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 environmental, social, political and reputational risks. We reject investment ideas where there is poor governance and high potential for detrimental environmental or social outcomes regardless of the sector. We are not a passive investor and we do not simply buy markets or indices of companies. We carefully select investment groups who in turn carefully select the companies in which they invest.

Due diligence

Before any investment is made, we undertake a detailed due diligence process to ensure an idea matches our expectations with regards to ESG risks. We use the United Nations Global Compact’s principles focused on: human rights, labour practices, environment and anti-corruption, to guide our questioning and 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 environmental and social 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 responsible business owner.

Collaboration

OUem 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, and we will join organisations that we feel are appropriate to further enhance our processes. We are a member of the Investor Forum and the Institutional Investors Group on Climate Change, a signatory of CDP (Carbon Disclosure Project), and a supporter of Say on Climate.

ESG risk management in practice