Insight

UK Equities: What does ESG mean to us?

8 March 2021
Martin Walker, Head of UK Equities, Henley-on-Thames
Martin Walker
Head of UK Equities
James Goldstone
James Goldstone
UK Equities Fund Manager
Ciaran Mallon
Ciaran Mallon
UK Equities Fund Manager
UK Equities ESG
Key takeaways
1.
1
Investing in stocks which have the right ESG momentum behind them can be a positive way for our funds to potentially generate alpha
2.
2
We draw upon ESGintel, Invesco's proprietary tool, which helps us to better understand how companies are addressing ESG issues
3.
3
Engaging with companies to understand corporate strategy today in order to assess how this could evolve in the future

Our focus as active fund managers is always on finding mispriced stocks and ESG integration underpins our investment process at every stage.

The incorporation of ESG into our investment process considers ESG factors as inputs into the wider investment process as part of a holistic consideration of the investment risk and opportunity, from valuation through investment process to engagement and monitoring.

The core aspects of our ESG philosophy include materiality; ESG momentum; and engagement.

  • Materiality refers to the consideration of ESG issues that are financially material to the corporate or issuer we are analysing.
  • The concept of ESG Momentum, or improving ESG performance over time, indicates the degree of improvement of various ESG metrics and factors and help fund managers identify upside in the future.
    We find that companies which are improving in terms of their ESG practices may enjoy favourable financial performance in the longer term.
  • Engagement is part of our responsibility as active owners which we take very seriously, and we see engagement with companies as an opportunity to encourage continual improvement.

Dialogue with portfolio companies is a core part of the investment process for our investment team. As such, we often participate in board level dialogue and are instrumental in giving shareholder views on management, corporate strategy, transparency, and capital allocation as well as wider ESG aspects.

ESG integration is an ongoing strategic effort to systematically incorporate ESG Factors into fundamental analysis. The aim is to provide a 360-degree valuation of financial and non-financial materially relevant considerations and to help guide the portfolio strategy.

Our investment process has four stages. In this paper we go through in detail how ESG is integrated into each stage of our process.

Download full paper

Investment risks

  • The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

Important information

  • All data is as at 8 March 2021 unless otherwise stated.

    This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities.

    Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals, they are subject to change without notice and are not to be construed as investment advice.

    ESG information is for illustrative purposes only. This information is not indicative of how or whether ESG factors will be integrated into a fund. Unless otherwise stated in the legal offering documents, ESG integration does not change a Fund’s investment objective or constrain the Investment Manager’s investable universe. For more information regarding a fund's investment strategy, please see the fund's legal offering documents.