How Mawer makes ESG a priority

Taking environmental, social and governance factors into account is nothing new for these award-winning fund stewards.

Jess Morgan 14 December, 2015 | 6:00PM

 

 

Beth Hamilton-Keen: We've been incorporating ESG factors in our analysis ever since the beginning of investing in companies. Because we're looking for companies that have a good return on capital, good long-term approach, a sustainable business model and good management. So a number of ESG factors are a normal part of the analysis that we are doing of any business that we would consider for the portfolio.

The biggest hit to investors' avoiding ESG factors, because again those ESG factors can be very important in analyzing a company, would be that you could miss some very significant risks. So if you are looking at a company who has risks that they are managing -- regulatory change would be a good example -- and if they are avoiding that or they are not incorporating those changes into their business models, then those companies could fail, or they could be very much less profitable than perhaps originally intended. So it’s not a smart investment decision.

In terms of the ESG factors that we are evaluating, it really does depend on the company. I would say the ones that come up for us more often, particularly in the last few years, are the governance ones. Those tend to be ones where we can spot it and sometimes influence the outcome.

So a Mawer fund where ESG has been especially important in the past year would be the New Canada fund. Again, we don’t take a separate ESG approach as a part of our regular analysis of the companies that we are investing in. In our New Canada fund, we have had a few instances where we have collaborated with other investors or directly approached the companies about governance issues in particular. That’s where we can suggest improvements in some of their reporting or in some of their methods of governance.

I do think that there will continue to be pressure in trends to encourage investment managers to make decisions about long-term sustainable investments, and ESG factors into that. So I believe that whether it's regulatory reform or just the pressure from within about the long-term investment nature of businesses and their contributions, their ability to sustain and weather the various challenges and risks that they face would be very important factors. In fact, I believe that ESG should be something that's a normal, everyday part of the analysis of a company, rather than a separate factor or a separately regulated recommended approach.

About Author

Jess Morgan

Jess Morgan  Jess Morgan is the associate editor of Morningstar Canada’s website. She began her career as a television producer and freelance writer, often making appearances on TV and radio as a commentator on politics and culture. She holds a BA in communications from the University of Winnipeg and a diploma in Creative Communications from Red River College.