Our Approach to Responsible Investing
There is a growing awareness of sustainability and a fundamental shift in how markets are incorporating these risks. Sustainable investing incorporates ESG or Environmental, Social, and Governance issues into the investment process. For the past 15+ years, Telligent has specialized in investing in Asia. Our team focuses on fundamental investing and has a clear and transparent strategy for the integration of sustainability factors in our decision-making process. Sustainability is a mindset within Telligent culture.
Telligent takes a long-term investment approach. Instead of weeks or months, we typically think in terms of years. Because of our longer holding periods, assessing ESG factors helps us to better understand the risks. Our systematic approach is based both on global best practices and local market-specific fundamental insights. Our team has refined the investment approach over many years with clients at the center of our focus. We have a fiduciary duty to act in our clients’ best interests as we maintain a strict adherence to legal and ethical codes of conduct and compliance. Our active, integrated strategy for Responsible Investment considers ESG factors as mandatory risk management tools.
In 2019, Telligent became one of the first organizations of our kind to join as signatories of UNPRI. UNPRI has led the way toward responsible investing best practices worldwide. Our CEO and ESG director attended the annual PRI conference in 2019 in Paris and look forward to 2020 in Tokyo. As a learning platform, the PRI brings together the foremost experts in understanding the risks that ESG has not only on our investments but our state of living in the future. As signatories, Telligent has taken on the voluntary and aspirational set of six Principles for Responsible Investment. Developed by investors, for investors, the principles offer a menu of possible actions for incorporating ESG issues into investment practice.
At Telligent, our Responsible Investment Policy incorporates our core philosophy:
Act as a Partner and Responsible fiduciary
Exemplify Global best practices for compliance and risk management
Focus on the largest growth market in the world
Utilize our entire team to understand the world around us for a better future
Key components of our responsible investment approach
ESG Integration: Incorporate ESG factors into investment analysis and decision-making processes. This involves considering the impact of environmental and social issues, as well as corporate governance practices, on investment performance and risk. By assessing ESG factors alongside traditional financial analysis, investors can gain a more comprehensive view of companies and their long-term sustainability.
Active Ownership and Engagement: Engage with companies in which investments are made to influence their behavior and promote sustainable practices. This includes participating in shareholder meetings, proxy voting, and dialogue with company management. By exercising active ownership rights, responsible investors can advocate for improved ESG performance, transparency, and long-term value creation.
ESG Integration Across Asset Classes: Extend responsible investment practices beyond equities to include other asset classes such as fixed income, real estate, infrastructure, and private equity. Apply ESG analysis and engagement across the entire investment portfolio to mitigate risks and seize opportunities associated with sustainability and responsible business practices.
Impact Investing: Consider allocating a portion of the investment portfolio to impact investing, where investments are made with the intention of generating positive social and environmental outcomes alongside financial returns. Impact investments target specific areas such as renewable energy, affordable housing, healthcare, or education, aiming to address pressing global challenges.
Collaboration and Partnerships: Engage in collaborative initiatives with other investors, industry associations, and organizations to amplify the impact of responsible investment practices. Collaborative efforts can promote standardization, develop industry best practices, and drive systemic change.
Stewardship and Transparency: Act as responsible stewards of capital by being transparent about responsible investment practices, policies, and performance. Publish regular reports on ESG integration, engagement activities, voting records, and the impact of responsible investment strategies. Transparent reporting helps build trust with stakeholders and encourages accountability.
Alignment with International Standards: Align responsible investment practices with international frameworks and standards. Examples include the United Nations-supported Principles for Responsible Investment (PRI), the Task Force on Climate-related Financial Disclosures (TCFD), and the Sustainable Development Goals (SDGs). Adhering to recognized standards enhances credibility and ensures a consistent approach to responsible investment.
Risk Management and Long-Term Value Creation: Recognize that ESG factors can impact investment performance and risk. Integrate ESG considerations into risk management frameworks, stress testing, and scenario analysis. Responsible investment aims to enhance long-term value creation by considering financial and non-financial factors influencing companies' ability to thrive in a changing world.
Team Approach: As active investors, we are driven to understand all of the material factors that determine the price of a security. We take a team approach to our ESG investment strategy. Led by our CEO and research directors along with our operations team, it’s a teamwide discussion. Our sector-specific analysts identify materiality markers. Understanding materiality points in Asia comes from our years of experience and engagement with companies. We study each sector-specific risk and opportunity and continue to fine-tune our understanding of regional drivers. Governmental regulation, stranded assets, and social unrest are factors that we need to understand and investigate in this continually changing social structure.
Partnerships and Engagement: Alongside our years of experience and knowledge, we utilize key data from our partnering programs as additional information for more comprehensive strategic analysis. We have created a process to develop our ESG research methodology to make better investment decisions with greater data points. Key research initiatives such as UNPRI and CDP offer insights into the decision-making process. We also seek to engage with an aim to influence sustainable behavior within company-specific performance metrics that could serve the best interest of our investment and ultimately win for everyone. Within this scope is a proxy voting prescription adopted by Telligent and used to guide and influence voting.
Guidelines on environmental factors for responsible investing
Environmental factors play a crucial role in assessing the sustainability and impact of investments when seeking financial returns. We are guided by the following when incorporating environmental factors into responsible investment practices:
Climate Change and Carbon Footprint:
Assess the carbon footprint of companies and their exposure to climate-related risks. Consider factors such as greenhouse gas emissions, energy efficiency, and renewable energy usage.
Evaluate the company's strategy and preparedness to transition to a low-carbon economy, including initiatives to reduce emissions and adapt to physical risks associated with climate change.
Natural Resource Management:
Evaluate how companies manage and conserve natural resources such as water, forests, and biodiversity.
Consider the impact of resource extraction, land use, and deforestation on the environment and local communities.
Assess the company's commitment to sustainable sourcing, recycling, and waste management practices.
Pollution and Waste Management:
Evaluate the company's environmental performance in terms of waste generation, pollution prevention, and adherence to environmental regulations.
Consider the company's efforts to minimize air and water pollution, hazardous waste disposal, and adoption of cleaner technologies.
Environmental Compliance and Regulation:
Assess the company's compliance with environmental laws and regulations at local, national, and international levels.
Consider any instances of environmental violations, fines, or legal disputes related to environmental issues.
Environmental Innovation and Technologies:
Look for companies that invest in research and development of environmentally friendly technologies, products, and services.
Consider companies that contribute to sustainable solutions, such as renewable energy, energy efficiency, waste reduction, and clean transportation.
Supply Chain Management:
Evaluate the environmental practices and standards of companies within the supply chain, including suppliers and contractors.
Consider the company's efforts to promote responsible sourcing, reduce environmental impacts throughout the supply chain, and address any environmental risks associated with suppliers.
Disclosure and Transparency:
Look for companies that provide transparent and comprehensive reporting on their environmental performance, goals, and initiatives.
Consider the company's disclosure of environmental risks, opportunities, and their long-term sustainability strategy.
Engagement and Advocacy:
Engage with companies to encourage improved environmental practices and disclosure.
Support initiatives and collaborations that promote sustainable environmental practices and advocate for stronger environmental regulations.
Guidelines on stewardship engagements
When engaging with investees as part of stewardship activities, we follow these guidelines to effectively promote sustainable practices and drive positive change:
Establish Clear Objectives: Define the objectives and priorities of the engagement strategy. Determine the key environmental, social, and governance (ESG) issues that are material to the investee company and align with the firm's responsible investment principles.
Conduct Robust Research and Analysis: Gather relevant information about the investee company, including its ESG performance, policies, and practices. Conduct thorough research and analysis to identify areas where improvements can be made and assess the company's overall ESG risk and opportunities.
Constructive Dialogue: Initiate a constructive and collaborative dialogue with the investee company's management, board of directors, and other relevant stakeholders. Seek opportunities for engagement through meetings, letters, or other forms of communication to discuss ESG issues, share concerns, and propose recommendations for improvement.
Focus on Material ESG Issues: Prioritize material ESG issues that are significant for both the company's long-term sustainability and its impact on stakeholders. Address issues such as climate change, resource management, labor practices, diversity and inclusion, supply chain ethics, and corporate governance.
Influence Through Shareholder Rights: Utilize shareholder rights to influence company decisions and promote responsible practices. This includes voting on key resolutions, participating in proxy voting, and using voice and voting power to support ESG-related initiatives.
Set Clear Expectations: Clearly communicate the firm's expectations regarding ESG performance and improvement to the investee company. Provide specific guidelines and targets for the company to work towards, and encourage transparency and disclosure of relevant ESG information.
Collaborative Engagement: Collaborate with other responsible investors, industry associations, or coalitions to amplify the impact of engagement efforts. Engaging collectively can increase the influence and effectiveness of stewardship activities, especially when addressing systemic ESG issues that require broader industry collaboration.
Monitor Progress and Accountability: Continuously monitor the progress and outcomes of engagement efforts. Regularly assess whether the investee company is implementing the recommended changes, meeting the set targets, and demonstrating a commitment to ESG improvements. Hold the company accountable for its actions and progress.
Share Best Practices and Learnings: Share successful engagement practices, case studies, and learnings with other asset management firms and industry stakeholders. Promote knowledge exchange and encourage a collaborative approach to stewardship and responsible investment.
Report and Disclose: Provide regular reports and disclosures to clients, stakeholders, and the public on the firm's engagement activities, including the companies engaged, issues addressed, and outcomes achieved. Transparent reporting demonstrates accountability and builds trust with stakeholders.
