Exploring outside the lines

Exploring outside the lines

Our interactive tool, Portfolio Explorer is helping us share how impactful companies are contributing to sustainable investments.

We believe the true drivers of sustainable development are to be found in people and enterprises, from the bottom up.

Take soy milk company Vitasoy1 as an example. Vitasoy is stewarded by the Lo family. The founder Dr. KS Lo sold soy milk door to door as a low cost source of protein from 1940, a time of food shortages and malnutrition in Hong Kong. Over the eight decades since, the company has been managed with competence, humility and integrity, and now provides healthy dairy alternatives in 40 countries. 

What Dr. Lo didn’t know back in 1940, was that plant-based proteins like soy milk would one day be vital for managing a different crisis - climate change. Soy results in less than a third of the greenhouse gas emissions of dairy milk, along with a fraction of the land and water use. However, while Vitasoy’s business drives an important climate change solution – plant-rich diets - it is often not categorised as a ‘climate solutions company’ by sustainability researchers.  

It is stories, like Vitasoy’s, which show the limitations of top-down, narrowly focused efforts at aggregating sustainability metrics. While we could develop portfolio level metrics and elaborate calculators, which aggregate and quantify the contributions the companies we invest in are making to sustainable development, such an approach would always be heavily laden with assumptions and be driven by abstraction. Has my investment really resulted in 1,000 cars worth of emissions being taken off the road? Or 500 previously excluded people being included in the financial system?  

It would also fail to capture the central role the leaders and employees of the companies we invest in play in achieving these outcomes, which also happens to be the question we focus on more than any other – can we trust the stewards of this company to do the right thing with our clients’ capital? Nor would it reflect the bottom-up way we invest, leaving us open to charges of greenwash.

We couldn’t guess at how much less ruminant emissions will be from the growth of soy milk vs dairy in one scenario vs another, or the number of hectares of forest that will be saved thanks to Vitasoy’s plant-based milk sales, but we know the potential is huge. Like colour by numbers, sustainability by numbers forces investors to stay within the lines. This results in the deep interconnections between social and environmental issues being missed, even though we believe, this is where some of the best opportunities that sustainable investment has to offer lie.

Taking a holistic view

A holistic view of sustainable development allows us to better appreciate the many different ways companies can and are contributing to a better future for people and planet. 

We have identified credible frameworks which we use to further test and validate the sustainable development contribution of the companies we invest in. While no single framework can capture all the different dimensions of sustainable development, assessing companies against frameworks like Project Drawdown’s c.90 climate change solutions helps inform without dictating what sustainability means. Incidentally, according to Project Drawdown, plant-rich diets can make the fourth largest contribution to achieving a 1.5oC climate outcome2.

In addition to Project Drawdown we have also identified 10 human development pillars, and consider company contributions to the Sustainable Development Goals. Using multiple lenses for viewing companies allows us to look at them from different angles and gain a more complete view of their sustainable development contributions, along with the areas where they need to improve. 

Introducing our Portfolio Explorer

In the same way they help us, we believe these perspectives can help our clients and other stakeholders better understand how we invest. The stories of these impactful but imperfect companies also makes sustainable investment real by connecting them to the products and services we consume in our everyday lives. For this reason, we have developed Portfolio Explorer, our new interactive tool.

We believe that Portfolio Explorer is unique as it tells the stories of all the companies we invest in across our regional and global strategies. Importantly, the company descriptions have been written by our investment team and provide a balanced view highlighting both the positive contributions along with the risks and areas for future engagement. 

We know that too much information can be as bad as not having enough! So we’ve provided four simple views of our strategies which display companies by their location on the map as well as their contribution to climate change solutions, human development or the Sustainable Development Goals. 

Explore companies from the bottom-up - the same way we invest. 

Footnotes

  1. For illustrative purposes only. Reference to the names of each company mentioned in this communication is merely for explaining the investment strategy and should not be construed as investment advice or investment recommendation of those companies. 

  2. Source: Project Drawdown. Gigatons of CO2 equivalent reduced/sequestered (2020-2050).

Portfolio Explorer

Portfolio Explorer

Our  Portfolio Explorer tool allows you to explore strategies, companies, countries and sustainability issues of interest in four views – map, human development pillars, climate solutions and Sustainable Development Goals.

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This material is for general information purposes only. It does not constitute investment or financial advice and does not take into account any specific investment objectives, financial situation or needs. This is not an offer to provide asset management services, is not a recommendation or an offer or solicitation to buy, hold or sell any security or to execute any agreement for portfolio management or investment advisory services and this material has not been prepared in connection with any such offer. Before making any investment decision you should consider, with the assistance of a financial advisor, your individual investment needs, objectives and financial situation.

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