ESG at Mondrian
Mondrian believes that the inclusion of ESG factors is essential in understanding risk-adjusted returns for both dedicated ESG and standard strategies. Mondrian’s long-term, fundamental research process has always demanded that analysts strive to consider all material risks that could influence a security or market’s valuation, including those factors rooted in environmental, social and governance concerns.
The willingness of value investors to take a position in a broad range of companies and industries – including those that typically score very poorly with regards to certain ESG characteristics – has been taken by some to mean that a value investment philosophy is incompatible with the incorporation of ESG factors. This needn’t be the case as demonstrated by Mondrian’s integrated approach to incorporation in our equity and fixed income strategies. In particular, Mondrian recognizes that climate change must be considered as a risk to the long-term future of economies and individual business, and addresses these concerns through its bottom-up analysis.
Clear ESG Integration Process
Mondrian uses long-term investment models to evaluate the operating environment of each investment over an extended time horizon. To the extent that issues such as climate change, carbon emissions, water usage and energy usage have been identified as potential risk factors to consider in evaluating the investment case of a particular company, our analysts will conduct further investigation into the extent of these risks as well as risk mitigation.
The findings from this questioning and disclosure will be incorporated into our overall investment evaluation of the company and highlighted in the ESG Summary Report.
Stewardship considerations are part of the initial purchase decision, subsequent monitoring of an investment and any ongoing dialogue with an investee company, including active participation through our proxy voting process. A key element of our process is actively meeting with and engaging with management and the board of current and prospective investments to discuss the:
Governance discussions will include governance policies, corporate structure, management and board experience and composition, remuneration policies, board oversight policies and procedures, climate change impacts, human capital concerns, and policies on shareholder returns.
Dedicated ESG Strategies
Mondrian’s firm-wide approach to integrating ESG factors is first and foremost a risk-based approach, but we also provide solutions for clients that would like to pursue principles-based capital allocation through our dedicated ESG products. Mondrian’s long-term, scenario-based approach to value investing is particularly well-suited to the integration of ESG factors, which are essential in understanding risk-adjusted returns. Our International Equity and Global Equity ESG products build on this value approach by combining risk-adjusted returns with principles-based capital allocation decisions:
News and Insights
Reading Time: 11 minutes The decarbonization journey poses both investment opportunities and challenges with implications to risk appetite, access to capital and asset valuations.