In 2012, Hermes Global Equities perceived Walmart as a company with attractive investment characteristics. But our proprietary ESG Dashboard, which analyses the environmental, social and governance (ESG) risk exposures of each company in our universe, flagged significant social and governance concerns regarding the US retailer. At the time, ongoing labour rights disputes that resulted in high-profile lawsuits, and allegations of bribery and corruption in its Mexican, Brazilian, Indian and Chinese operations, were significant ESG risks that also fuelled negative press coverage. This led Hermes EOS, our stewardship team, to engage the company and compelled us to seek more information about these incidents and consider alternative investments.
Louise Dudley, Portfolio Manager, explains why the team identified CVS, another US retailer as a suitable alternative investment. As an integrated pharmacy business it had comparable financial credentials but superior ESG performance to Walmart.
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