Environmental, Social and Governance (ESG)
Our Policy
We believe that integrating Environmental, Social, and Governance (“ESG”) characteristics into our assessment of company fundamentals helps us to better understand the full perspective of a company’s prospects for sustainable long-term value creation. ESG risks and opportunities are not, by themselves, determinative of an investment decision. However, they can provide key information about the overall quality of a business and help assess a company’s long-term prospects within a given industry. We believe that the appropriate integration of any financially material ESG risks and opportunities is critical to our investment process and our overall objective of maximizing risk-adjusted returns over the long-term.
Our Philosophy
Our investment strategy is driven by the belief that:
Long-term sustainable and successful businesses incorporate and manage all relevant factors whether they be economic, financial, operational, environmental, social, or governance related.
Where material to a particular investment opportunity and consistent with a strategy’s investment goals and objectives, we seek to consider environmental, social, and/or governance factors that we believe may influence risks and rewards as an element of our investment research and decision-making processes.
However, such environmental, social, and/or governance factors are not by themselves determinative to an investment decision.
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We believe our approach to sustainability shares a natural alignment with our quality-focused investment approach that has been implemented since 1989. In our view, key philosophical components, including deep fundamental research, concentrated portfolios, and a long-term investment horizon, pair naturally with effective responsible investing -
PRI Signatory Since 2019 -
Received a 5-star rating from PRI for our active equity strategies in 2023 (Direct – Listed Equity – Active Fundamental module)*
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ESG research is conducted by each member of the investment team with specialist support from a dedicated ESG Research Analyst
We utilize Sustainability Accounting Standards Board (“SASB”) Standards as a framework to help identify the most financially material risks and opportunities that should be considered based on the company’s industry and operational footprint
We assess both the company’s exposure to the issue and the company’s management or response and rate each on a 1 to 5 scale
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We analyze each of the SASB key issues and aggregate an overall score
A Rating
We view the company as leading in how they are addressing the sustainability risks facing their business and have taken significant steps to mitigate or manage the potential risk/opportunity that is before them
B Rating
We view the company neutrally with respect to their exposure and/or management of the sustainability risks they are exposed to
C Rating
We view the company as lagging their peers and potentially under allocating in their response to financially material sustainability risks
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Our individual risk ratings help us monitor exposures to specific sustainability issues within our portfolio
The overall company risk rating can help us target where our engagement efforts should be best spent
Ratings are updated annually or as frequently as necessary as new information becomes available. The ESG team updates in coordination with the relevant Research Analyst
*KAR’s UN Principles for Responsible Investing (“PRI”) rating applies to its “Listed Equity” indicator scores and pertains solely to KAR’s equity strategies for 2023. No organization-wide score is given. Investors that report on their responsible investment activities through the PRI’s Reporting Framework receive a confidential private assessment report that shows year-over-year progress and broad scoring bands per covered module or asset class/sub-strategy. At the module and asset class/sub-strategy level, the score consists of a grading system ranging from 1 to 5 stars. The lowest possible grade is one star, allocated to those whose responsible investment practices are at the lower end of what is expected from signatories. The highest score is five stars, awarded to those signatories that demonstrate leading responsible investment practices. For additional information regarding PRI ‘s Equity Indicator scoring methodology please visit: https://www.unpri.org/reporting-and-assessment/how-investors-are-assessed-on-their-reporting/3066.article.
Where material to a particular investment opportunity and consistent with KAR’s investment strategy, KAR seeks to consider environmental, social, and/or governance (“ESG”) factors that KAR believes may influence risks and rewards as an element of its investment research and decision-making processes. However, such ESG factors are not by themselves determinative to an investment decision.