Making an ESG impact while benefitting from compelling equity returns

Companies that generate income from tobacco, gambling, arms, pornography, nuclear power production, thermal coal production as well as oil and gas extraction are excluded from the investment universe (certain thresholds apply). Further, companies that are identified as UN Global Compact violators based on a controversial news flow assessment and those that are deemed as worst-in-class (bottom-quartile) are also excluded.
For mandate solutions, additional exclusions can be applied.

All stocks in the investment universe are scored on Environmental, Social and Governance factors as well as on their impact on the Sustainable Development Goals (SDG). The approach considers a company’s ESG performance through its operations, its products and services, and ESG controversies. Taken together, these dimensions provide a holistic ESG overview that identifies both risks and opportunities.

All stocks in the universe are screened based on ten fundamental criteria with the aim of identifying companies with stable, long-term oriented business models that demonstrate attractive returns, strong pricing power, low debt levels and a superior growth outlook.

The quantitative steps form the basis from which the sector specialists then begin their qualitative assessment and valuation analysis. They seek to identify companies with strong market positions, which can participate in structural trends that will drive long-term growth, and which benefit from a compelling combination of ESG and traditional financial return drivers.

The combined qualitative assessment serves as the starting point from which the portfolio manager chooses the highest conviction stocks in close collaboration with sector specialists. The individual sector lists include the analyst’s weighting of each stock within the list. This represents their current convictions in a stock relative to others in the sector. Based on this information, the portfolio manager makes the final stock selection following their individual fundamental assessment, sector evaluation and the stock’s interaction in a portfolio context, amongst other factors.

Active ownership is an integral part of being a responsible investor. The investment team engage with companies on their current ESG efforts. It is a two-way dialogue which allows the team to express their expectations towards companies as a sustainable investor, while also providing firms with the opportunity to offer further clarification and insight into their ESG practices and aspirations. We engage both on an individual basis and also in collaboration with other investors. 

With regard to proxy voting, LGT CP closely follows the SRI International Proxy Voting Guidelines provided by the Institutional Shareholder Services Inc. (“ISS”). The ultimate voting decision lies within the investment team.