Investment quality and sustainability

To achieve this, we consider traditional financial matters as well as many that are less-widely recognised as financially relevant, for example trends disregarded by investors with short-term objectives.  Many environmental (E) and social (S) risks fall into this category.  Together with the governance (G) features that enable these risks to be managed, these are often referred to as “ESG”.

Examples of common ESG issues include:

• pollution
• occupational health and safety
• modern slavery
• climate change.

However, critical to our objective is to see beyond the issues recognised by financial markets at any given time, because not every relevant risk is properly valued by markets. Therefore, instead of being oriented to specific ESG issues or goals, we expand our sources of insight and enable diverse thinking to enrich our analysis, within the rigours of our disciplined investment and risk management framework. This applies equally to issues that some do not consider to be ESG, for example: 

• pandemic and other global shocks;
• geopolitical tensions;
• the threats and opportunities of technology;
• changes in economic, regulatory and financial market conditions;
• vulnerability in supply chains;
• how well a business is managed, including how its management team:
  • understands its competitive environment;
  • supports, trains, manages and aligns its employees to its purpose and values; and
  • considers and manages its impact on the environment; and the community in which it operates.

We take ESG matters into account for the purpose of achieving our investment objectives. We do this through ESG integration in our investment risk management, and through stewardship activities where it is both cost-effective and in the best financial interests of our members to do so.