Stage two: Environmental, Social & Governance considerations
Data about ESG practices can provide insight into how effectively a company operates. This can help investors to better understand:
- The quality of a business
- Potential vulnerabilities to future cash generation
- The likelihood of a company seeing a large drop in value – a negative tail-risk event
Businesses that have high ESG standards are also more likely to attract top talent due to:
- Having strong corporate cultures
- Treating staff well, often with good compensation and career opportunities
- Not significantly damaging the planet
By attracting top talent, a business may be more likely to produce higher levels of knowledge-based intellectual property, which often leads to higher profitability.
ESG is essential to our investment due diligence process as it gives us more information to make better investment decisions.
Compared to the global Lipper mutual fund universe of over 28,000 funds, this ranks the strategy in the top 10% globally, showing the quality of the businesses we invest in
Next, we integrate this with independent MSCI ESG research to ensure we only invest in companies that score well from an ESG perspective. MSCI provides ESG ratings on each company within an investment portfolio, ranging from ‘AAA’ to ‘CCC’ based on a range of ESG factors. Our strategy is currently 'AA’.
Compared to the global Lipper mutual fund universe of over 28,000 funds, this ranks the strategy in the top 10% globally, showing the quality of the businesses we invest in.
Sustainable portfolio: Top 10 equity positions
| Companies | Active weight | ESG rating |
|---|---|---|
| CSL | 3.8% | A |
| ASML | 3.2% | AAA |
| American Tower | 3.2% | A |
| L'Oréal | 3.1% | AAA |
| Adobe Systems | 3.0% | AA |
| Ecolab | 2.9% | AAA |
| Visa | 2.9% | A |
| Halma | 2.9% | BBB |
| Mettler-Toledo | 2.6% | AA |
| Intuit | 2.6% | AA |
Active weight relative to position size in MSCI all Country World Index ESG rating provided by MSCI ESG research as of 31 December 2019
Sources and references
Investments can fall as well as rise in value. Your capital or the income generated from your investment may be at risk.
You could get back less than you invest. Adding leverage to your portfolio may amplify returns in a rising market, but will amplify losses in a falling market
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