Sustainable investing involves an analysis beyond short-term profits, favoring instead factors that support long-term value creation. A company’s Environmental, Social and Governance (ESG) policies and track record are likely to be a helpful lens through which to gauge quality, furthering our ability to invest in the most sound companies.
Sustainable investing involves the following:
Integrating ESG risks and opportunities into investment decisions;
Taking a long-term view;
Being engaged investors and demanding high-quality business practices.
Ultimately, sustainability is about managing risk and delivering strong investment returns for the long term.
Consistent with our investment philosophy as long-term investors in high-quality businesses, we integrate Environmental, Social and Governance (ESG) factors into fundamental investment analysis. ESG integration is intrinsic to our long-standing approach. This approach to investing in high-quality businesses is pragmatic, not ideological.
In essence, sustainable investing and the analysis of material ESG factors have always been core elements of our bottom-up, fundamental investment approach.
As the world around us changes and issues that impact it continue to evolve, we use the following principles to guide our investment process:
#1 - Integrate the analysis of material ESG factors in our investment decisions. At Jarislowsky Fraser, ESG information is integrated into our bottom up fundamental analysis. ESG factors that are material to the investment prospects are discussed in industry reviews, as well as covered in individual company reports. Proprietary tools, such as our Business Practice Scorecard and Portfolio ESG Scorecard, ensure this is done systematically.
#2 – Take an engaged ownership approach. Acting as long-term stewards is our fiduciary duty and can be an opportunity to add value for shareholders. We seek constructive engagement with company management, and in some cases with Boards of Directors, on material business concerns including ESG issues. We believe that Jarislowsky Fraser has historically been viewed as a credible shareholder from whom managements seek counsel. This is further reinforced in our proxy voting decision-making:
Proxy voting is fully integrated into our investment process;
Our global investment team meets to consider each proxy;
Decisions are made in-house by the investment professionals.
In 2015, we disagreed with management on a least one agenda item for 73.4% of proxies.
#3 - Encourage disclosure of information that is relevant to the analysis of material ESG factors by companies and stakeholders where commercially reasonable. We value management candor and believe that transparency and accountability contributes to the quality and ethics of a company and can drive excellence.
#4 - Collaborate with other organizations in order to advance sustainable investment practices for the benefit of all stakeholders. See below for a listing of key associations.
Click here for a copy of our Sustainable Investment Policy.
We incorporate ESG considerations into quality assessments across all of our mandates. For clients with specific values-based restrictions, or other investment policy considerations, Jarislowsky Fraser offers a tailored approach to meet their needs. We manage approximately $3 billion on behalf of clients with a variety of unique values based restrictions. Illustrative mandates include “low carbon” and “religious values”.
Core to our approach is a belief that accountability and transparency drive outperformance. Consistent with that philosophy, we would highlight the following:
You may also access our Proxy Voting Policy and Procedures.
We will work with clients to develop reporting according to their needs, which may include carbon footprint analysis as well as other ESG elements.
The firm has a Sustainable Investment Committee to assist with the coordination of sustainable investing activities and the development of ESG tools across the firm.
Principles for Responsible Investment – We are signatory to the PRI, an international network of investors working together to put the six Principles of Responsible Investment into practice. We were a featured speaker at the PRI 10-year Anniversary Series: Innovations for a Sustainable Financial System.
Canadian Coalition for Good Governance – In 2003, Stephen Jarislowsky co-founded the CCGG to promote good governance practices in the companies owned by its members. Currently, CCGG members together manage more than $3 trillion in assets on behalf of Canadian investors.
CDP (Formerly Carbon Disclosure Project) – In 2007, Jarislowsky Fraser became a CDP signatory to show support for increased corporate environmental public disclosure and behavior change. We believe that measuring, managing, and disclosing environmental indicators is essential to a company’s management of these as both material risks and opportunities.
Foundation for Advancement of Investor Rights – The Jarislowsky Foundation has helped found and fund FAIR Canada. The mission of FAIR is to be a national voice for investors in securities regulation and a catalyst for enhancing the rights of Canadian shareholders and individual investors.
Global Initiative for Sustainability Ratings – We were a founding member of the Steering Committee, and a Partner of the firm is currently a member of the Board. GISR's mission is to design and steward a global sustainability (ESG) ratings standard to expand and accelerate the contribution of business and other organizations worldwide to sustainable development.
Institute for Governance of Public and Private Organizations – In 2005, Jarislowsky Fraser was a founding member of the IGOPP. The IGOPP is committed to improving governance in the private and public sectors.
Sustainability Accounting Standards Board – Dan Hanson, Partner, is a Board member of SASB. SASB’s objective is to establish industry-specific accounting standards for material sustainability issues for use by U.S. publicly listed corporations and their investors.
Canada Contact: Mark Fattedad, Partner
Tel: 604.676.3612 | mfattedad@jflglobal.com
US Contact: Michele Browne
Tel: 212.951.0188 | mbrowne@jflglobal.com
Insights & Articles
Buying Great Businesses at a Fair Price. The Wall Street Transcript interviews Dan Hanson, Partner & Portfolio Manager. (02-15-2016)
ESG Investing in Graham & Doddsville An in-depth look at how ESG investing has been a part of investment decision-making (published in the Journal of Applied Corporate Finance).
The Science and Art of High Quality Investing An illustration of critical qualitative and quantitative factors used to identify companies likely to sustain high quality attributes over the long term (published in the Journal of Applied Corporate Finance).
Videos
Speaking Engagements
Impact Investing The Economist, New York City | February 15, 2017
Moving the Market: SASB 2016 Symposium SASB New York City | December 1, 2016
ESG Investing: Why You Can't Ignore It CFA Society Toronto | November 22, 2016
RIA Foundation & Endowment Forum RIA Toronto | October 17, 2016
Additional Articles
Ceres Blueprint for Sustainable Investing This article aims to guide the institutional investor along the path of sustainable investing.
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