Message in a Bottle: Quality Companies Can Create Value by Spending on Sustainability
As investors, we believe long-term returns are supported by a healthy balance between a number of company stakeholders including: share and bond holders, customers of the business, the society the business operates in, and the environment. If a company can balance all these interests, we see it delivering a useful service to the economy as well as standing a better chance of maximizing value potential through a business able to sustain over the long term.
The quality of management teams that create and execute growth strategies on behalf of investors is of core importance, along with the business opportunity they are building into. We are highly sensitive to Environmental, Social, and Governance (“ESG”) issues. We see the results of management choices as fundamental drivers that can support or damage long-term returns for investors and that governance is an integral part of what a company is. We feel that without strong stewardship, risk to shareholders from many different directions can be significant. To us, governance risks stretch beyond environmental and social to fundamental aspects of managing a business such as: planning and acting for the long term, government relations, regulatory risk, and maintaining prudent levels of financial and fixed cost leverage.
We believe sustainability covers areas not explicit in the ESG acronym - an important example is Regulation. Over the years, many of our investment companies have held leading industry positions, and as a result regulation is one of the greatest risks they face. Even if regulation is not something management can control directly, we believe competent leadership can successfully steer a company around a dynamic regulatory landscape over time.
With our approach, we feel that protecting downside is more important than getting every last bit of upside and that this will reward investors over time.
We believe trust in management is key.
We are signatory to the United Nations – Principles for Responsible Investments.