Our goal is to generate positive returns for our clients. We believe that companies that deliver benefits to society and the environment face fewer risks over the long term and are therefore better placed to deliver positive returns to shareholders. We also know that we have a role to play that goes beyond that.
Companies are living, breathing entities that affect the world around them. They have the power to change people’s lives for the better and to contribute to solving some of the biggest challenges we face. We understand therefore that when we buy a share in a company, we are buying more than a piece of paper. We’re also purchasing influence and the ability to effect positive change.
We can choose, for example, to allocate money to a company producing healthier foods that reduce the risk of diabetes, rather than one producing sugary drinks. And we can choose to invest in a company that manufactures vaccines and plasma protein biotherapies or one that contributes in other ways to economic development or human welfare and safety.
Each of us in Stewart Investors investment team signs up to a code of conduct – our Hippocratic oath – in which we promise not to pursue returns to the extent that our actions will knowingly harm others.
We also promise to allocate funds where they can be used for the future benefit of all.
Investing in companies that are socially useful, that support and work within environmental system limits, and that have responsible business practices, helps us to protect and grow our clients’ capital, while at the same time honouring our promises to contribute to making a real and positive difference.
The further a country is to the right of the diagram, the more developed it is considered to be, in terms of things like income, health and education. But because of the world’s predominant model of growth, which is resource-intensive and consumption-driven, the more developed a country is, the greater its consumption of resources. At present, humanity is using up natural resources 50% faster than nature can regenerate.
The green, dashed horizontal line, which represents the globally sustainable ecological footprint, highlights the problem we all face. As countries get richer, and move to the right, they tend to move vertically upwards on this plot, well beyond the green line – that is to say, they consume an unsustainable amount of resources.
- The challenge for all societies is to shift their development paths towards the green rectangle at the bottom right, i.e. high human development with a sustainable environmental footprint.
- The challenge we set ourselves is to find high-quality companies that are both contributing to and benefiting from this shift.
Head winds and tail winds
We’re living through a time of growing sustainable development challenges, including depletion of resources, scarcity and degradation of land and water, and increasing population density, particularly in the developing world.
In our view, it would be foolhardy as long-term investors not to take into consideration both the risks these challenges pose to a company and the opportunities they present.
We like to think of these challenges as winds, and we ask ourselves: Are they likely to propel a potential investment forwards, or to blow it off course? Are they tailwinds or headwinds?