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Dec 09, 2022

Why companies’ ESG profiles matter

IR Magazine Q&A with Oliver Attwater of Robeco
Oliver Attwater, Robeco
Oliver Attwater, Robeco

How do you work and confer with the other teams at Robeco in Rotterdam, Zurich and elsewhere?

We share meetings across the equity teams at Robeco so all interested parties can participate and share questions with management teams. We also have a mix of meetings between those led by the portfolio managers and those led by our in-house engagement teams. This approach allows us to raise important ESG discussions with companies and fully integrate sustainability into our fundamental investment process.

The way we integrate ESG in the Sustainable Global Stars Equities Fund is at the very start of the analysis process: when we are looking at a new name or updating our investment thesis, we will work closely with the people in Zurich and Rotterdam who are focused on sustainability and integrate that into our fundamental research process.

So if I’m looking at a new name, I’ll work in parallel with Robeco’s sustainable investment team, ask it for information and further discuss it from an ESG standpoint. That’s how we make sure we fully integrate ESG. It is not just downloading a third-party report to copy and paste. It’s very much bottom-up sustainability research.

The fund has five portfolio managers. Do you split geographies and sectors?

Michiel Plakman is the head portfolio manager for the fund, but each sector portfolio manager has leadership responsibility for his/her sector. Michiel has been an expert for many years in technology so he’s an excellent person for me to work with and use as a sounding board when I’m working on individual names.

As well as technology, my focus is on consumer discretionary and communication services. Other sectors are primarily covered by my colleagues.

You tend to target medium and large companies – do you have a minimum market cap?

Liquidity is a very important consideration for us. We are a high-conviction portfolio and like to have approximately 40 holdings. We avoid investing in stocks that don’t have a comfortable level of liquidity or we’d be forced to hold small positions and lose the high-conviction discipline.

Any sectors you exclude?

We don’t exclude any sectors, but we are an Article 8 Fund and there are certain companies and industries we exclude. On a day-to-day basis the key for us is the discipline in following our investment philosophy. By targeting high-quality companies with positive ESG profiles that are trading at reasonable valuations, we ensure the portfolio consists of companies we believe can outperform over the long run.

What’s your investment objective?

The fund aims to offer asset growth in the long term while at the same time aiming for a better sustainability profile compared with the MSCI World Index by promoting certain ESG characteristics and integrating sustainability risks into the investment process. It also aims for an improved environmental footprint compared with the MSCI World Index.

What is your investment process?

Throughout my career, I have focused on identifying quality companies trading at a reasonable price. Often the market chooses to focus on short-term concerns, which I believe can present opportunities to own long-term winners at an attractive entry point.

I try to be broadly balanced in other metrics so, for example, I wouldn’t want to tilt too far toward value or growth, and I seek to own stocks that can perform well through economic cycles.

I screen for the type of characteristics I define as ‘quality’ – companies that generate high ROI and have healthy free cash flow generation and yield, low balance sheet leverage levels and attractive ESG profiles.

This is an extract of an article that was published in the Winter 2022 issue of IR Magazine. Click here to read the full article.

 

Gill Newton

Gill Newton

Gill Newton of Phoenix IR
Partner at Phoenix-IR