The names may change, but green heritage shines through
Stewart Investors is among the world’s leading ESG or responsible investment firms, yet a series of name and ownership changes have somewhat hidden this specialist investment firm. Originally part of the Colonial First State Global Asset Management (CFSGAM) stable, Stewart is now owned by First Sentier Investors, which itself is a subsidiary of Japanese investment bank Mitsubishi UFJ Trust. The group has more than $228 billion in assets under management across most asset classes.
In Gaelic, the translation of ‘Stewart’ is a simple one, meaning ‘steward.’ The global team of responsible investment experts takes this definition to heart, with the concept of ‘stewardship’ one of the guiding principles that drives its investment philosophy. This applies to both the way in which the team seeks to manage the capital of its clients and investors, but also in its assessment of the companies it is supporting.
Stewart explains this philosophy quite simply: “Our investment world-view is of a series of partnerships – with each other, with our clients, with the companies we invest in, the people who buy their goods and services, and with the wider society.” Stewart does not seek to hide its ‘green’ credentials or approach, making it clear to prospective investors that funds management has a “social purpose,” which it will not shirk.
Stewart Investors was founded in 1988 and operates through two distinct but related business units, the Sustainable Funds Group and St Andrews Partners. St Andrews Partners is the Edinburgh-based team focused on emerging market equities, established in 1992 and with several strategies having been running for close to three decades. The Sustainable Funds Group, however, would be the most familiar for Australian investors, operating the Stewart Worldwide Sustainability Fund, which is present in the growing range of ESG and sustainability portfolios being made available to investors.
The group has its own Australian touch, having been part of the CFSGAM group, with the group’s Sydney office standing alongside Singapore, London and Edinburgh and in fact housing the largest part of the team. The domestic team is led by David Gait and Nick Edgerton, who are responsible for the Asia Pacific and Worldwide Sustainability strategies respectively, both of which have been growing strongly.
The Worldwide Sustainability Strategy has been the most popular among Australian investors, with around $1.8 billion in assets under management across the retail and wholesale unit trusts. This is a truly global strategy, as diverse as you can find, with holdings spanning the globe from Brazil and India, to the US, Australia, the UK, Japan and the Netherlands. The focus on “stewardship” is extended to the group’s ongoing commitment to sustainability, with management believing that “companies that deliver benefits to society and the environment face fewer risks and have access to more enduring opportunities over the long term.”
Stewart is also realistic, noting that sustainability tailwinds do not automatically mean success: there are just as many “green” companies that have struggled to grow as there as less responsible companies in the same boat. The investment process relies on fundamental research, looking at companies from the “bottom-up” and seeking to understand everything about them. As is usually the case, the team seeks “reasonably priced, good-quality companies that are well-positioned to contribute to, and benefit from, sustainable development in the countries in which they operate.”
While easy to explain, ESG and responsible investing is much harder in practice. Rather than employing a large team of in-house analysts across every speciality and risking the confirmation bias that this can create, the group commissions independent experts ranging from qualitative to quantitative assessments and investigations into both existing and prospecting investments. These are intended to uncover issues or opportunities that aren’t always visible or appreciated by the market.
All members of the Stewart Investors team take an Hippocratic Oath, similar to that of a graduating doctor, i.e. “first do no harm,” with commitments ranging from a willingness to admit to mistakes, not pursue personal gain and seek to offer a “balanced viewpoint” amid volatility. But by far the biggest differentiating point of the group is its complete and utter transparency.
Stewart Investors offers full portfolio disclosure into every company to which it has allocated capital, outlining its view on each company’s sustainability positioning, the risks they face and areas of improvement with which they are engaging.
One such company is Tomra, the world’s leading supplier of reverse vending machines (RVMs), or automated recycling technology and sensor-based sorting machinery. Founded in 1972 by two Norwegian brothers and headquartered in Norway, the group is the definition of an “undiscovered gem.” Tomra operates more than 82,000 RVMs, which collectively facilitate the recycling of 40 billion drink containers a year, saving them from landfill. The RVMs’ sorting functionality also improves the efficiency of the company’s customers, improving quality, yield and safety while reducing the waste created.
As the trend of “greenwashing” grows, with nearly every asset manager having become a signatory to the UN’s Principles of Responsible Investment (PRI), the transparency and rating reports of each group becomes more important. Stewart is among the leaders in this regard, with its heritage and experience ensuring delivering a rating of A+ across seven of the eight categories, which range from “active ownership” to strategy and governance.