Environmental, Social and Governance (ESG) integration

When you invest with Brown Shipley flagship funds, not only do you capture a multi-asset diversified portfolio, but you also encapsulate environmental and social characteristics through positive & negative ESG data driven screening.
Our parent company’s engagement with the companies and proxy voting further enhances these environmental and social (E&S) characteristics. Lastly we exclude the industries which are becoming redundant or are harmful for society.

How do we promote Environmental and Social (E&S) characteristics?

For E&S characteristics, we apply an outside-in ESG integration analysis which takes into consideration how companies are managing the effect of E&S issues such as climate change, for example, the effect it will have on a company’s business environment through physical and regulatory changes. This may include extreme weather events, natural catastrophes, failure of adaptation, supply chain disruptions, reputational risks, trade risks, liability risks as well as any social impact on companies. A major portion of investments in our flagship funds takes this analysis into consideration.

"A major portion of investments in our flagship funds are aligned with environmental and social characteristics"

Aligned with environmental & social characteristics

We exclude or avoid transactions that are not aligned with environmental, social and ethical standards

We do not invest in instruments of companies that have violated the UN Global Compact for three consecutive years, involved in controversial weapons, or derive more than 10% of their revenue from thermal coal. We aim to avoid companies that are involved in activities like tobacco, gambling, alcohol, adult entertainment or genetically modified organisms.

We are also stewards of your assets and actively engage with companies in our funds

We consider active ownership as one of our most important and powerful tools to promote environmental and social characteristics.

We engage with investee companies collectively with other shareholders regarding subjects like climate change risks, sustainable reporting and strategy and corporate culture.

We try to influence companies to improve their social and environmental behaviour and use proxy voting to emphasise these topics. For more information see our 2022 Active ownership report.

We are data driven in our ESG integration analysis…

Before we invest in companies, we use 190 environmental and social data points for our analysis. Being driven by data and our proprietary materiality matrix ensures the right data point is used for the right purpose. Being evidence-driven provides a consistent view allowing for comparability.

We have observed that higher ESG ratings are generally positively correlated with valuation and profitability while negatively correlated with volatility. To learn more about why we believe ESG investing is better for the long-term investment outlook please see here.

We also use third party funds

We believe in open architecture, when we are not selecting individual stocks or bonds we may use third party funds and ETF’s in areas where we believe those funds offer the best investment opportunity.

These funds go through a due diligence process to determine their attractiveness with regard to sustainability, costs, risk and return. The sustainable due diligence is performed on top of the regular financial due diligence and requirements. With regard to the sustainability due diligence for funds and ETF’s we use a proprietary scoring methodology.

These funds have their own methodology to determine whether an instrument has E&S characteristics. Here we rely on their data analysis, which can be quantitative or qualitative. They also have their own exclusion policies.

Authors:

AJ Singh Head of ESG & Sustainable Investing
Bas Gradussen Sustainable Investment Strategist
Giang Vu Sustainable Investment Strategist
Martynas Rudavicius Sustainable Investment Strategist

Important Information

Information correct as of 24 May 2024.

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