Where we are now
How we integrate sustainability into our investment philosophy
Our award-winning sustainable investment philosophy looks to invest in high-quality companies that benefit from the following qualities:
- Strong and durable cash generation and capital growth
- Mission-critical intellectual property (IP) protected goods and services
- Robust balance sheets with comparatively low levels of leverage
We integrate this philosophy with a proprietary three-stage impact assessment.
Stage one: Excluding controversial industries
We exclude alcohol, armaments, adult entertainment, gambling, tobacco and fossil fuels businesses from our strategy.
Is it best to engage or divest in controversial businesses?
We find complete divestment often sits more comfortably with our clients. Trying to pivot a company’s business model can often be unsuccessful. We believe our energy and expertise is better used in identifying companies that already exhibit leading sustainability characteristics. That’s not to say that we don’t engage with the businesses that we do invest in. As long-term investors, we often have the opportunity to discuss strategy and Environmental, Social & Governance (ESG) risks that could impact future cash generation with the management of our companies.
Our portfolio skews away from the more commoditised industries within the market that often require large regular investment. These industries tend to have a high carbon footprint for their economic value (known as carbon intensity), so avoiding them naturally lowers the carbon risk of our portfolio.
But the exclusion of these commoditised industries is not the only factor driving the relatively low carbon risk of the portfolio. By focusing on high quality, knowledge-based businesses, our investments typically add value through their intellectual property, rather than the number of products they produce. As a result, the companies we hold have a much lower carbon intensity than each sector average. The weighted average carbon intensity chart shows the greenhouse gas emissions of a portfolio, relative to its sales. It’s calculated using the total ‘scope one’ (all direct emissions from an organisation) plus ‘scope two’ (all indirect emissions) of greenhouse gas emissions of the portfolio – using public company documents and the Carbon Disclosure Project data.
