At Marsham Investment Management LLP (Marsham IM), we believe that responsible investing will not only deliver sustainable, long-term value for our clients but it can also have a positive impact on society.
What is Responsible Investing?
For Marsham IM, responsible investing involves consideration of Environmental, Social and Governance (ESG) factors as part of our investment decision making approach to generate long-term financial returns that also have a positive societal impact. For businesses, sustainability is about how a company’s business model, i.e. its products and services contribute to sustainable developments and how it manages its operations in a way that minimises negative impact.
Responsible investing, also referred to as sustainable investing is a broad concept. There are many different rationales, approaches and definitions. The motives for sustainable investing vary from ethical principles to simply wanting to achieve better investment results. There are various methods to invest in sustainability, such as active share ownership (engagement & voting), integration of ESG factors, best-in class approaches, thematic investing, impact investing and exclusion.
Why is it important?
Taking ESG factors in account when investing enables firm’s to foster meaningful change in the global economy, and in the communities in which we live and work. We believe that ESG analysis leads to more effective investment solutions that address global challenges and create sustainable value for our clients. The integration of ESG factors is used to enhance traditional financial analysis by identifying potential risks and opportunities beyond technical valuations, providing data on issues such as potential reputational risk or identifying firms which are adapting to meet new market challenges.
Sustainability and Responsible Investment at Marsham IM
Approach to Sustainability
At Marsham IM, our mission is to enable our clients to achieve their financial objectives through superior returns and we believe that sustainability is key to achieving such returns. We believe that investing in companies with sustainable business practices and investing in disruptive companies that are able to adjust to change, are more successful in the long term. Furthermore, sustainability encourages positive economic, environmental and social change. As such, we integrate sustainable investment into our strategy.
Our investment process incorporates sustainability considerations by applying exclusions and integrating sustainability as part of our investment risk assessment to enhance risk-adjusted returns. We rely on ESG ratings provided by industry-leading data providers (e.g. Sustainalytics, S&P, Bloomberg, ISS, CDP and MSCI) to assess the ESG performance of single companies. Our Sustainability Policy sets out the principles for how Marsham IM ensures long-term sustainability of its operations, strengthen our long-term relationships with our clients, and contribute to a greater good. The policy aims to support Marsham IM and its employees in performing their work and decision-making.
Responsible Investment Approach
Marsham IM is responsible for delivering good returns by supporting international norms and being a responsible investor. We take into account the UN Principles for Responsible Investment and are committed to integrating ESG factors into our investment analysis and decision-making process.
Marsham IM works with a basic exclusion criteria, but the main objective is to sustain a valuation based investment process that does not categorically exclude lower rated companies or sectors (e.g. energy) from the overall investment universe. However, we expect the lower rated companies to formulate quantifiable objectives to gradually improve their respective ranking. Under our Exclusion List, norm-based exclusion criteria are applied to all potential investments, first with reference to the UN’s Global Compact principles. These ensure investments considered do not breach established fundamental responsibilities across the areas of human rights, labour, environment and anti-corruption. Exclusion criteria also extend to unconventional and controversial weapons (e.g. chemical, biological, nuclear).
ESG integration (“best-in-class” approach):
Marsham IM aims to be invested in best-in-class companies. However, in case of a large valuation gap between the best-in-class company and other companies in the sector (on a risk-adjusted basis), the investment manager may choose not to invest into the highest ESG ranked company. Specific Sustainability Risks (soft factors) in the area of Environment, Social Capital, Human Capital, Business Model and Leadership & Governance are incorporated in investment process as part of the basic fundamental assessment of any company. We regularly assess information provided by each company that we invest in on behalf our clients and monitor for any deviation from ESG factors.
More information on our approach to sustainability, responsible investing and our exclusions is available in our Sustainable Investment Policy upon request.