At Crake Asset Management (‘Crake’) we take a clear view on ESG. We are a responsible corporate citizen and we expect the companies that we invest in on behalf of our clients to be so too.
Our approach is both moral and practical. Moral because it is right and practical because an assessment of a company’s compliance with its legal and ethical responsibilities to all stakeholders (shareholders, government, the environment, customers, suppliers and society as a whole) is a crucial factor in determining a company’s cost of capital and therefore its ability to successfully invest in and grow its own business. Put simply, ‘bad’ companies and ‘bad’ business models tend to make bad investments.
The five factors we use to analyse every company we consider for investment are Management, Growth, Liquidity, Currency and Valuation. Our analysis of ESG falls within Management. Using an empirical score regarding a company’s ESG track record from an external consultant and qualitative analysis by the Crake analyst team we make an assessment as to whether the company falls into one of three categories whereby management is either:
- a) complying with its ESG responsibilities, or
- b) not complying with their responsibilities and making no effort to do so, or
- c) not complying with their responsibilities but embarking on a serious effort to do so in the future.
If a company falls into category (a) there are no ESG implications with regard choosing whether to invest or not. Conversely, Crake is extremely unlikely to invest in companies in category (b) – there would have to be an extraordinary and clearly documented reason for doing so. Crake might invest in companies in category (c), but only if it was clearly documented that positive change was in train; change that we would of course actively support.
Crake also takes an active approach to our role as shareholders. We have retained an external specialist consultant to highlight and advise on proposed votes with ESG implications at the companies we are invested in. We also monitor directly ourselves proposed votes for all the companies we invest in on behalf of our clients, with a particular emphasis on any companies in category (b) and (c). Crake will actively support (or oppose) measures that we believe will improve (or deteriorate) a company’s approach to complying with its ESG responsibilities.
As long-term shareholders, we have an obligation to take climate risk into account in the management of our portfolio. Below is Crake Asset Management’s Position Statement on Climate Change and the 2016 Paris Agreement.
Crake Asset Management believes the following:
- 1. There is incontrovertible scientific evidence of global warming.
- 2. Climate change and global warming are a real and present threat to humankind.
- 3. Global warming is partly, if not wholly, caused by an increase in atmospheric greenhouse gases.
- 4. The observable increase in greenhouse gases, such as CO2, has been largely caused by human activities which continue to make a significant contribution to global warming.
- 5. The key source of the increase in CO2 in the earth’s atmosphere is the burning of fossil fuels (combined with deforestation).
- 6. Tackling climate change, and the man-made greenhouse gases that contribute to it, requires urgent action.
- 7. International, intergovernmental co-operation and agreements, such as the 2016 Paris Agreement, have a vital role to play in tackling climate change and accelerating the transition to a low-carbon society.
- 8. As a major source of greenhouse gas emissions, the corporate sector must do all it can to encourage and help national governments achieve their targets (NDC) to reduce greenhouse emissions under the Paris Agreement.
The Paris Agreement is a legally binding international treaty on climate change. It was adopted by 196 Parties at COP 21 in Paris, on 12 December 2015 and entered into force on 4 November 2016. Its goal is to limit global warming to well below 2°C, preferably to 1.5 degrees Celsius, compared to pre-industrial levels. In order to realise the objectives of the agreement, signatory countries have submitted comprehensive national climate action plans (nationally determined contributions, NDCs).
Crake Asset Management fully endorses the Paris Agreement and undertakes the following:
- Crake will monitor climate-related risks with respect to our investment portfolio and be transparent in doing so.
- Where possible we will engage with and encourage our portfolio companies to support the Paris Agreement by devising and implementing strategies to reduce both their operational emissions of greenhouse gases and those from the goods and services they sell.
- We will encourage our portfolio companies to improve their disclosure related to greenhouse gas emissions and other climate-related risks and to co-operate with national governments to assist them in meeting their Paris climate targets.
- Crake will actively use its vote at company AGMs to support management and shareholder resolutions aimed at facilitating the transition to a low-carbon economy and promoting the goals of the Paris Agreement.
Crake has registered as a member of the UN PRI.
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