Our approach to integrating Environment, Social and Governance (ESG) factors.
Risks associated with ESG factors (although not necessarily by that name) have always been included in our qualitative analysis framework for evaluating stocks. In the past, this analysis has tended to be a risk assessment exercise. Recently we have started to look at positive factors associated with ESG – that is, understanding which companies might benefit from the changing environment and what companies, in particular, are doing on the positive side to either benefit from environment and social change or to mitigate the risks associated with those changes.
We believe that sound corporate governance protects the interests of all shareholders and that the economic, social and environmental sustainability of a business are linked. Poor ESG practices can suggest inefficient and unsustainable processes, are costly to rectify and are socially unacceptable. As such we support the hypothesis that ESG factors will highlight risks through the identification of material but often overlooked investment issues.
ESG considerations form part of our process. A specific ESG issue can alone hold enough weight in deciding whether or not to invest in a company. In any event ESG considerations are factored in to analysts’ qualitative research and may therefore influence the final rating for each stock by having an impact on our quantitative valuation of the company. Our approach is to assess each investment on its own merits and compare it to its relevant industry peers. We incorporate these factors into our investment analysis as part of and with deference to our primary fiduciary responsibility.
We believe that any investment case must include a thorough analysis of opportunities and risks. ESG factors indicate the sustainability of a business and are integral to our valuation discussions.
Our process combines qualitative and quantitative assessment of each investment opportunity.
We invest with a three year time horizon and consider that by effectively engaging with the companies in which we invest, we are able to monitor the integrity of our investments.
As an investment manager, we take our ownership responsibilities seriously as we believe the right to vote as proxy is an important asset. We vote on all company resolutions, regardless of materiality, where we have authority to do so.
NovaPort Capital support the Task Force on Climate-related Financial Disclosures (TCFD) which promotes standardised frameworks for reporting on financially material climate risks and opportunities. We encourage the companies we invest in, or are considering for investment, to assess and disclose their exposure to climate-related financial risks, adopting where possible the framework set by the TCFD. In support of this Framework, NovaPort are also committed to developing portfolio level carbon metrics in line with the TCFD’s guidelines.
For further information please refer to our ESG Policy.