A presenter on a recent ESG-related webinar likened many debates on the topic to linguistic anarchy. They noted that when debates strayed from the value-add of ESG investing to comments on values, they typically disintegrated.
At the Sanlam Sustainable Global Dividend Fund, we have a lot of sympathy for this view. We have always taken a practical rather than emotional approach to ESG or sustainable investing. Strong emotions in fund management tend to result in behavioural biases, never a good thing in our view.
Our practical approach means that Sustainability analysis is the first part of our company research. We don’t outsource our Sustainability Analysis externally or even to other teams internally. Using our bespoke Sustainability Scorecard, we ask a range of questions across the Environmental, Social and Governance pillars. The answers are either yes or no. This avoids the ambiguity of sliding scale scoring and meaningless averages. If a company fails our Scorecard, we don’t proceed any further.
Our question format typically follows a pattern: Is there a policy? Is there data available to back the policy up? Does the data evidence improvement? This is as relevant for a water policy as it is for an equal pay policy or a remuneration policy.
We upgrade our Scorecard each year to keep it current. We also update the analysis of each portfolio company annually to monitor any positive or negative changes.
This practical approach extends beyond our sustainability analysis. For each potential investment, we undertake industry, balance sheet, accounting, dividend, and valuation analysis. Each of these is a key component of our research system for analysing companies.
We see this as a robust and repeatable system. A system focusing on the value-add of analysis, ESG or otherwise. This way we aim to build a portfolio of companies that demonstrate strong dividend growth and compelling sustainable credentials. This approach we believe will offer investors superior returns. Linguistic anarchy has no place here.
Fund risks
The Fund has holdings which are denominated in currencies other than sterling and may be affected by movements in exchange rates. Consequently the value of an investment may rise or fall in line with the exchange rates.