Our perspective on global micro event and strategies.
Mark is an equity portfolio manager specializing in concentrated environmental, social, and corporate governance (ESG) strategies that aim to invest responsibly in companies with leading corporate stewardship. As vice chair and a member of the CEO Leadership Team, Mark also meets with clients, consultants, and prospects to represent the firm and to discuss global capital markets, investment opportunities, risks, and potential solutions.
A climate-driven capital cycle is underway, and we believe companies must invest in low-carbon solutions to protect and grow the value of their assets and strengthen competitive positions. In our view, companies that prioritize environmental stewardship and establish clear climate strategies can be first movers and market leaders that profit from the low-carbon transition and deliver value for investors.
We want all portfolio companies to achieve net-zero greenhouse gas (GHG) emissions by 2050 and set science-based targets to accomplish this. We look for companies that view climate planning as a strategic priority. We seek businesses adapting to changing regulations and positioning themselves to capitalize on evolving governmental incentives and consumer preferences. During our engagements, we ask boards and management teams to embrace low-carbon practices and align business plans with the Paris Agreement to cap global temperature rise to 1.5°C. We seek leadership on supplier practices and sustainable product innovation as a way to reduce indirect emissions. Our proxy voting policies are aimed at…
How to incorporate environmental, social, and governance (ESG) research and ratings into fundamental security analysis can be a vexing question for investors. The connection of ESG issues to equity returns isn’t always clear and disconnects can persist for companies that screen well on fundamentals but poorly on ESG. As ESG-focused investors with extensive fundamental investing experience, here are some ways we help our colleagues think about applying ESG to their investment process.
Look for red flags. I see ESG as a cost-of-equity scaler. The more material ESG red flags there are, the more concerns the market may have about a company’s financial risks. These concerns can reduce the likelihood for strong fundamental performance to translate reliably into strong share-price performance over the long term. Conversely, the more a company’s ESG profile improves and concerns abate, the more the stock’s…
Earlier this summer, I virtually participated in an institutional conference with about 100 other asset managers and prominent asset owners from the US, Canada, Europe, Australia, and New Zealand. It was well worth my time. Here are my main takeaways, along with some personal observations on the post-COVID-19 industry landscape.
1. Economic assumptions and forecasts were more dire than I’ve seen internally. While Chinese gross domestic product (GDP) is expected to reach pre-COVID levels this year, the US may not get there until mid-2021 and likely only on the strength of “50% of the economy in steep recovery,” according to one conference participant. The other half of the US economy may..
This crisis represents a seminal moment for responsible investing. To this juncture, I believe many portfolio managers have understandably struggled to incorporate environmental, social, and governance (ESG) into their investing frameworks. ESG can feel steps removed from buy/sell decisions and seem arbitrary, as though conclusions are reached by applying personal values.
I see this changing right now. Starting with Wellington’s recent virtual Consumer Conference, and continuing over the past couple of weeks, we have had hundreds of touch points with company management teams. Those conversations have broached topics affecting a wide range of stakeholders:
These discussions have felt natural, because they are very relevant to long-term shareholder value. Stakeholders will remember companies’ actions during this crisis for a long time. The ability to hire, rehire, and retain talent will be shaped by reputations developed now…
We believe good corporate stewardship and positive environmental, social, and governance (ESG) behavior can help create business resiliency, enhance competitive advantages, and sustain economic growth. Through this lens, climate change is a growing point of friction. Can carbon-intensive companies that are otherwise models of stewardship — with quality management teams that consider all stakeholders, track records of capital allocation that add long-term value, and engaged independent boards — measure up for portfolios like ours, which aim to balance financial returns and responsibility? Increasingly, our answer is no. If a business is categorically negative for the environment (E), it is difficult for positive S and G behaviors to outweigh the growing financial challenges and other risks to the company.
Central to our investment philosophy is belief in a flywheel effect: Companies that reinvest returns to improve competitive position and strengthen ties to key stakeholders may ultimately…