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Environment, Social and Governance

  • Environment

    Environmental factors are considered in context of a company’s environmental performance and how it is likely to be affected by the evolution of climate change policies.
    Environmental performance is monitored through company and regulatory disclosures, which are reflected in the cash flows of our company models.
    We also model the cashflow effects of a range of assumed changes to climate change policy for each of the companies within our universe through detailed scenario analysis.
    The Global Strategy aims to have a positive net exposure to companies which will benefit should climate policy develop in line with our ‘Fast Transition’ (most aggressive) climate change scenario.

  • Social

    Infrastructure assets, especially those working within a regulated, operate under an implicit social contract. Companies which fail to perform in line with that contract may be subject to penalties or reduced allowed returns.
    We spend time considering the behaviour of each company and its relationships with its regulator and customers, seeking companies which demonstrate strong regulatory relationships (and strong social contract management).
    We avoid assumptions that companies will be allowed to earn excessive profits over extended periods at the expense of their customers and other stakeholders.

  • Governance

    We monitor and evaluate the impact of a company’s management and oversight and make specific assumptions as to management’s ability to generate (or undermine) the company’s value over time.
    We assess management’s incentives, capital structure decisions and use of cash. Companies with poor reinvestment skills will show lower returns and higher risk and will be less likely to form part of a portfolio.