One notable outcome of the lockdowns... has been the positive reduction on pollution and carbon emissions.
Martin Currie Australia Sustainable Equity Strategy
In Australia, we have seen the launch of the Martin Currie Australia Sustainable Equity Strategy. The strategy is designed to provide higher returns than the index over the longer term, while considering and positively influencing the sustainability practices of the companies it invests in. It builds on our long-term experience in integrating ESG into Australian Equity portfolios and combines our unique multi-lensed research process with portfolio construction that tilts towards companies which score highly on our proprietary sustainability assessments. It reflects our belief that companies which focus on sustainability contribute to healthier outcomes for all stakeholders such as employees, communities, customers and broader society, and will, in fact, prove to be more financially successful over time.
PRI Stewardship Committee
I attended the first meeting of the PRI Stewardship Committee (previously the ESG Engagement Committee). The work for the committee this year is likely to focus on building on the Active Ownership 2.0 document (published last year) with an emphasis on facilitating collaborative engagement, policy engagement on systemic issues and driving improvements in stewardship practice across the PRI signatory base. The PRI will be producing a blog signposting relevant and useful guidance on areas such as approaches to engagement and active ownership. There is also currently an extensive review of the reporting framework including looking at its structure and the questions that are asked within it. The PRI are targeting 50 investors to test the new framework, and Martin Currie has applied to be part of this process.
The proxy season in Europe, the US and Asia is now past its peak, but in the run up to meetings this month there has been engagement with a number of companies. Again, we have found that companies remain very open to engagement through this challenging period.
In Asia, we have been engaging with a Chinese company on board structure, where we had concerns about succession planning and the associated nomination process. In particular, the process around the appointment of a new chair to the board raised some concerns. Our strong relationship with the company as long-term investors means that the company was keen to engage and understand our viewpoint on this.
Diversity has also been a topic that has come up at a couple of recent meetings. Specifically, it is has been an engagement topic with two technology companies held in our Emerging Markets funds. In both cases, we have engaged previously, but have seen limited progress in board diversity despite an opportunity in both cases to address the issue. As a result, we have chosen to vote against the relevant member or chair of the nomination committee in each instance.
We always take a case-by-case approach to how we vote proxies and in the case of Partners Group, a Swiss-listed private equity group we had a very informative discussion about its approach to remuneration. This addressed some of our initial concerns, but also provided the opportunity to suggest that a robust approach should be taken to counter the opinions of the proxy advisors.
As mentioned previously, our work on physical climate risk currently includes the trial of ‘Carbon Delta’, a forward looking and return-based valuation assessment to measure climate related risks and opportunities in an investment portfolio. Carbon Delta can provide insights into the physical risks presented by climate change and help understand the extent to which companies and portfolios are aligned with different temperature pathways.
Over the course of the coming month – now that there is greater comfort with the virtual environment – there is a broad range of ESG-focused conference and engagement activity. A number of brokers are hosting ESG seminars and both the Investment Association and the PRI have a number of webinars to come.
Meanwhile, I have been working on papers on climate change which we aim to publish in the next month and we will continue the work that we have been doing on the UN-backed Sustainable Development Goals and our stewardship ambitions.
1Source: Le Quéré, C., Jackson, R.B., Jones, M.W. et al. Temporary reduction in daily global CO2 emissions during the COVID-19 forced confinement. Nat. Clim. Chang. (2020). https://doi.org/10.1038/s41558-020-0797-x
2Source: IEA (2020), Oil Market Report - May 2020, IEA, Paris https://www.iea.org/reports/oil-market-report-may-2020
Regulatory information and risk warnings
This information is issued and approved by Martin Currie Investment Management Limited (‘MCIM’). It does not constitute investment advice. Market and currency movements may cause the capital value of shares, and the income from them, to fall as well as rise and you may get back less than you invested.
The information contained in this presentation has been compiled with considerable care to ensure its accuracy. But no representation or warranty, express or implied, is made to its accuracy or completeness.
This document has been prepared for professional investors, it is intended for the recipient only and may not be distributed to third parties. The document does not form the basis of, nor should it be relied upon in connection with, any subsequent contract or agreement. It does not constitute, and may not be used for the purpose of, an offer or invitation to subscribe for or otherwise acquire shares in any of the products mentioned.
Past performance is not a guide to future returns.
The views expressed are opinions of the portfolio managers as of the date of this document and are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. These opinions are not intended to be a forecast of future events, research, a guarantee of future results or investment advice.
The analysis of Environmental, Social and Governance (ESG) factors form an important part of the investment process and helps inform investment decisions. The strategy does not necessarily target particular sustainability outcomes.
The information provided should not be considered a recommendation to purchase a particular strategy / fund or sell any particular security. It should not be assumed that any of the security transactions discussed here were or will prove to be profitable.