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Specialist in Asia Pacific, China, India and South East Asia and Global Emerging Market equities.
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Leader in active quantitative equities across Australian equities, global equities, emerging markets and global small companies.
Backed by a unique blend of research, portfolio construction and risk management, focused on uncovering original insights and translating them into investment strategies that are active and systematic, aiming to generate alpha.
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Insights
At Stewart Investors, we believe in putting people first. Our investment world-view is of a series of partnerships – with each other, with our clients, with the companies we invest in, the people who buy their goods and services, and with the wider society in which we all live and work.
Discover moreSmall and Mid Cap Companies Responsible Investment
- Our capabilities
- Australian equities
- Australian Small and Mid Cap Companies
- Approach to responsible investment
Approach to responsible investment
Stewardship and ESG integration
The strategies do not have ESG targets and on that basis are not designed for investors who are looking for strategies that meet particular ESG targets. The strategies investment decision process, including with respect to ESG factors, may differ to other strategies managed by First Sentier Investors.
As part of the team’s investment decision process for these strategies, each entity considered for investment is evaluated against six key criteria, being:
- management
- industry/entity position
- financials
- valuation
- sustainability, and
- market factors.
Sustainability criterion
ESG factors are considered in the sustainability criterion. When evaluating an entity against the sustainability criterion, the Investment Manager may consider ESG factors including, but not limited to, the following:
- Environmental factors: an entity’s commitments with respect to climate change (such as its commitment to managing carbon emissions) and an entity’s management of water and waste.
- Social factors: an entity’s commitment to workplace health and safety and an entity’s stated commitments and policies regarding human rights (such as modern slavery).
- Governance factors: an entity’s board composition (which may include factors such as board independence, the separation of the chairman and CEO roles and audit remuneration committee independence), remuneration structures and corporate disclosure.
The emphasis placed by the Investment Manager on a particular ESG factor in the assessment of the sustainability criterion is based on the Investment Manager’s assessment of the extent to which that factor is likely to have an impact on the returns of the relevant security over the long-term. As a result, consideration of a particular ESG factor may vary by sector and/or industry, as well as being influenced by entity-specific details.
There is no set weight given to the sustainability criterion as part of the overall investment decision process and as a result it is possible that an entity which scores poorly on the sustainability criterion may still be considered eligible for inclusion in the portfolio when considered against the other five criterion.
The Investment Manager relies on internal qualitative research, which includes active company engagement when assessing and monitoring entities in respect of the sustainability criterion. ESG matters are frequently raised with senior management, including board members, during engagement with entities. Research may also be supplemented by third-party providers from time to time.
Case studies
We believe that a strong commitment to stewardship is an essential component of a strong approach to responsible investment, and that embedding responsible investment into the core of our investment activities is in the best long-term interests of our clients. For more than a decade we have systematically and progressively improved our practices and processes across our investment capabilities globally.
Climate change statement
Key climate-related risks in the team’s portfolio
The key climate-related risks in the team’s portfolios include physical, transitional, reputational and regulatory risks.
Physical risks are expected to arise from longer-term shifts in climate patterns which may have financial implications for companies the team invests in. For example, an increase in adverse weather events, such as flooding or extreme heat, may result in operational downtime, supply disruption or increased capex.
Transitional risks to a lower-carbon economy may entail companies dealing with material changes to how they are able to develop, produce and sell products and services. This may lead to potential earnings risk, stranded assets, restricted markets, or carbon border tariffs.
Reputational risks arise from expectations and perceptions of a company’s contribution to the shift towards a lower-carbon economy. Those companies tied to fossil fuels, higher emissions and failure to transition may be at increased risk of losing their social licence to operate.
Regulatory risks will continue to evolve, with new legislation likely to encourage or mandate companies to reduce carbon emissions. The move towards net zero will not come without cost for small and mid cap companies, especially for higher emitters which are likely to have increased administrative and operational expenses.
The team expects these risks to emerge over the medium- (3–7 years) to long-term (7+ years) investment horizon.
How these risks are identified
The team’s comprehensive research process assesses every potential investment on a range of six factors, one of which is sustainability. Climate change and carbon risk are considered as part of the sustainability rating.
In-depth, ongoing company engagement is the primary tool the team uses to identify climate related risks in the portfolios. This is augmented by third party research and the in-house Responsible Investment function’s expertise. The team works closely with companies to understand and manage the risks associated with climate change and the transition to a low carbon economy.
The team does not use quantitative carbon-related metrics in valuations or risk models. Rather, the team takes a qualitative, case-by-case approach with regards to understanding and managing climate related risks to companies and the portfolio.
Addressing risk
Climate change risk is evaluated by the team when considering the sustainability of a company’s activities. Although climate change may not be an important short-term issue for some stocks, it is likely to be an important long-term issue for stocks with sensitive exposure to trends in climate change. For example, industries related to fossil fuel production, such as the coal, oil and gas industries, will likely face multiple challenges during the transition to a low carbon economy.
The team engages heavily with senior management and boards to identify potential or existing risks. The team expects senior company management to understand ESG risks and manage them successfully. When this isn’t the case, the team works closely with management to resolve any ESG risks to the satisfaction of the investment team.
Where the team cannot gain confidence in management’s understanding and management of ESG risks, this will be reflected in the team’s proxy voting decisions and will ultimately feed through to stock positioning in the portfolio via the team’s investment process.
The targets and objectives that have been set
The team has committed to short, medium and long term targets for selected companies in the portfolio, based on analysis performed in line with the Institutional Investors Group on Climate Change (IIGCC) Net Zero Investment Framework Implementation Guide. The targets are as follows:
Short term: The selected companies are to develop a decarbonisation strategy and set a net zero target accompanied by targets that align with net zero emissions by 2050 or sooner.
Medium term: The selected companies are to have a decarbonisation strategy in place with emission reductions achieved in line with targets set by company.
Long term: The selected companies are to achieve net zero by 2050.
More specific targets have not been set at this time, as mandating targets of this type is inconsistent with the team’s broader investment philosophy and process. Rather, the team collaborates with the selected companies on the issue of climate change, related risks, and the transition towards net zero. Pleasingly, a rapidly increasing number of companies in the small and mid cap companies’ space are positioning themselves to provide the solutions needed to reduce emissions, manage climate-related risks and successfully transition to a low carbon economy.
Carbon footprint
Proxy voting
Proxy voting history by type of resolution
The table below contains the proxy voting history for the team by issue type. The chart provides the same information for FY2023.
Voting independence
The chart below shows the number of times the team has voted against management recommendations, proxy advisors' recommendations, or against both. The purpose of this table is to show the independent judgement which is applied by the team when making voting decisions.
Proxy voting by region
The chart below shows the number of times the team voted in each region and the percentage of votes against management recommendations, against our proxy advisors' recommendation, or against both. The purpose of this table is to show the regional difference in voting patterns and governance concerns.
Proxy voting information is as at 31/12/2023
Source: First Sentier Investors / CGI Glass Lewis
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Disclaimer
Any targets (including, but not limited to, the net zero targets) on this webpage are based on (i) available information and representations made to First Sentier Investors by third parties, including, but not limited to, portfolio companies; and (ii) assumptions made in relation to future matters such as the implementation of government policy in climate-related areas, enhanced future technology and the actions of portfolio companies. Such information and representations may ultimately prove to be inaccurate and such future matters may not ultimately be realised. As such, First Sentier Investors cannot guarantee the achievement of these targets. These targets are subject to ongoing review and may change without notice.
Any ESG related commitments, are current as at the date of publication and have been formulated by the relevant investment team in accordance with either internally developed proprietary frameworks or are otherwise based on the Institutional Investors Group on Climate Change (IIGCC) Paris Aligned Investment Initiative framework. The commitments are based on information and representations made to the relevant investment teams by portfolio companies (which may ultimately prove not be accurate), together with assumptions made by the relevant investment team in relation to future matters such as government policy implementation in ESG and other climate-related areas, enhanced future technology and the actions of portfolio companies (all of which are subject to change over time). As such, achievement of these commitments depend on the ongoing accuracy of such information and representations as well as the realisation of such future matters. Any ESG related commitments are continuously reviewed by the relevant investment teams and subject to change without notice.
To the extent this material contains any measurements or data related to ESG factors, these measurements or data are estimates based on information sourced by the relevant investment team from third parties including portfolio companies and such information may ultimately prove to be inaccurate.
First Sentier Investors became a Certified B Corporation in November 2022 with a score = 107.2, noting that the passing score is 80. Please visit the B Corp Directory to view our report and for additional information regarding the assessment process.
Material on this website is intended to provide general information only. This material has been prepared and issued by First Sentier Investors (Australia) IM Ltd (ABN 89 114 194 311, AFSL 289017) (FSI AIM), and includes the Financial Services Guide for FSI AIM.
This material does not take into account your objectives, financial situation or needs. Before making an investment decision you should consider the information on this website and the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the relevant fund, issued by either Colonial First State Investments Limited (ABN 98 002 348 352, AFSL 232468) (CFSIL) or The Trust Company (RE Services) Limited (ABN 45 003 278 831, AFSL 235150) (Perpetual) and assess whether the fund is appropriate given your objectives, financial situations or needs.
Any opinions expressed in videos are the opinions of the individual participant and are subject to change without notice. Such opinions: (i) are not a recommendation to hold, purchase or sell a particular financial product; (ii) may not include all of the information required to make such a decision in relation to such financial product; and (iii) may substantially differ from other individuals within First Sentier Investors.
Copyright © First Sentier Investors (Australia) Services Pty Ltd 2024 (part of First Sentier Investors, a global asset management business. First Sentier Investors is ultimately owned by Mitsubishi UFJ Financial Group, Inc MUFG).
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