at Lingohr & Partner
The interplay of economic, ecological and social goals is crucial for a healthy economy and the generation of long-term, attractive investment returns. We are convinced that the consideration of sustainability criteria (ESG criteria) for investments contributes to a solid and transparent market environment while being beneficial to society as a whole.
We believe that incorporating ESG criteria can provide investors with additional information about companies. As such it supports meeting ethical goals and contributes to long-term asset growth for investors by improving investment results. ESG considerations are integrated into the stock selection and portfolio management processes both on a company-wide basis as well as tailored to individual client needs.
Lingohr & Partner has been a signatory to UNPRI, a global investor initiative in partnership with the UNEP Finance Initiative and the UN Global Compact, since 2017.
“The PRI is the world’s leading proponent of responsible investment. It works to understand the investment implications of environmental, social and governance (ESG) factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions. The PRI acts in the long-term interests of its signatories, of the financial markets and economies in which they operate and ultimately of the environment and society as a whole. ” (source: www.unpri.org)
The principles are as follows:
- We will incorporate ESG issues into investment analysis and decision-making processes.
- We will be active owners and incorporate ESG issues into our ownership policies and practices.
- We will seek appropriate disclosure on ESG issues by the entities in which we invest.
- We will promote acceptance and implementation of the Principles within the investment industry.
- We will work together to enhance our effectiveness in implementing the Principles.
- We will each report on our activities and progress towards implementing the Principles.
Our path to ESG integration
We began offering sustainable, customized solutions for our clients in 2007. Since then, however, a lot has happened both in the realm of ESG as well as with our considerations. More reliable data initially enabled us to systematically exclude cluster bombs, land mines and companies that violate aspects of the UN Global Compact. Today, broad data coverage combined with a long history provide us with the opportunity for a wide array of integration as well as a solid ground for quantitative analysis.
In addition to our mandates with customized exclusion lists, we received our first specific ESG mandate in 2015 with a worst-in-class approach and UN Global Compact compliance.
By signing the UN Principles for Responsible Investing (UNPRI) in 2017, we showed additional support for this global movement. New ideas, data sources and methods of integration are currently being discussed and reviewed internally. ESG has been and remains a core topic in our research efforts.
The ESG integration at Lingohr & Partner combines normative screens with materiality assessments. In the first step, normative screens exclude companies in which an investment is uncompromisingly out of question for us. This includes business involvement in landmines and cluster bombs as well as companies that violate certain aspects of the UN Global Compact.
As asset managers, we specialize in identifying fundamentally attractive companies. Hereby, we pay particular attention to identifying companies with sustainable cash flow potential. While a company may appear cheap on the basis of traditional financial indicators, ESG criteria help us to identify material effects on portfolio companies and potential buy candidates. Individual cases are checked as part of the qualitative evaluation and potentially excluded from the investment process.
In addition to the company-wide ESG integration, Lingohr & Partner also offers tailor-made solutions. This includes positive or negative lists (black- / whitelists) with which investors can exclude companies they do not want to invest in. Clients can also define their own criteria for normative exclusions - this includes industry exclusions, exclusions from various business participations (e.g. alcohol, armaments, tobacco) or significant controversies to name a few. On the portfolio level, targeted ESG optimization can be applied using more complex data-driven solutions.
Data & research
ESG factors expand the amount of information available about a company and enable investors to make ethical and financial decisions based thereupon. Our vision is to reflect the interests of our investors with additional factors from the realm of ESG and to create added value for our investment strategy across all portfolios.
The amount of ESG data and quality has increased significantly in recent years. Since 2014 we have been working with MSCI ESG Research as a data provider whose data and analyst reports support us in both the quantitative and qualitative analysis of companies. In addition, data from Credit Suisse HOLT, Bloomberg and proprietary data points are used to form a holistic picture of companies.
Our proprietary database and backtesting engine enable us to analyze hundreds of E, S and G factors both individually and in combination with our valuation factors.
Team approach and development
All Lingohr & Partner employees are committed to responsible investment and encouraged to share our principles and beliefs with existing and potential clients, business partners, and the investment industry as a whole.
In addition to the daily integration of and working with ESG criteria, employees are continuously encouraged to further develop themselves in this area. This includes attending conferences as well as targeted trainings and seminars. Our investment team now also includes 4 EFFAS-certified ESG analysts (CESGA).
In accordance with our fiduciary duties, Lingohr & Partner exercises shareholder rights (for those clients who delegate this responsibility to us) by engaging in proxy voting, thereby representing the long-term interests of our clients.
It is our view that every company, including Lingohr & Partner, should attach great importance to long-term and sustainable business activities and take into account potential impacts on the economy, environment and society.