Booster Client Update - Responsible investing, haven't we always?

28th Mar by Lifetime

Booster Client Update - Responsible investing, haven't we always?

Booster Client Update - Responsible investing, haven't we always?

Booster has always considered itself ‘responsible’ when looking after other people’s money! We also follow the six Principles of Responsible Investing (PRI) set in motion in 2005 by Kofi Annan of the UN. However, investors are increasingly looking for responsible investment to be clearer across the investment world.

What’s responsible investment?

Responsible investment (RI) is an holistic approach to investing that includes environmental, social and governance (ESG) factors into all investment decisions, to better manage risk and generate sustainable long-term returns. Unlike Socially Responsible Investment (SRI), RI does not typically just rule out investing in any sector or company. It simply means including ESG information in investment decision-making.

SRI, on the other hand, typically only excludes certain sectors or industries. Exclusions are based on values, ethical or moral grounds, and cover areas such as alcohol, gambling, tobacco, all weapons and, more recently, fossil fuels.

In short, RI includes ESG factors – a positive approach – while SRI excludes investments based on certain criteria – negative screening.

So who was the genius who thought SRI and RI aren’t confusing?

Good question! And quite frankly, we don’t know. Even most RI specialist organisations shake their heads in bemusement.

As an aside, we’re thinking of renaming our SRI funds to something like ‘Values Exclusion’ funds, to more clearly describe them.

What are examples of ESG?

There are many environmental, social and governance factors, which often shift. Typically, they include:

 ESG Example

How do we plan to more fully incorporate ESG into our decision-making?

Although we do already consider ESG factors as part of our investment research process, there are a number of ways for us to potentially progress and enhance this:

Subscribe to external ESG research specialists for ratings, scores, data and information on individual companies around the world, to supplement our own in-house research
Include this ESG information in our existing in-house quantitative and qualitative analysis where we believe it will be of value
Engage more – either individually or alongside other investors – with companies/entities we invest in about relevant ESG factors
Continue to use our shareholder voting rights to influence company behaviour on your behalf
Encourage the companies/entities we invest in to share more about ESG factors that do or could affect them
Monitor overall ESG risk within portfolios, for instance by measuring the portfolio’s carbon footprint.
We also encourage you to discuss responsible investing issues with your financial adviser, so they can help us determine the best ways to ensure your money continues to be put to good use. Your money can earn you a good return as well as making you feel good that you might be making a positive difference to the world.

Market & portfolio update – February

  • Share markets regained ground as February progressed, recovering most of the declines from the start of the month. While portfolios with an allocation to shares finished the month lower, the effect was much less than one might think from reading the newspaper! A Balanced portfolio finished February down less than 2%, well within the normal range of monthly results and still up close to 7% over the last year.
  • We bought additional shares in James Hardie, the Australian-listed building products company which continues to expand its United States presence, after seeing signs that some constraints on its manufacturing capacity were diminishing.
  • We also purchased more shares in Inditex, owner of the global fashion brand Zara, taking advantage of some recent weakness in the company’s share price. The purchase was offset by selling shares in Louis Vuitton Moet Hennessy, which has performed very well, leading to a demanding hurdle for future performance.
  • On the NZ share market, the demise of construction insurer, CBL Corporation, has been at the forefront of the media’s focus recently. It has rightly grasped their attention given only a month ago it was valued at $750 million and now it looks to be worthless. We can confirm that none of the Booster portfolios ever invested in CBL. We ran our eyes over it and couldn’t get our head around the business. Others are now coming to the same conclusion (albeit a tad late) with it seeming to be a “black box” of trouble.

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