Our Responsible Investing Philosophy and Approach
Our approach to responsible investing is to incorporate environmental, social, and governance (ESG) factors into investment decisions to better manage risk and generate sustainable, long-term returns.
As small cap investors, evaluating a company’s environmental, social and governance practices is core to our deep-dive fundamental research approach. We employ a proprietary, fully integrated evaluation approach that was developed by investment professionals who know small cap companies best – our own equity analysts.
Having built our own set of materiality risks, we fully understand the methodology that informs our framework — and our decisions. Our ESG analysis is an extension of our fundamental investment process.
Materiality of risks
ESG assessments must be grounded in company specific risks, their materiality and the company’s handling of them. We believe this can only be achieved through an internal analysis framework. Fundamental equity investment managers are best positioned to determine the ESG risks associate with a specific investment and integrate them into their core process. Through the use of our proprietary ESG Materiality Matrix, we seek to identify and evaluate current and prospective ESG risks & opportunities of our investments, to make impactful investment decisions that can improve risk-adjusted returns.
The second component that is necessary for meaningful ESG insights — particularly in the small-cap universe — is engagement with company management. With a robust understanding of the risks and by engaging with management, responsible investors have a role to play in helping to increase the rate of adoption of sustainable business practices more broadly.
As long-term investors, we take a multi-year approach to engagement, and work with management teams through their ESG journey instead of focusing on a singular outcome. For smaller companies, operating growth and ESG risk exposures move in lockstep – we strive to engage with management teams to identify and establish policies to manage these risks as they emerge.
We are a signatory of the United Nations supported Principles for Responsible Investment.
We have established an ESG committee that is made up of three portfolio managers and the chief compliance officer. The committee reports directly to board and is responsible for oversight of our ESG policy.