Nick Dignam from Fortitude Investment Partners shares insights with Lachlan Maddock from Fortitude Investment Partners on how a diversified portfolio in mid-market private equity is structured. The Inside Adviser
The world of alternative investments is at a crossroads. As markets defy expectations and liquidity concerns take centre stage, investors find themselves forced to rethink how they deploy capital in an increasingly complex environment.
ESG’s key role in Clearbridge’s award winning strategy
The Clearbridge RARE Infrastructure Income fund was last week awarded Money Management’s Fund Manager of the Year award for the Infrastructure Securities category. This comes after a strong recovery to April and an impressive long-term track record.
According to Money Management, it was Clearbridge’s ability to “focus on the best ideas and staying index-unaware” that helped the team take top spot in the Infrastructure Securities – Currency Hedged category at this year’s awards.
Reading through the company’s annual Impact Report, Clearbridge highlights ways in which companies can improve their current practices to drive change in environmental, social and governance (ESG) characteristics. CEO of ClearBridge Investments, Terrence Murphy said, “in a year like no other, the global pandemic starkly highlighted the social and economic inequalities in our society. At the same time, it reinforced the value of our decades-long efforts to prioritise ESG factors in our investment approach.”
ESG is becoming the ‘new black’ in investing, gaining popularity through the investment world. New regulations in the EU support ESG investing by “giving investors the ability to identify the asset managers whose ESG efforts are delivering positive benefits while companies are realising the public expects them to foster transparency while channelling capital toward a more sustainable economy.”
Clearbridge goes one step further than simply screening out unfit companies. The team uses a “proprietary framework that identifies key ESG considerations for each sector and subsector, focusing on the issues that truly matter for each company. In addition to informing stock selection, these assessments help the firm track progress and drive engagement with company management.”
Shane Hurst, portfolio manager, says it is vital that ESG and sustainability are incorporated into the investment style of a portfolio. With the need to lower carbon emissions becoming more important to stakeholder and shareholder interests, the need for ESG-focused infrastructure assets is rising. Construction of new infrastructure is required to achieve lower emissions targets. These factors have given rise to a fast-growing asset class.
Clearbridge says “a meta-study by New York University’s Stern Center for Sustainable Business show that ESG and strong financial performance are positively correlated. The study also found that improved financial performance due to incorporating ESG becomes more noticeable over longer time horizons.”
Hurst sums up Clearbridge RARE’s investment style by saying, “Active voting is also key to influencing change. These factors have been at the heart of our approach to ESG integration, and it is encouraging to see data confirm them.”
