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ESG – our expertise

The in-depth analysis and process that underpins our world-class Environmental, Social and Governance (ESG) credentials.

More about the ELTU strategy
Date published
2 Nov 2020
Tag
Zehrid Osmani Head of Global Long-Term Unconstrained

We have put in place a proprietary issue risk assessment which continues to perpetrate our leadership position and drives us to continue to innovate in the field.

Script

In this video we're talking about ESG, what we call Governance and Sustainability.

We have strong expertise in ESG, developed over more than a decade long of fundamental research, culminating in a triple A plus rating by the PRI (Principles for Responsible Investment) for the 4th year in a row, which we are immensely proud of.

Our ESG analysis is part of the fundamental research that we do, it gets carried-out by our team of nine and we carry that across all companies that we cover, across all holdings in the portfolio. We have put in place a proprietary issue risk assessment which continues to perpetrate our leadership position and drives us to continue to innovate in the field.

Our ESG risk assessments are carried across 2 broad verticals - Governance and Sustainability. On the Governance side, we have four distinct areas that our analysts research in detail: management, board assessment, culture and remuneration.

On the Sustainability side, we focus on: environmental risk, social risks, understanding of those risks and integration into corporate strategy and remuneration, as well as reporting. And then we focus on the common factors whether it's climate change, cybersecurity social impact, customer trust or taxation.

All in all, we have over 50 parameters that our analyst assess on any company that we consider investing in. We're also focusing on momentum across governance and sustainability to assess whether any given company we look at is improving on any of those areas.

On the environmental risks, we focus on: carbon footprint, pollution risk resource intensity of the activities that corporates are involved in. But also we're assessing supply chains, to ensure that we are able to capture the impact, environmentally, of a company’s activity across the whole supply chain.

We expect social risks to be an important focus for the market going forward given the nature of the pandemic crisis that the world is just gone through.

When we're assessing management, we focus not only on management quality, where we also assess management breadth and depth but also capturing management accessibility. Because as a rule, we will not invest in a company unless we've had good access and interaction with management.

We're also assessing their ability to manage through crisis, and that's been particularly useful as the world's gone through this pandemic crisis. We've been able to assess each company in the portfolio through what we had already estimated in terms of risk exposures.

We expect social risks to be an important focus for the market going forward given the nature of the pandemic crisis that the world is just gone through. As part of our structured assessment. We assess social impact and social improvements of the corporate activities that businesses get involved in. We will also focus on exploitation risk that's where we would focus on risk of modern slavery.

Political lobbying is an important other aspect. And that's where we would assess corruption risk amongst other aspects. And social risks it currently an important area for us to consider as part of the sustainability of any business model that we consider investing in.

We have recently been doing some focus on cyber security. It has become a board level consideration and clearly management will increasingly invest more in cyber security. And this is particularly pertinent in a world post pandemic, where more of activities have gone online and into the cloud and therefore whether its increasingly more pronounced need to ensure cybersecurity investment is appropriate.

We assess a company’s impact both on their environment - both in terms of social impact, but also in terms of general aspect of interactions with the customers and whether they generate customer trust that is needed to make their businesses to stable. Ultimately, a sustainable business model tends to generate value for shareholders.

And for us as long-term investors this is critical.