Sustainable, Responsible &/or ESG Policy:
The Global Sustainable Equity Team (the ‘team’) aims to outperform the market over the long term through creating a differentiated global equity portfolio of the best sustainability ideas. The team’s investment approach is explicitly low carbon and by incorporating environmental, social, and governance factors into their analysis, they seek to construct a portfolio with a favourable risk profile.
The team believes there is a strong link between sustainable development, innovation, and long-term compounding growth. Our investment framework seeks to invest in companies that have a positive impact on the environment and society. At the same time, it helps us stay on the right side of disruption by avoiding companies we consider to be involved in activities that are harmful to the environment or society. We believe that this approach will provide clients with a persistent return source, deliver future compound growth, and help mitigate downside risk.
Key distinctions
30 years of sustainability thought leadership
We have a long and successful track record in the consistent application of our sustainability framework – the strategy was launched in 1991 and Hamish Chamberlayne has been managing the strategy since January 2012. We have been thought leaders on sustainability issues since the inception of the strategy and were founding signatories of the UNPRI in 2006.
Investing with positive impact
Environmental and social considerations are integral to the investment philosophy and process, from universe definition and idea generation through to fundamental analysis, engagement, and portfolio management. A dedicated sustainability professional within the team enables deep integration of sustainability issues into investment process and enhances our ability to analyse issues from multiple angles.
Deep investment resource
The dedicated Global Sustainable Equity (GSE) portfolio management team works in collaboration with Janus Henderson’s global equity research platform and draws upon the deep knowledge and domain expertise of the sector and regional teams.
Explicitly low carbon
We consider six levels in our approach to low carbon investing. We believe this approach will be a significant source of alpha as the transition to the low carbon economy continues over the next decade and beyond. Hamish Chamberlayne has had training in climate change and has written a paper on the investment implications. The team have many years of experience in analysing, understanding, and managing both climate risk and transition risk within portfolios (the strategy has had this low carbon approach since inception in 1991).
Continuous improvement
We have a philosophy of continuous improvement that applies both to ourselves and the companies we invest in. We are always looking to enhance our understanding of evolving sustainability issues and how to incorporate them into our investment process. Our portfolio management is driven by this philosophy.
Our alignment with sustainable development
The guiding principle of our investment philosophy is: ‘Is the world a better place because of this company?’ and we always consider whether a company’s products contribute beneficially to the environment and society. Ten sustainable development investment themes help us identify long-term business opportunities. These have been informed by both the environmental and social megatrends that are pressuring the global economy, and by the UN’s 1987 Brundtland Report that defined sustainable development. Consequently, there is high alignment between our investment process and the UN Sustainable Development Goals (SDGs), and our portfolio contributes to all 17. Identifying companies that contribute towards the goals is inherent to our investment approach and we measure and report on this.
We believe there are a myriad of investment opportunities arising from the migration towards a more sustainable global economy, and that the best investment returns will be generated by companies that are on the right side of these. Looking for these long-term compounding characteristics and staying focused on long-term value not short-term valuation metrics, can generate exciting investment returns. We also believe there are substantial risks to companies and shareholder returns that come from factors such as asset obsolescence, regulatory risk, weak corporate cultures, or damaged franchises that are on the wrong side of ESG. While these risks can appear small in the short term, they also compound over time and can dramatically hurt company fundamentals.
Sustainable, Responsible &/or ESG Process:
Investment approach
There are four pillars to our sustainable investment process which incorporates both positive and negative selection criteria and includes both product and operational impact analysis. It is through this rigorous and repeatable stock-selection process that we believe we add value to our clients.
- Positive impact: Ten sustainable development themes guide idea generation and identify long-term investment opportunities.
- ‘Do no harm’: Strict avoidance criteria are adopted. We will not invest in activities that contribute to environmental and social harm. This also helps us avoid investing in industries most likely to be disrupted.
- ‘Triple bottom-line’ framework: Fundamental research evaluates how companies focus on profits, people, and the planet in equal measure.
- Active management and engagement: We construct a differentiated portfolio with typically high active share (>90%). Collaborative, continuous, and collective engagement is a key aspect of our process.
Thematic framework
The positive selection criteria lead the team to invest in businesses that have a positive impact on society and the environment by virtue of the products or services they sell, and by the way in which they manage their operations, thereby supporting the United Nations Sustainable Development Goals (SDGs) adopted in 2015.
Idea generation
Idea generation is derived from four ‘core’ megatrends that are pressuring the global economy: population growth, ageing populations, resource constrains, and climate change.
The team believes that the defining investment issue of our time will be transitioning to a low-carbon and sustainable economy, while maintaining the levels of productivity necessary to deliver the goods and services that an ageing and growing population requires. Derived from these four megatrends, we identify ten environmental and social sustainable development themes. For a company to be eligible for our portfolio at least 50% of its revenues will be aligned with at least one of these sustainable development themes.
Investing with positive impact is inherent in our approach and integral to all investment decisions. All investments must demonstrate positive impact and we measure and report on this. We do this by measuring the proportion of portfolio revenues that are aligned with each of our ten positive sustainable development themes, by mapping our portfolio holdings against the United Nations Social Development Goals (SDGs); by reporting our carbon footprint, and by measuring our portfolio against a set of ESG KPIs that are informed by the Global Impact Investing Network’s IRIS metrics.
Do no harm, avoidance criteria
The negative impact on global prosperity from the cost of economic externalities is becoming increasingly recognised. The team seeks to avoid businesses involved in activities contrary to the development of a sustainable economy, believing these types of business to be at a higher risk from government regulation or disruption.
We believe our exclusions make sense ethically, socially, environmentally, and financially. We seek to avoid investing in businesses that have products or operations directly associated with:
All holdings are compliant with the UN Global Compact, whose Ten Principles cover human rights, the International Labour Organisation’s declaration on workers’ rights, corruption, and environmental pollution. Additional oversight is provided by Janus Henderson’s ESG Oversight Committee, an independent committee comprising senior figures from across Janus Henderson, responsible for ensuring the strategy’s adherence to its exclusion criteria.
Fundamental and valuation analysis
The third pillar of the investment approach is constructed around two key questions, ‘Is the world a better place because of this company?’ and ‘Is there a large growth opportunity?’. The team has a rigorous process the fundamental research process which is looking at both ESG factors and also financial factors in an integrated fashion. The team ultimately analyses every company on the basis of the ‘3 Ps’ of their ‘triple bottom line’ framework: how they generate Profits, how they impact People, and how they impact the Planet.
The team seeks to identify businesses with long-term compounding characteristics, and with optionality upside, which are trading at discounts to their intrinsic value. Typically, the team looks for companies with the ability to generate and compound long-term free cash flows, where the equity market is currently under-valuing those. There is a specific focus to the financial analysis that the team does to identify intrinsic value.
The team looks for:
- The potential for multi-year revenue compounding
- A culture of innovation, that in turn drives that upside optionality
- Durable business models
- Greater predictability of revenues
- Consistency of margins and cash flows
- Strong balance sheets
The team also believes there are substantial risks to companies and shareholder returns from factors such as asset obsolescence, regulatory risk, the loss of key talent arising from weak corporate culture, or the loss of customers given the perception that a company operates on the wrong side of ESG. While these risks can appear small in the short term, they also compound over time and can dramatically hurt company fundamentals.
We believe that the equity market often fails to see both the long-term value being created by some companies and under-appreciates the long-term risks to others. We consider all of these factors as we think about a business’ fair value and stay focused on the potential for long-term value creation rather than on shorter-term valuation metrics.
Active portfolio construction and risk management
Every stock selected for the portfolio must fit at least one theme; but for the purposes of portfolio construction, there is no forced distribution of themes. Portfolio construction is driven by stock selection, with each stock assessed within the disciplined analytical framework.
The portfolio is constructed with the aim of generating attractive excess returns, but with a good level of overall risk diversification. The intention is to construct a high-conviction portfolio with high active share against the benchmark. There are some key principles to this.
Portfolio construction is driven by stock selection, with each stock being assessed within the disciplined analytical framework. There are 3 levels of position size:
- Substantial positions, of over 2% portfolio weight, are stocks with a superior combination of predictable revenue growth, financial strength, and valuation upside. These positions typically account for 30-40% of the total portfolio.
- Standard positions, of 1.5-2.0%, are the initial sizes for investments that meet all our portfolio entry requirements and have good liquidity.
- Small positions, of less than 1% are less liquid investments which tend to be earlier in their life cycle, but where we see significant upside. These positions typically account for less than 5% of the total portfolio.
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The portfolio will be regionally balanced to avoid unintended country and currency risk. Emerging market investments will be limited to a maximum of 3% of the portfolio.
The portfolio will comprise 50 to 70 equity investments. Every investment is selected on its own fundamental stock attributes but must contribute to overall portfolio fit and risk diversification.
The team believes that a high-conviction portfolio of stocks that align with the investment philosophy, which looks very different to the benchmark, but is managed with this high awareness of geographic, thematic and liquidity risk, can generate attractive risk-aware returns for our clients.
Sell discipline
Sales will be executed when the long-term investment thesis is impaired, or when corporate responsibility issues emerge and there is no possible resolution from engagement with the company. Additionally, a position will be sold if new information identifies a breach of the strategy’s avoidance criteria.
Engagement and reporting
Company engagement forms an important part of the investment process. We take an active approach to communicating our views to companies and seeking improvements in performance. We participate in various forms of engagement:
- Collaborative engagement: coming together with a group of other institutional investors to engage with companies on a range of ESG issues
- Continuous engagement: working with companies on ESG issues that have long-duration and do not result in immediate outcomes
- Collective engagement: bringing together ideas and resources from a diverse range of stakeholders from outside the organisation to engage with companies on key issues.
On a quarterly basis we publish our ‘Positive Impact Report’ and our ‘Voting & Engagement Report’. The Positive Impact Report details how the portfolio holdings are having positive environmental or social impact. The Voting & Engagement Report details our corporate engagement and proxy voting activity.
On an annual basis we publish our ‘Annual Sustainability Report’ and our ‘Investment Principles Report’. The Annual Sustainability Report details our portfolio impact measurement. We review the UN SDGs and our positive impact for each SDG. This report also discloses our portfolio Carbon Footprint, measuring scope 1, 2, and 3 emissions. The Investment Principles Report details our investment philosophy, our definition of sustainability, and an in-depth description of our positive impact themes and avoidance criteria.
Resources, Affiliations & Corporate Strategies
Hamish Chamberlayne co-manages the strategy with Aaron Scully, CFA, and is supported by dedicated sustainability analysts Amarachi Seery, CEnv, MIEnvSci, MIEMA*; and portfolio analyst Jigar Pipalia. The team is based between London (Hamish, Amarachi, and Jigar) and Denver (Aaron). Hamish and Aaron have dual analyst and portfolio management responsibilities, and each has an inter-disciplinary skillset comprising both financial and sustainability analysis. Hamish has been managing the strategy since January 2012, after joining the firm in 2011. Aaron Scully joined the team as an assistant portfolio manager in August 2017 and was promoted to co-portfolio manager in May 2019. Amarachi joined in June 2018 as a dedicated sustainability analyst. This is a collegiate team, with a strong set of shared values and thoroughly enjoy working together. They are dedicated to the management of the strategy.
*CEnv is the Chartered Environmentalist designation. MIEnvSci is full membership of the Institution of Environmental Sciences. MIEMA is full membership of the Institute of Environmental Management & Assessment.
The team has a close working relationship with the firm’s ESG Investment Team, specifically in relation to the analysis of material ESG issues and company engagement. The ESG Investment Team is an in-house specialised group focused on ESG data analysis and research, governance, ESG company and thematic engagement, proxy voting, and advisory services that serves as a resource for all our investment desks. The team’s mission is to promote ESG integration across the business. They play a leading role internally in working with investment desks to enhance their ESG integration processes and externally leading our active participation in numerous ESG initiatives.
Additionally, the dedicated GSE portfolio management team works closely with the wider Janus Henderson Central Research Team. These analysts provide idea generation, sector domain expertise and deep analytical due diligence on companies and sectors.
Our alignment with sustainable development
The guiding principle of our investment philosophy is: ‘Is the world a better place because of this company?’ and we always consider whether a company’s products contribute beneficially to the environment and society. Ten sustainable development investment themes help us identify long-term business opportunities. These have been informed by both the environmental and social megatrends that are pressuring the global economy, and by the UN’s 1987 Brundtland Report that defined sustainable development. Consequently, there is high alignment between our investment process and the UN Sustainable Development Goals (SDGs), and our portfolio contributes to all 17. Identifying companies that contribute towards the goals is inherent to our investment approach, and we measure and report on this.
We believe there are a myriad of investment opportunities arising from the migration towards a more sustainable global economy, and that the best investment returns will be generated by companies that are on the right side of these. Looking for these long-term compounding characteristics and staying focused on long-term value not short-term valuation metrics can generate exciting investment returns. We also believe there are substantial risks to companies and shareholder returns that come from factors such as asset obsolescence, regulatory risk, weak corporate cultures, or damaged franchises that are on the wrong side of ESG. While these risks can appear small in the short term, they also compound over time and can dramatically hurt company fundamentals.
Global Sustainable Equity Team
- Hamish Chamberlayne, CFA - Head of Global Sustainable Equity | Portfolio Manager (16 years with firm, 20 years of experience)
- Aaron Scully, CFA - Portfolio Manager (22 years with firm, 25 years of experience)
- Amarachi Seery, CEnv, MIEnvSci, MIEMA - Sustainability Analyst (5 years with firm, 15 years of experience)
- Jigar Pipalia - Portfolio Analyst (2 years with firm, 4 years of experience)
- Steve Weeple - Client Portfolio Manager (6 years with firm, 26 years of experience)
Source: Janus Henderson Investors, as at 31 December 2022.
ESG Investment Team
- Michelle Dunstan - Chief Responsibility Officer (<1 year with firm, 18 years of experience)
- Paul LaCoursiere, CFA*– Global Head of ESG Investments (2 years with firm, 21 years of experience)
- Antony Marsden - Head of Governance and Stewardship (18 years with firm, 24 years of experience)
- Blake Bennett, PhD - Governance and Stewardship Analyst (2 years with firm, 2 years of experience)
- Oliva Gull - Governance and Stewardship Analyst (8 years with firm, 8 years of experience)
- Ruchi Biyani - Governance and Stewardship Analyst (1 year with firm, 14 years of experience)
- Adrienn Sarandi - Head of ESG Strategy & Development (5 years with firm, 24 years of experience)
- Bhaksar Sastry, CFA - ESG Content Manager (2 years with firm, 15 years of experience)
- Henrik Jeppesen - ESG Implementation Manager (1 year with firm, 24 years of experience)
- Jesse Verheijen - ESG Data Analyst (3 years with firm, 8 years of experience)
- Dan Raghoonundon - ESG Corporate Research Analyst Lead (5 years with firm**, 16 years of experience)
- Charles Devereux, CFA - ESG Corporate Research Analyst (1 year with firm, 11 years of experience)
- Charlotte Nisbet - ESG Corporate Research Analyst (3 years with firm, 8 years of experience)
- Oliva Gull - Governance and Stewardship Analyst (8 years with firm, 8 years of experience)
- Phoebe Lei - ESG Corporate Research Analyst (1 year with firm, 1 year of experience)
- Xiaoyi Luo Tedjani, FRM - ESG Corporate Research Analyst (3 years with firm, 11 years of experience)
Source: Janus Henderson Investors, as at 9 March 2023.
* Announced departure effective 31 March 2023
**Bridged tenure from previous employment
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