As business and the economy evolves, sustainability is becoming a core focus for many company’s business models, whilst not that long ago it was seen as an optional extra.
AAN Director Jeff Thurecht was recently joined by the Stewart Investors team, Portfolio Manager Nick Edgerton and Investment Specialist Pablo Berrutti, to discuss Sustainable Investing. The chat had a particular focus on discussing the ESG (Environmental, Social, Governance) issues both globally and domestically, as well as sharing their sustainable Investment philosophy.
In this article we’ve provided you with a summary of the discussion Jeff had with the Stewart Investor’s team, or you can check out the full Q&A interview on our Youtube channel.
Investment philosophy of Stewart Investors
The Stewart Investors team take a long term view, think 10 years plus, when it comes to investing in a particular company. They are bottom-up focused, placing less importance on benchmarks when thinking about risk, instead focusing on capital preservation.
They are seeking high quality companies and look at three different areas;
- franchise quality – is it a good business and are they trusted? Do they have a good brand reputation and pricing power?
- quality of the management team – are they honest, competent and humble in the way that they approach managing the business?
- quality of financials – with a focus on capital preservation. They look for companies operating in a relatively conservative way. Businesses that don’t have an indebted balance sheet, who aren’t taking shortcuts with tax and for businesses they can see in their financials will be around for the long run.
The last point, which talks about companies being around for the long run, is where sustainable investing comes in. Stewart Investors launched their first dedicated sustainable strategy back in 2005, and since then their investment philosophy has been about looking for high quality companies who are also well positioned for sustainable development.
Misconceptions around sustainable investing
Many people might think sustainability is all about green energy, but it is much more than that. In our view it is about investing in companies that make medicines and medical devices cheaper for both emerging markets and for wealthy countries, it is about investing in banks in places like India that can provide people with mortgages for the first time. With India, we have this large country coming out of poverty where people are beginning to want to own assets for the first time and you need a responsible and sensible facility for capital to do that. Then it’s all the way through to some of the amazing eco-efficiency coming out of technology and then, of course, energy as well.
So the Stewart Investors team are looking at how they can make better human development outcomes with a lower footprint. While at the same time making a good return for shareholders.
What Australian businesses have caught the Stewart Investors team eye
Australia is a fascinating economy, and it has striking similarities with both Nigeria and Brazil. With commodity currencies; a fairly cosy oligopoly banking system and a strong resources sector powering the economy. There are a handful of phenomenal leading companies in Australia, some that come to mind include CSL, Cochlear, Atlassian and Xero.
Importance of long term investing
It’s important to recognise sustainable investing is often about long term investing, not chasing the short-term trades of what the latest fad and trend is. With the Stewart Investors team genuinely looking for great people with integrity and stewardship who run high quality franchises that are in control of their destiny. They aren’t cutting corners or financially engineering ways to juice the lemon as much as they possibly can, they are just running businesses the right way for good long-term outcomes for the environment and society in a way that they believe will provide fantastic returns.
For those looking for a solution in the area of sustainable investing, the AAN Sustainable Growth Model allows you to ensure your clients will access best of breed managers that have a common sense approach to investing. The subject of this article, Stewart Investors, manages 15 percent of that portfolio.
To learn more about our Sustainable Growth Model download the fund profile and brochure, or make a time to meet with your adviser to determine whether this investment is right for you.
