Committed to Putting the Future First
In order to capture all the ESG risks and opportunities that our company might face, we have essentially developed a number of key performance indicators across our four pillars of the environment, governance, human capital management, and products and services.
At Partfield, we consider environmental, social, and governance information to be fundamental information when considering a stock. As a result, the conventional analysts and ESG analysts work together in a very integrated fashion to develop. Research on any given name.
Some ESG factors that we
believe are most relevant to
ESG factors can materialize in different ways, but the
major distinction is between sudden shocks and gradual
trends. In either case, they can be highly disruptive to a
Cross-ESG factor concerns
• Supply chain oversight and management
• Technological innovation and disruption
• Cybersecurity and privacy • Population demographic shifts
• Resiliency of infrastructure
• Significant ESG-related controversies
• Quality of ESG disclosure and transparency
Companies need an ESG strategy and high-quality managemet to execute it
Company's ESG strategy
• Labor stoppages
• Product recalls
• Supply chain
• Pollution incidents
• Accounting fraud
• Executive corruption
• Climate change
• Water scarcity
• Tech disruption
• Labor scarcity
• Operational stoppages
• Regular intervention
• Executive rotation
• Reputational loss
• R&D, compliance costs
• Gain/loss access to markets
ESG analysis in our
We take a multifaceted approach to conflicts management
Multiple policies, processes, and review bodies help us identify and
mitigate conflicts of interest
Global trade oversight
tailored to specific
ESG Data Analytics Application
Integrated Information. Individual Preferences.
The ESG Data Analytics application is a cloud-based application that mass-customizes investment portfolios to clients’ individual ESG factor preferences. The application’s rigorous data governance and peer behavior feedback loops guide the user’s selection of ESG factors to construct custom investment portfolios.
Through peer behavior feedback loops, the ESG Data Analytics app helps support the definition of ESG industry standards across investor types. As a part of an open ecosystem of complementary solutions and designed for ESG investment portfolio managers, research analysts, financial advisors, client reporting teams, securities borrowers, and lenders, the application solves three key client needs—customization, standardization, and demonstrability.
We recognize the critical connection between deciding to
invest and maintaining a strong program of stewardship
to protect each of our
investments. The central objective
of our approach is to strengthen the potential
profile of our clients' portfolios.
In all asset classes, we're committed to continuing to integrate ESG
our fundamental research process, and we seek to create a positive impact by engaging
with investee companies to mitigate ESG-related challenges and enhance ESG-related
opportunities. We believe that identifying and assessing material sustainability issues
help us protect and enhance the value of the assets we own or operate.
Our approach to ESG integration
We seek to incorporate material ESG considerations throughout the stages
investment and lending lifecycles, considering the characteristics of the asset class
and investment process in question, as well as industry and geography, among
other factors. In our capacity as stewards of capital, our investment approaches go
beyond conventional financial statement analysis. Our investment strategies that have
fully integrated ESG analysis monitor a company's strategy, capital structure, and
management of ESG risks and opportunities on an ongoing basis. In our operating
activities, we hold ourselves to a high standard of sustainability. We do this to both
protect and grow the value of the assets as we create long-term value for
Environmental, Social, and Governance (ESG) issues are increasingly important to the long-term financial success of a company. As skilled, experienced, and active investment managers we believe it is our duty to our clients to evaluate and integrate material ESG factors into the overall investment process. We believe doing so can contribute to better investment outcomes.
Genuine ESG Integration means our investment teams:
in extensive in-house ESG resources, training and education
ESG across strategies within an overarching research framework
consistent with each
active ownership responsibilities
custom solutions that meet each client's ESG objectives
to achieve 100% integration
Focus on Financial Materiality
ESG Integration Framework
Our ESG integration process is guided by a three-layer analytical framework that is aligned with our fundamental analysis process and fiduciary duty. The framework is applied to equity and fixed income strategies and seeks to 1) identify macro-level ESG issues impacting market dynamics, 2) determine which of these issues are relevant at the sector level, and 3) evaluate ESG materiality at the issuer level.
ESG Macro Analysis
Identify ESG issues affecting sectors and companies
Determine ESG risk exposures at sector level
Issuer Materiality Assessment
Assess ESG materiality at issuer level
• Consider relative ESG assessments in context of analysis/fundamental research process.
• Address company management with any ESG issues and controversies deemed material to an issuer's long-term financial condition.
ESG 2.0: Crowdsourcing Standards and Mass Customization
“More transparency, flexibility, and responsiveness to investor needs will yield tremendous gains in advancing ESG standards in a post-pandemic world.”
With net flows into sustainable funds nearly quadrupling in 2019, attracting a record $20.6 billion, last year was widely heralded as a breakthrough year for Environmental, Social, and Governance (ESG) investing. The dramatic growth provided yet more proof of the heightened demand for ESG investment options from institutional and retail investors alike. With the outbreak of the COVID-19 pandemic, ESG focused funds now face their first real test since entering the mainstream.
The initial signs remain encouraging: assets under management continued to grow in Q1 2020 and, relatively speaking, there is some evidence that ESG funds performed better than broader market indices. There are still a number of underlying challenges to be overcome, however, and the fallout from the pandemic could prove to be an inflection point for ESG investing.
One of the key issues with ESG investing is that it is – by definition – a broad range, encompassing a huge number of factors, even within each of the over-arching environmental, social, and governance themes. As such, ESG can often mean different things to different people. In Europe, for example, ESG is typically viewed through more of an environmental lens with climate change and carbon risk the primary focus while in many APAC countries social factors, particularly those related to financial inclusion of under-served communities, tend to take center-stage. In North America, there has traditionally been a greater emphasis on governance issues, particularly around management quality. At an individual level, it becomes even more complex and disparate; one investor may be interested in carbon emissions, while another may be interested in diversity.
A range of ESG issues in our engagements
We often engage with a company on more than one ESG issue in a given engagement interaction. These engagements can be purely to learn about firm management of sustainability risks or to encourage them to address a material issue we've identified that may affect value over the long term.
Top 10 engagement topics*
Board structure and practices
Market opportunity: environmental
Customer pref and shift
Other governance topics
Other social topics
Climate change vulnerability
Other environment topics
Number of engagements
New Tools of the ESG Trade
In practical terms, achieving a greater alignment between investor objectives and the investment process will require:
- A deeper understanding of investors’ interests and concerns when it comes to ESG, allowing them to define relevance on their own terms;
- An ability to “open up the box” to explore and identify the underlying components of ESG, how they’re scored, and how they can inform and support specific investment strategies and objectives;
- Customized portfolio construction to reflect investor preferences and needs;
- Demonstrability to ensure preferred ESG factors are represented in the portfolios or fund investments.
Without existing common standards and the disparity across ESG’s data universe, a consensus will likely only form through greater transparency into what investors are doing, which will, in turn, inform best practices.
At Partfield Data and Analytics Solutions, for instance, we are developing an application to leverage the power of the Partfield network to learn how portfolio managers and business users are interacting with and interpreting ESG data. Effectively this will provide crowdsourced guidance around the preferred ESG factors and priorities to determine the materiality of specific data sets and in the process create standards that both guide future ESG investments and continually improve and optimize the effectiveness of ESG metrics to complement traditional fundamental analysis or facilitate non-financial goals.