Our Impact strategy aims to address what we believe to be are the world’s most pressing climate, social, and environmental challenges, that, if left unaddressed, pose a very real threat to the sustainability of society and the environment. We identify and invest in companies we believe are addressing these challenges through either their core products and services, the operating approach, or supply chain management. Through this purpose driven approach to capital allocation, the Impact strategy strive to improve quality of life, reduce inequality, protect our planet’s biodiversity, and mitigate the effects of climate change.
Market support for sustainable leaders is growing and Impact-focused investments are providing creative, diverse investment opportunities to the market that address the key social and environmental challenges of our time.
Our Impact strategy aims to identify long-term, structural Impact Themes that collectively encompass what we believe to be are the world’s most pressing challenges. As humanity seeks ways to inclusively solve these challenges through the deployment of significant financial, human, and natural capital, companies that successfully operate within these themes have access to multi-decade, structural growth opportunities. High-quality growth companies which are leading the way in addressing these challenges are then identified, delivering on the objective of both financial returns and tangible social and environmental impact.
Our Impact strategy targets the key sustainability risks which, in its opinion, have both the highest likelihood of happening, and the biggest impact on society, and identifies growth opportunities that will be created in the pursuit of solving these challenges. These opportunities are then grouped into Impact Themes, around which the investment process is built, to ensure an equal focus on growth and impact. The Impact Themes are regularly reviewed and evaluated, and as such, themes may evolve over time as new trends and challenges emerge.
The eligible universe of companies is determined through both a top-down and bottom-up approach. The Impact Themes, alongside screening for metrics consistent with high-quality growth companies, creates the investable universe from a top-down perspective. A bottom-up approach is also used to identify companies that deliver impact through their operating approach or supply chain management. In the bottom-up approach, the Impact strategy will utilise sell-side reports and industry publications, as well as cross-sector input from the internal research team. The Impact strategy also screens to ensure specific activities are excluded, in-line with its ESG Policy.
Inclusion is dependent upon companies meeting the criteria of the Impact strategy’s proprietary Impact Assessment. Fundamental analysis is then conducted to ensure that the companies are high-quality, long-term growth compounders, which are reasonably priced from a valuation perspective. The fundamental analysis specifically focuses on: sustainable and recurring revenue growth; the ability to capture this growth profitably; the robustness of the business model; the existence of an economic moat, and the moat trend; superior cash flows; returns above the cost of capital through a business cycle; appropriate financing structure through a business cycle; and quality of management who must demonstrate that they are effective custodians of shareholder capital. A detailed Environmental, Social, and Governance (ESG) analysis to address Sustainability Risk is also performed.
The percentage of companies in that are analysed for sustainability characteristics will always be between 90%-100%. There is no alignment to a specific taxonomy.
Defining, measuring, and reporting Impact
Impact, as defined by the Impact strategy, is a deliberate, material, and measurable economic activity that improves societal and environmental interaction, to achieve a long-term sustainable future.
Companies deliver impact through either their core products and services, their operating approach, or supply chain management. For inclusion, the company’s impact must be aligned to the Impact Themes.
Companies will only be considered if they do not significantly harm any climate, social, and environmental objectives, and comply with minimum social safeguards. The Impact strategy uses a combination of internal and third-party analysis to assess both a company’s compliance with minimum social safeguards, as well as doing ‘no significant harm’ to climate, social, and environmental objectives.
Our Impact strategy measures the impact generated by companies based on the tangible climate, social, and environmental metrics produced annually. It develops individualised impact Key Performance Indicators (KPIs) for each investee company, which reflect and assess the material impact expected to be delivered, in alignment with the Impact Themes. Impact metrics are either directly disclosed by the companies, derived through data analysis conducted by the Impact strategy, or sourced from specialist third-party data providers.
Our Impact strategy aligns the reporting of its impact measurement with the UN Sustainable Development Goals (SDGs) of No Poverty, Good Health and Wellbeing, Gender Equality, Clean Water and Sanitation, Affordable and Clean Energy, Decent Work and Economic Growth, Responsible Consumption and Production, and Climate Action, to provide a common and comparable assessment of the impact created. The data on the impact delivered by the individual investee companies is aggregated and reported at the strategy level to reflect the total impact of the investment approach.
Eligibility is dependent upon companies meeting the impact criteria set by our Impact strategy, which need to be met prior to further fundamental analysis taking place.
The proprietary Impact Assessment provides a consistent framework for the measurement and evaluation of a company’s impact. The Impact Assessment collects, analyses, and interprets data in the following areas: overall ESG risk rating; material impact; Net Zero targets; tangible social and/or environmental impact delivered, and future targets; and trends in Principal Adverse Impact (PAI) indicators to assess the company’s focus and intent on transitioning to an inclusive, low carbon and/or circular economy.
Our Impact strategy maintains a database of the impact data points analysed, as well as forward looking statements and targets issued by management, in addition to emphasis that the company’s activities ‘do no serious harm’ to the environment and society.
Our Impact strategy uses screening to ensure that certain activities are excluded or restricted, in accordance with the ESG Policy. These include companies with involvement in the following industries or business practices: the development, manufacturing, maintenance, stockpiling, transfer, use, production, and trade in nuclear, chemical, biological or other weapons of mass destruction, landmines, cluster bombs (including cluster munitions in violation of the Convention on Cluster Munitions); Alcoholic beverages; Gambling, casinos and equivalent enterprises; Radioactive materials; Tobacco. Activities related to thermal coal, whilst not explicitly excluded, investment is restricted such that the revenue derived from thermal coal does not exceed 10% of the total revenue of the company.