Ecofin’s investment processes and decisions and everyday business practices are driven by responsible principles.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) RESEARCH
We believe that companies which actively engage with ESG-related issues are more capable of enhancing their long-term performance. A thorough understanding of ESG issues can empower companies to mitigate risks and take advantage of resulting opportunities. Ecofin’s research process fully integrates analysis of traditional fundamentals and ESG factors that we believe will affect stock valuations and shareholder value. Fundamental and ESG-related analysis is undertaken by our portfolio managers and analysts and not outsourced to a separate team. Each company has an assigned analyst who is responsible for all aspects of research and engagement with management.
Our portfolio managers/analysts engage with companies in a constructive manner. Dialogue is crucial to assess a company’s approach to ESG-related issues. PM/analysts place high importance on management quality, make hundreds of company site visits annually and speak to or meet with management teams regularly. The team is forthright in raising questions or concerns they perceive may affect a company’s ability to create value and looks for an appropriate response from management. Crucially the team is looking for signs of improvement or deterioration.
PROXY VOTING AND CORPORATE ACTIONS
Engagement and proxy voting is an integral part of our role in managing, protecting and enhancing the value of investments. All decisions relating to proxy votes, voluntary corporate actions and events are taken by the team using their in-depth knowledge of the companies on a case-by-case basis. Each company in Ecofin-managed portfolios has a dedicated primary analyst who makes recommendations to be approved by the senior portfolio manager in order to ensure the same governance principles are applied consistently. If necessary or potentially productive, we re-engage with management to explain our vote/intentions and suggest alternative actions. We use several third party services to monitor and process all proxy voting instructions electronically.
For sustainability strategies we produce environmental reports on a semi-annual basis which provide investors with transparent and unbiased information on the ESG risks of portfolios. These include an ESG risk analysis for each position and assess the level to which each company is exposed to environmental themes, such as renewable energies, energy efficiency, water infrastructure & technologies, waste management & technologies or pollution control, and also detail any coal, oil or nuclear exposure.
The Ecofin Global Renewables Infrastructure Fund, a long-only strategy investing in the owners of power generation assets and grids, also provides carbon data to assist investors in measuring the impact of the portfolio. The fund’s investment universe is made up of companies whose emissions are at least 10% lower than their respective grids’ and where less than 30% of their generation fleet is coal-fuelled. We have built a proprietary database that screens all global owners of power generation assets and compares each company’s emissions to those of the country grid in which the company sits; this allows us to quantify an ‘emissions avoided’ number for the fund each month.
We fully support and comply with the UK Stewardship Code. The Code sets out the principles for effective stewardship by institutional investors in respect of their equity holdings in UK listed companies. The Code is overseen by the Financial Reporting Council, the independent regulator overseeing financial reporting, accounting and auditing and corporate governance.
The Code, whilst focused on the UK, also sets a standard for stewardship and engagement for non-UK equity investments and we seek to apply the same principles globally. We also support and comply with the Japan Stewardship Code.
Please see below for the full documents.