We assess environmental, social and governance (ESG) standards because we believe that a combination of legislation, regulation and changing societal preferences will impact negatively on the most unsustainable business models.
We aim to preserve the long-term value of our clients’ investments by driving change.
We aim to protect short and medium-term value by integrating ESG factors into our listed equity investment process.
We believe that this allows us to assess financial risks that are not often visible through the lens of conventional financial analysis.
Our process for listed equities
Before we purchase a company, we assess them by:
We review each company’s approach to managing their most financially material sustainability risks.
The CCLA Corporate Governance Rating is a bespoke tool that awards companies a grade from A-F dependent upon the quality of their board structure, accounting, ownership and capital stewardship.
Any sustainability controversies that the company has been involved in.
We assess companies' impact on the real world based upon three themes:
- Better work – labour standards and human rights
- Better health – encouraging high standards of health and wellbeing
- Better environment – climate change and the environment.
Taken together, this analysis allows us to identify, and remove from our investment universe, the most unsustainable businesses and develop appropriate engagement action plans to help others move forward.
How we incorporate sustainability risks into investment selection
Corporate governance and voting
Monitoring
Our ESG analysis does not end once an investment has been made. Companies’ ESG characteristics are routinely monitored to ensure that standards do not slip, and where engagement has been prioritised, progress is closely reviewed. Due to the importance that we place on change, we reconsider continued investment in companies if they are hesitant to engage or are not adequately responding to engagement on the most serious issues.
We pay particular attention to any controversies our investee companies have been implicated in and seek to ensure that they are complying with the international standards set out in the UN Global Compact and UN Guiding Principles for Business and Human Rights.
We believe that this approach helps us to control risk, support our aim to deliver consistent long-term risk-adjusted returns to our clients, and contributes towards our ethos of pushing for positive change.