Get the right experience for you. Please select your location and investor type.
Client letter: Why change a name?
We have decided to remove the word ‘Sustainability’ from the Stewart Investors fund names. Why? Three and a half slow-burning thoughts have combined to make it the right time.
In late 2005, after much agonising, we launched what is now one of the world’s oldest Asia Sustainability funds. This was never our intention. As long-term investors in Asia, we were already compelled to consider the sustainability positioning of companies to which we were handing over our clients’ savings for five, ten years and longer. We had spent the previous decade and more trying to find better ways to analyse sustainability positioning as an essential part of our investment approach.
There were no sustainability data service providers and very few, if any, sustainability reports across the region. The term ESG (Environment, Social and Governance) was not yet in widespread use. Pictures of smiling children, schools and hospitals were starting to make their way into annual reports but were mainly of use as contrary indicators for those companies with something to hide. We scrambled to find additional clues to the sustainability positioning of Asian and emerging markets companies, often stumbling along the way. We devised our own corporate questionnaires, spoke to local stakeholders including community leaders and non-governmental organisations (NGOs), and commissioned our own external research, usually at a sector level.
"Regulatory approaches are changing quickly and unpredictably and will likely continue to do so. We would rather focus on improving our own approach to sustainable investment than lose focus trying to second-guess regulatory changes."
Clients often expressed interest, before asking us, “Your focus on sustainability positioning sounds great, but how much return are you giving up by focusing on it?” Our answer was always the opposite. We believe sustainability positioning is a driver of investment returns. After one too many trade-off questions and an approach by an interested Scandinavian pension fund, we decided to launch an explicit ‘sustainability strategy’ aimed at proving there was no trade-off.
We debated the name. Stewart Investors already ran an Asian fund and a Global Emerging Markets (GEM) fund. We ran a naming competition internally to generate ideas. There was no winning entry. At the time, ‘SRI’ was the label of the day and could refer to either ‘Sustainable and Responsible’ or ‘Socially Responsible’ Investment. We opted instead for ‘Sustainability’ to capture our emphasis on long-term sustainability positioning and to be a bit different.
Fast forward 19 years and we have decided to remove the word ‘Sustainability’ from the fund name. Why? Three and a half slow-burning thoughts have combined to make it the right time.
First, we no longer have any other Asian or GEM funds alongside us, so there is no need for differentiation. The companies we admire the most don’t put sustainability in their name. It’s ‘Patagonia’, not ‘Patagonia Sustainability’. We would like to be known as Stewart Investors, not ‘Stewart Investors Sustainability’.
Second, we have always wanted to compete in the mainstream. We don’t use sustainability indices. Having the word ‘Sustainability’ in our fund names has sometimes led to us being excluded from mainstream conversations. We are keen to avoid this happening, especially as we push further into markets such as the US.
Third, financial regulators globally are spending more time trying to define what ‘sustainability’ means and how it should be regulated. Unsurprisingly each regulator is coming up with a different approach. There are many paths up the same mountain when it comes to investment styles. No two ’value’ investment approaches are the same, while interpretations of ‘quality’ and ‘momentum’ are many and extremely varied. So too with sustainable investment. Having ‘sustainability’ in a fund name may create regulatory confusion instead of clarity, particularly at a time when the term is becoming more politically charged.
Regulatory approaches are changing quickly and unpredictably and will likely continue to do so. We would rather focus on improving our own approach to sustainable investment than lose focus trying to second-guess regulatory changes. Removing the word ‘sustainability’ helps us in this regard too.
The final half-thought is that for us, sustainability positioning has always been essential but not sufficient on its own. There are plenty of companies with great sustainability positioning in which we would never invest. Quality of the people, franchise and financials are equally critical and, together, form the backbone of our investment analysis. And so too the price we are prepared to pay. Removing sustainability from the name may help to reinforce externally the importance of each and every part of our investment approach.
Taken together, these reasons persuaded us it is time to update our fund names. We have also taken the opportunity to clarify our own distinction between all cap strategies (to be explicitly named ‘All Cap’) and Leaders strategies (which are ‘all cap minus small cap’). We plan to implement these changes across our product ranges over the coming year.
"We will always seek out companies with strong sustainability positioning, not because of any labels, but because it’s an essential part of any long-term investment case. And we will always try to improve."
Removing the word sustainability doesn’t mean we will be focusing less on the sustainability positioning of our companies. The opposite is true. We are always trying to improve and do more, so long as it is company-focused, creative and original. Learning from our mistakes remains our greatest competitive advantage, along with our ten year investment time horizon.
We analyse and map each of our companies to specific environmental footprint and human development solutions. This process naturally continues to evolve and we always seek to improve and add rigour to what we do. Meanwhile, pre-defined sustainability performance indicators for each investment remain on our radar as a potentially useful tool, although we believe companies can contribute to sustainable development in different ways and that it is helpful to evidence that contribution using measures and methods which are suitable for each company.
Elsewhere, our research tender process is now well out of its infancy and the major teething issues we faced - such as how to best design, award and pay for a research tender! – have largely been resolved. We had no idea how difficult the design process was and how many simple mistakes can be avoided with the benefit of experience.
Our engagement continues to improve and is now flourishing, albeit in an unusual way. We actively try and avoid a prescriptive, formal, systematic approach where possible. This has become harder to do, given the financial industry’s predilection for measurement and quantification. Instead, we prefer to take a companyfocused approach which backs the curiosity, passion and persistence of our investment analysts as they grapple with the sustainable investment challenges facing our companies. Our recent conflict minerals engagement is a good example of this.
Born out of analyst frustration that companies are avoiding a critical long-term risk, our conflict minerals engagement has taken many different turns and directions, collecting wonderful partners along the way. No one has all the solutions to the problem, but we are now part of a group of companies and investors working together to see what might be possible. The closer we get to a lasting solution for all stakeholders, the greater the long-term shareholder returns are likely to be. We dream of launching similar engagements over time.
Our reporting is continually evolving and we are proud of our online Portfolio Explorer, which transparently reports on the sustainability thinking behind each and every investment. We are dreaming about what the next version of our Portfolio Explorer will be able to deliver. All these activities, and most importantly the imagination and creativity that they require, are unrelated to what we call ourselves, or our funds. We will always seek out companies with strong sustainability positioning, not because of any labels, but because it’s an essential part of any long-term investment case. And we will always try to improve.
David Gait
September 2024
Subscribe to our updates
To get regular updates and content from Stewart Investors, please register here.
Important information
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 conduct your own due diligence and consider your individual investment needs, objectives and financial situation and read the relevant offering documents for details including the risk factors disclosure.
Any person who acts upon, or changes their investment position in reliance on, the information contained in these materials does so entirely at their own risk.
We have taken reasonable care to ensure that this material is accurate, current, and complete and fit for its intended purpose and audience as at the date of publication. No assurance is given or liability accepted regarding the accuracy, validity or completeness of this material.
To the extent this material contains any expression of opinion or forward-looking statements, such opinions and statements are based on assumptions, matters and sources believed to be true and reliable at the time of publication only. This material reflects the views of the individual writers only. Those views may change, may not prove to be valid and may not reflect the views of everyone at First Sentier Investors.
Past performance is not indicative of future performance. All investment involves risks and the value of investments and the income from them may go down as well as up and you may not get back your original investment. Actual outcomes or results may differ materially from those discussed. Readers must not place undue reliance on forward-looking statements as there is no certainty that conditions current at the time of publication will continue.
References to specific securities (if any) are included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same. Any securities referenced may or may not form part of the holdings of First Sentier Investors’ portfolios at a certain point in time, and the holdings may change over time.
References to comparative benchmarks or indices (if any) are for illustrative and comparison purposes only, may not be available for direct investment, may be unmanaged, assume reinvestment of income, and have limitations when used for comparison or other purposes because they may have volatility, credit, or other material characteristics (such as number and types of securities) that are different from the funds managed by First Sentier Investors.
Selling restrictions
Not all First Sentier Investors products are available in all jurisdictions.
This material is neither directed at nor intended to be accessed by persons resident in, or citizens of any country, or types or categories of individual where to allow such access would be unlawful or where it would require any registration, filing, application for any licence or approval or other steps to be taken by First Sentier Investors in order to comply with local laws or regulatory requirements in such country.
This material is intended for ‘wholesale clients’ (as defined under the Corporations Act 2001 (Cth) or Financial Markets Conduct Act 2013 (New Zealand) and ‘professional’ and ‘institutional’ investors as may be defined in the jurisdiction in which the material is received, including Hong Kong, Singapore, Japan, and the United States, and should not be relied upon by or be passed to other persons.
The First Sentier Investors funds referenced in these materials are not registered for sale in the United States and this document is not an offer for sale of funds to US persons (as such term is used in Regulation S promulgated under the 1933 Act). Fund-specific information has been provided to illustrate First Sentier Investors’ expertise in the strategy. Differences
between fund-specific constraints or fees and those of a similarly managed mandate would affect performance results.
About First Sentier Investors
References to ‘we’, ‘us’ or ‘our’ are references to First Sentier Investors, a global asset management business which is ultimately owned by Mitsubishi UFJ Financial Group (MUFG). Certain of our investment teams operate under the trading names FSSA Investment Managers, Stewart Investors, Igneo Infrastructure Partners and RQI Investors all of which are part of the First Sentier Investors group.
This material may not be copied or reproduced in whole or in part, and in any form or by any means circulated without the prior written consent of First Sentier Investors.
We communicate and conduct business through different legal entities in different locations. This material is issued in:
- Australia and New Zealand by First Sentier Investors (Australia) IM Ltd, authorised and regulated in Australia by the Australian Securities and Investments Commission (AFSL 289017; ABN 89 114 194311)
- European Economic Area by First Sentier Investors (Ireland) Limited, authorised and regulated in
- Ireland by the Central Bank of Ireland (CBI reg no. C182306; reg office 70 Sir John Rogerson’s Quay, Dublin 2, Ireland; reg
- company no. 629188)
- Hong Kong by First Sentier Investors (Hong Kong) Limited and has not been reviewed by the Securities & Futures Commission in Hong Kong. First Sentier Investors, FSSA Investment Managers, Stewart Investors, RQI Investors and Igneo Infrastructure Partners are the business names of First Sentier Investors (Hong Kong) Limited.
- Singapore by First Sentier Investors (Singapore) (reg company no. 196900420D) and this advertisement or material has not been reviewed by the Monetary Authority of Singapore. First Sentier Investors (registration number 53236800B), FSSA Investment Managers (registration number 53314080C), Stewart Investors (registration number 53310114W), RQI Investors (registration number 53472532E) and Igneo Infrastructure Partners (registration number 53447928J) are the business divisions of First Sentier Investors (Singapore).
- United Kingdom by First Sentier Investors (UK) Funds Limited, authorised and regulated by the Financial Conduct Authority (reg. no. 2294743; reg office Finsbury Circus House, 15 Finsbury Circus, London EC2M 7EB)
- United States by First Sentier Investors (US) LLC, authorised and regulated by the Securities Exchange Commission (RIA 801-93167).
- other jurisdictions, where this document may lawfully be issued, by First Sentier Investors International IM Limited, authorised and regulated in the UK by the Financial Conduct Authority (FCA ref no. 122512; Registered office: 23 St. Andrew Square, Edinburgh, EH2 1BB; Company no. SC079063).
To the extent permitted by law, MUFG and its subsidiaries are not liable for any loss or damage as a result of reliance on any statement or information contained in this document. Neither MUFG nor any of its subsidiaries guarantee the performance of any investment products referred to in this document or the repayment of capital. Any investments referred to are not deposits or other liabilities of MUFG or its subsidiaries, and are subject to investment risk, including loss of income and capital invested.
Copyright © (2024) First Sentier Investors
All rights reserved.
