SDG Engagement Equity

Reasons to invest

Serving investors, serving society

We invest in, and engage with, small- and medium-sized companies globally, aiming to increase the value of your investment over the long term and achieve a positive societal impact.

Positive impact

Through engagement, we aim to influence what a business does and how it does it, to meaningfully contribute to achieving the SDGs.

SDG focused

The United Nations Sustainable Development Goals (SDGs) provide a framework for identifying opportunities to create long-term, positive change.

Investment expertise

As experienced stock pickers, we have a long track record of investing in small- and medium-sized companies in rising and falling markets.

Engagement strength

The strategy’s lead engager, Will Pomroy, sits within the investment team and is supported by the rich resources of our experienced stewardship team.

Focus on quality

A focus on high-quality stocks, particularly in terms of returns on equity, durable competitive advantage and earnings stability, results in a relatively low-risk approach to the asset class.

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Strategy overview

We focus on attractive companies with the potential – through engagement aligned with the UN SDGs – to generate outcomes that benefit people, the planet and investors.

Hamish Galpin

Director, Head of Small and Mid Cap, Lead Manager of Global Small Cap

Why SDG Engagement Equity?

A growing imperative

Catalysing impact

Generating shareholder value

There is increasing understanding that the enduring success of companies is intertwined with that of the economies, communities and environments in which they operate and in which their employees and customers live. Companies are often uniquely situated – as a result of their integral position within communities, their direct relationships with employees and their connection with suppliers – to significantly impact the lives of a range of stakeholders.

We aim to generate positive societal and environmental impacts through engagements with companies focused on the UN SDGs. We believe there are compelling opportunities to create change and value among smaller companies whose operations, supply chains and products or services provide rich potential for improvement.

We view attainment of the SDGs as an opportunity to create value for shareholders. Through engagement, we not only look to improve a company’s sustainability profile, but generate additional insight into the characteristics and quality of businesses.

How we invest

Investment approach

Engagement approach

Any successful engagement strategy requires attaining buy-in from company management and boards. Our approach is to work collaboratively with companies – focusing on areas where the most tangible outcomes can be generated – and to be patient, recognising that meaningful, substantive and sustainable change takes time.

Finally, while climate change and related environmental topics are hugely important, the most tangible impact a company has is through its employment. Who a company employs and how it treats its workers contributes to a number of social goals, providing opportunities over the long-term.

SDG framework

The UN SDGs are an agreed set of goals to 2030, designed to end poverty and improve the lives of all. The 17 SDGs and their associated targets provide a common framework for identifying, assessing and measuring a company’s impact on society and the environment. Engaging with companies on specific SDGs provides us with valuable insights into investment risks, opportunities and long-term sustainability.

Investment philosophy

We seek companies that are attractive from both an investment and impact perspective; returns are not sought from sector and country positioning.

As such, stock selection is the primary source of risk. The strategy’s impact objective means there is a tilt towards industry sectors that are more resource intensive in nature (with respect to both physical and human capital).

Investment process

1. Identifying quality

2. Idea generation

3. Fundamental analysis

4. Portfolio construction

We focus on finding high-quality businesses with good growth prospects, led by management teams with the ability and willingness to embed the SDGs in their corporate strategies.

We have a defined quality framework. This, combined with the lengthy experience of our regional managers, means that suitable investment opportunities are easily identified. In many cases, we are waiting for an attractive entry point. Investment ideas come from a large number of sources, the most important of which is meetings with company management teams.

We produce an engagement thesis for potential holdings. This outlines where we believe there is potential for achieving positive change, given the company’s particular geographic footprint and business model.

Engagement opportunities may relate to a company’s supply chain, direct operations, or products and services (sometimes all three are relevant).

Detailed fundamental research is undertaken by members of the regional teams and the lead engager. Research is generated internally and supplemented with information from sell-side brokers and other sources. The emphasis on own-research – informed by discussions with the company – is particularly important for smaller companies.

Investment and engagement criteria are equally essential to the investment case:

Bottom-up stock selection drives portfolio construction. We run a relatively concentrated portfolio of 40-60 holdings, which we believe provides opportunities to generate alpha, while also being sufficiently diversified at the sector and regional level.

Initially, portfolio weights are determined using investment metrics. They are then flexed up or down based on perceived engagement and impact potential. This is an iterative process, where the investment thesis and the progress being achieved are regularly tested.

Team

1633, 1557

Product information

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Insights

Read our latest portfolio perspectives

Potential to access uncorrelated alpha with limited reliance on traditional return drivers.

A fundamental investing approach, aiming to deliver financial outperformance across changing market environments.

Promoting sustainability through investment.