Responsible Investment Policy
Lofoten’s investment approach incorporates environmental, social and governance (“ESG”) issues into its investment analysis and decision-making process, as well as into its ownership policies and procedures, in line with its commitments as a signatory to the UN-supported Principles for Responsible Investment (“PRI”).
This means in practice that all new ideas need to be screened for ESG-related risks and controversies before they are bought for one of the strategies, and will be regularly reviewed for such factors on an ongoing basis. The investment team discusses matters of particular concern in these areas when we meet company representatives, alongside questions on strategy, competitive position and profitability.
Sometimes the ESG risks presented by new ideas will be manageable, and we believe that over time by engagement with the company and other investors they can be reduced. However, in other cases the risks presented will be just too great, or we believe the company does not take them seriously enough, both of which will preclude us from investing. While we automatically exclude certain sectors from our portfolios for ESG-related reasons, we believe that it is appropriate to look at most stocks on an individual basis. We exclude sectors such as controversial weapons and combustible tobacco.
We use data and research from leading providers to assist our decision-making and analysis. These providers include Sustainalytics, CDP, ISS and the PRI. Our ESG Lead, Rosie Bichard, is also a member of Chapter Zero, the UK organisation which seeks to educate non-executive directors about climate change risk and reporting.
Lofoten believes quite simply that firms which have a strong culture of good corporate governance, and which take environmental and social issues seriously, will outperform over the long-term. We also believe that it is part of our duty as investors to encourage more sustainable practices across the corporate and financial world, and that we should actively position client portfolios for a lower carbon future. This is a dynamic and evolving approach which requires collaboration, thoughtfulness and an ongoing commitment to learning.
We are active owners, and believe that stewardship is a key responsibility we carry out on behalf of our clients (see Stewardship Policy) in order to create value over the long term for our investors, the economy and society more broadly. We actively vote our proxies after careful consideration of the issues involved. We report on our voting record as well as on our engagement with companies. Engagement can take two forms: responding to specific resolutions or actions by individual companies, or a longer-term thematic approach seeking to achieve change in certain areas over time. The latter type of engagement is typically undertaken in collaboration with other investors in order to maximise our impact.
Lofoten Asset Management has also committed to give a proportion of its profits to charity every year, with an emphasis on those causes which can have a sustainable impact on the world over time and which are aligned with its values as an organisation.