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Our approach to sustainable investing
We believe 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 our clients.
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 produces 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 take risks or invest in a way that 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 boundaries, and that have responsible business practices, helps us to protect and grow our clients’ money, while at the same time honouring our promises to contribute to making a real and positive difference.
How we think about sustainability
Sustainable investing can mean many things to different people, but at Stewart Investors, the approach focuses on finding high-quality companies run by excellent management teams, that are well-positioned to contribute to, and benefit from, sustainable development.
While the Sustainable Development Goals and other frameworks are extremely valuable for understanding sustainable development issues, we have found the chart below, by the Global Footprint Network, to express it most simply.
It plots human development against environmental impact per head of population. Each circle represents a country and the diameter of the circle is proportional to that country’s population.
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.
What we don't do
- We don’t have a separate sustainability team determining an ‘investable list’. All judgments are made by members of our investment team.
- As investors, we don't rely on external agencies to rate how sustainable a company is, to point us in the direction of companies they believe are sustainable, or to rule out other companies.
- We don’t focus on themes or ‘green’ sectors; rather we focus our analysis on individual companies. We invest in many companies that have excellent sustainability potential but do not appear on thematic lists because the contribution is indirect, e.g. companies that develop the equipment used to test the safety of electric batteries rather than making electric batteries themselves.
- We don’t put sustainability positioning above, or hold it distinct from, company quality, or vice versa. As much money has been lost on companies that have great sustainability positioning but unethical management teams or deep financial weaknesses as there has been on companies who lose their social license to operate.
- Our focus on positive contributions to sustainable development means we avoid harmful and controversial companies.
You can view our position on harmful and controversial products and services here.
