Botanical Gardens

ESG risk management

To be a successful long term investor, analysis of environmental, social and governance (ESG) risks should be integrated into holistic risk management.

We have robust mechanisms in place to ensure that environmental and social risks are fully considered in all investment decisions.

ESG risk management principles

In practice, our analysis of ESG risks is focused around four areas of activity: screening, due diligence, engagement and collaboration.

Screening

We screen ideas on a variety of factors including market structure, experience of team and return potential; as well as assessing social, environmental, political and reputational risks. We immediately reject investment ideas where there is poor governance and / or high potential for detrimental social or environmental outcomes regardless of the sector.

Due diligence

Before any investment is made we undertake a detailed due diligence process to ensure an idea matches our expectations with regards to environmental, social and governance risks. We use the United Nations Global Compact’s principles focused on: human rights, labour practices, environment and anti-corruption, to guide our questioning to ensure that managers are building these areas into their own due diligence. If we are not happy with the outcome of the due diligence process, we will not invest in the idea.

Engagement

Our ongoing evaluation of the groups we invest in involves frequent contact and dialogue on a range of topics including social and environmental concerns. We prefer investment managers that have a concentrated number of holdings and engage with the management teams of underlying companies regularly. These groups focus on environmental and social issues as part of being a great business owner.

Collaboration

OU Endowment Management has forged a wide reaching professional network, which spans all levels of our team. All team members are encouraged to engage with peers to constantly evaluate our processes. We take best practice from a variety of frameworks, including the United Nations-supported Principles for Responsible Investment (PRI) and the United Nations Global Compact, and we will join organisations that we feel are appropriate to further enhance our processes. We are members of the Institutional Investors Group on Climate Change.

ESG risk management in practice