Active owner, active engagements
As active investors, one of our most important priorities is to engage and collaborate with companies in working towards sustainable change.
SKAGEN has long recognised our responsibility as an investor to play our part with regard to the whole range of issues that need to be addressed to ensure a more sustainable future. Creating a sustainable future is a difficult and complex endeavour, but we seek to play our part as investors.
As an asset manager, our portfolio managers work relentlessly towards our ultimate goal; delivering the best possible long-term risk adjusted returns to our clients. This entails finding businesses that have, or are developing, future-oriented business models that will meet our expectations for shareholder returns. Considering material environmental, social and governance (ESG) issues is an integrated part of that search. We look at the entire value chain of a product life cycle and seek to find responsible attractively priced companies that will benefit from the move towards a more sustainable planet.
Ever since publicly stating our ESG guidelines in 2002, we have spoken and written about ethical companies; companies whose business practices we do not want to be a part of and how we expect companies to treat all shareholders equally. As society has evolved, as we have learned more and as the challenges the world is facing have grown, we have adapted as well.
The nature of the commitments that corporations make to society has evolved over time. As these now encompass wider stakeholder considerations, we diligently assess how our holdings manage the accompanying ESG risk and opportunities. We then use our position as an active owner to engage with companies to address these considerations. You can read case studies of our engagements here.
We have one clear goal with our engagement work; to create and make visible shareholder value. Companies with bad products or poor client service will most likely not create value for shareholders. Nor will companies that are engaged in environmental damage or that do not treat minority shareholders fairly. It is as simple as that.
While we may find companies that do not behave as we would like, if we believe that we can engage with these companies and facilitate change, then we can unlock shareholder value at the same time as contributing to a more sustainable future.
Engagement Overview as of Q3 2021
ESG is evolving rapidly, and at SKAGEN we strive to stay up-to-date with developments and to judiciously leverage ESG factors in our investments. One key challenge that we have sought to address is to better communicate and document the engagements and dialogues that we have with our portfolio companies on a continuous basis – be they by email, telephone, video conference or in face-to-face meetings. To better address this challenge, we have developed an internal tool, named the ESG Engagement Engine. The tool provides our portfolio managers, analysts and ESG team with low-threshold access to logging ESG engagements through an app on their phone whenever an ESG topic is discussed. The data is in turn aggregated into different visualisations so that we can maintain an overview of all our engagements and the different stages of each.
Addressing controversies when they occur in companies plays a key part in shaping our engagement strategies. However, good ESG engagement is not just about being reactive. By targeting financially material sustainability topics in the companies we engage with, we can proactively promote observable sustainability improvements and thereby safeguard our investments. We determine what we believe to be financially material to a company based on input from the Sustainable Accounting Standards Board (SASB), company opinions and our own analysis. That is where we believe that companies should be paying extra close attention.