Since 1923, Empire Life has been committed to helping our clients achieve their financial goals. For our investment business, this means delivering attractive investment returns for our clients over the long term. We also understand that for many clients the environmental, social and governance (‘ESG’) impact of their portfolios is an important consideration in conjunction with investment performance.
As an active manager, it is increasingly evident that material ESG factors are an important driver of long-term investment returns from both an opportunity and a risk-mitigation perspective.
Environmental factors include among other things, climate change, carbon emissions, deforestation and sustainable approaches to energy use.
Social factors can include topics such as product safety, social equality, access to healthcare and diversity at work.
Governance tackles broad issues including ethical business practices, executive pay, board diversity and shareholder rights.
These factors have grown in importance, both in terms of their impact on business results but also from the perspective of investor expectations. We take a comprehensive approach toward managing client assets, including the integration of ESG criteria into our investment processes.
We believe that corporate responsibility and a sustainable approach to business operations is a hallmark of quality. We also believe that strong corporate governance aligns management and shareholder interests, and that analyzing environmental and social factors can assist in identifying business models that may create sustainable value while reducing risk.
We believe that the most effective way to integrate ESG factors into an investment process over the long term is for investment teams themselves to research ESG factors and consider them alongside other inputs into the investment process. This aligns well with our focus on identifying high-quality, well-managed companies that trade at attractive valuations and also have strong growth prospects. The investment team can then choose how best to apply all the tools of active management, whether that is to engage or ultimately to sell a security when it no longer offers an attractive risk-adjusted potential return.
ESG factors must be considered alongside other key quantitative and qualitative factors to determine financial materiality. Our investment team will access ESG data sources, and incorporate that research into their bottom-up, fundamental analysis, and from insights we gather from engaging directly with management teams. Our portfolio manager and analysts engage on ESG topics as part of their ongoing dialogue with company management.
We monitor the progress we are making and are continuously enhancing the integration of ESG into our investment processes. This monitoring includes the effect of ESG analysis on portfolio performance, ESG scoring of individual securities, as well as for the funds overall. Given the dynamic and evolving nature by which ESG factors are material to investment performance, we are committed to continued innovation and improvement.