Viewpoints

How do you identify risk from water stress? This blog looks at causes and vulnerability by business and location. Population growth of 750 million this decade and climate change will keep water stress rising. Companies need to adjust to the value of water before the market prices for scarcity.

Tesla’s current valuation reflects aggressive assumptions about its dominance of the electric vehicle market and its ancillary businesses. While parts of Tesla’s exciting story may materialize, progress is unlikely to be as linear as the market suggests. In fact, the market may be overlooking several key risks

Understanding potential value destruction from climate change is challenging. A strong framework can significantly improve visibility. There are hundreds of companies that appear to have value at risk from climate change greater than their market capitalization – climate zombies. Insights on where to find, and value, risks in this blog.

Why should investors care about ESG and why has the focus on ESG increased over the last several years? We believe the answer lies partly in the uncertain times in which we live. ESG shines a light on stability. It is not a luxury, but a critical part of risk management.

Unlike horses that need blinders to keep them narrowly focused on winning a race, investors should expand their field of vision to consider the risks around them. Matthew Benkendorf, CIO of the Quality Growth Boutique, shares 5 principles that are critical to help successfully navigate emerging markets.

Charlie Munger, Warren Buffett’s brilliant partner, famously remarked that their investment approach was “simple, but not easy.” After nearly 40 years of investing, Portfolio Manager Ed Walczak explores how the Quality Growth team aims to overcome the many challenges investors face today in determining the “true” value of a company.

The US government launches 2 new rules aimed at ESG and proxy voting. Individually they appear investor-first, but taken together may be seen as a political agenda to limit investor activism from social and environmental interest groups. We are concerned about the impact on effective stewardship.

Our equity experts from the Quality Growth Boutique are constantly trying to find exceptional companies. In this insight, they explore businesses that may be high quality today that were not in the past. Does the current COVID crisis change the playbook for investors in any way?

Ethnic minorities account for 40% of the US population, 29% of bachelor degrees, but just 16% of Fortune 500 board seats. Sub-conscious bias plays a big role. A structured approach to hiring and mentoring are required for change. Diversity can drive innovation and shareholder returns.

Like a pendulum, once equity markets swing one way, they will swing back. Investors can manage market swings by actively allocating to international equities using 3 timeless tactics: diversification, exposure to a unique opportunity set of strong businesses, and buying at attractive valuations.

Portfolio Manager Ed Walczak and Client Portfolio Manager Grant Bughman provide an update on the markets, US Equity portfolio positioning and outlook.

3 steps to help navigate the storm: recognize change, keep an eye on your horizon, and get ahead of structural shifts that will follow the shock of death and economic damage. How we frame the crisis in terms of capital preservation and recovery will affect investment decisions.

We are now witnessing a market panic as the continued spread of the coronavirus is threatening a global recession. Portfolio managers Ramiz Chelat, Jin Zhang and David Souccar explain how they are adjusting their portfolios to take advantage of market dislocations and why quality growth businesses can help provide downside protection.

Modern slavery affected an estimated 89 million people during the 5 years to 2016 – more than Germany’s population. Its profits creep into our homes through imported goods enabled by complex supply chains. Imported goods with content produced by forced labor is a central problem. Active investors have a role.

Employees are consumers that power the economy. They also represent a large part of valuations worldwide. So why are investors so bad at measuring people impact? Understanding how and why employees add value enables companies to get the most from their staff, delivering better results for savers and society.

What is the purpose of your company? Not what it does, but its purpose. Its goals. Its compass. A meaningful answer is usually pretty short, understood by a layman, and can provide a light to follow through tough decisions. The pressure for companies to rethink their purpose, and the sharing of rewards across a company’s stakeholders, has risen sharply.

Get Social, ‘S’ from ESG, wrong and a company stands to lose customers and employee loyalty, and damage value of the business. The priority of owners in how socially responsible investments are made, and the expected returns, are key. Liquid markets can deliver rapid change in ownership. Can the two coexist? Owners are as much part of the solution as part of the problem.

China is relying on consumer spending for growth, with consumption driven by running property prices, rapidly rising incomes and debt. China’s property prices reached 84% of those in the U.S., yet disposable income is just one tenth. As the trade fallout with the U.S. saps demand for jobs – red flags are up.

For years, CEOs across the world have diluted their focus by serving on the boards of unrelated companies. Average time commitment for a board position at an S&P 500 company is around one month! Shareholders don’t get a vote on CEO focus – how can they get the undivided attention they deserve?

Dominant technology companies protected by awesome ‘network effects’ can benefit society and investors. But monopoly control of communications or private information can have unexpected consequences for users. How bad it can get depends on who’s running the company and who runs the regulators. What is ‘network effect’ and how can it be controlled?

China’s ambitions being challenged is creating significant uncertainty. Alongside this, MSCI and FTSE appear to be stumbling over each other to add China weight to their indices. The potential to reshape the benchmarks has significance – for both active and passive investors. Is the herd being led down a dark alley?

While a big payday for a CEO is not headline material anymore, it still makes most people queasy. When a CEO earns $20 million in one year, it would take someone making $100,000 a year more than four lifetimes to earn the same amount. Balance matters.

A growing emerging markets middle class and increased domestic demand may reduce poverty across the planet, and also provide fertile ground for investors. Companies that can consistently deliver to increasingly wealthy EM consumers stand to profit.

In this Viewpoints paper, Gary Thompson, Head of Trading, explains how overseas investors can get exposure to Chinese A-shares and Chinese Depositary Receipts (CDR).