager of Martin Currie Global Portfolio Trust
Adam Heltzer, Head of ESG and Sustainability at Partners Group, the investment manager of Princess Private Equity, said: "In 2018, we invested in Techem, a German-based global market leader in the provision of heat and water sub-metering services. During our investment committee discussions, it became clear that energy efficiency was at the heart of the company’s offering. By enabling heating and energy supplies to be managed in a more precise and sustainable manner, Techem’s solutions today account for 6.9 million metric tons of CO2 emission savings per year, thus contributing to global climate protection objectives. We decided that growing Techem’s positive impact on the environment had to be a key component of our business plan. Through our investment, not only of capital but also of human resources, we hope to make a significant contribution to making Techem even more impactful.”
What does an ESG approach offer to investors?
Mark Mobius, Joint Manager of Mobius Investment Trust, said: "First and foremost, taking ESG seriously means risk management. Companies that have good corporate governance and pay attention to the environment and social issues run less risk of becoming involved in scandals, having to pay fines or facing social problems.
"A recent study shows that companies implementing changes to environmental, social or governance standards following engagement from investors generated more than 7% of excess returns after 18 months. This is also supported by our personal experience during many years of investing in emerging markets. By taking ESG factors into account, investors can significantly reduce the risk profile of their investments, which over the long term not only translates into positive risk-adjusted returns, but also positively impacts all stakeholders.”
Austin Forey, Manager of JPMorgan Emerging Markets Investment Trust, said: "We do not see ESG as something that restricts our ability to generate returns. It’s a necessary part of what we do. We take a long-term view because we believe it delivers better results, reduces costs and allows the power of compounding to translate into investment outcomes. Anything which affects the long-term prospects of companies is important to us, just as it should be to the companies themselves.”from-www.reuters.com