In our view, companies that effectively address Environmental, Social and Governance (ESG) issues tend to be more attractive long-term investments. ESG factors have, therefore, always been a component of our fundamental investment analysis, and by taking an active approach to integrating ESG into our decision-making process, we are improving risk management for our clients’ portfolios. ESG is one of many fundamental risk factors that we evaluate in determining the quality and risk-return trade off of a security, helping us fully understand all the risks inherent in a company.
As a signatory to the PRI, we have high expectations of the companies we own in our portfolios, and we believe that our discussions and engagement with management teams and boards of directors is the most important element of our ESG analysis and research, including our proxy voting. Consequently, we communicate regularly with senior decision-makers, and look for opportunities to discuss our viewpoints and possible recommendations for a firm’s ESG principles and governance. We attempt to structure these conversations in a constructive, cooperative manner in which we show the benefits of a “win-win” outcome at improving ESG governance for shareholders and other stakeholders.
In 2022, we continued to monitor and engage with management teams. Our engagement activity is based on the sector, industry, region, and impact.
Some of our engagements with management have led to formal targets being set. Please see below for some examples.
We continue to vote our proxies in-house, and in 2022 voted against several management proposals. We attempt to own a portfolio of well-governed companies, and therefore it's important for us to be in alignment with Boards and management. Consequently, we don't expect to vote against management often. When we do vote against management, and if we believe the issue is material, we will communicate and engage as required.
While our ESG analysis is an important part of our investment decision-making process, it does not necessarily eliminate a company from being considered for a portfolio. We can have more impact and influence on a company’s policies and procedures as equity owners and debt holders than if we exclude them from the portfolio. However, for those clients that have specific restrictions and requirements, we do manage customized portfolios that exclude certain companies for ESG reasons.
For more details, read our Responsible Investment Policy.
The PRI most recently gave FGP’s responsible investment approach higher scores than the median of our peers across every module reviewed by the PRI. Of note, our fixed income and equity incorporation modules received scores of 98% and 89%, respectively. Read more about these results below.