Måns Carlsson-Sweeny

Ausbil Investment Management believes it is important to not only consider companies that are industry leaders in environment, social and governance (ESG) but also those companies seeking to improve their ESG performance.

Måns Carlsson-Sweeny

Ausbil Investment Management’s Head of ESG Research, Mans Carlsson-Sweeny, has been recognised with an Anti-Slavery Australia Freedom Award Certificate of High Commendation for his work in combating slavery in investment supply chains.

Carlsson-Sweeny was recognised for his contribution in identifying the risk of modern slavery in investment, and promoting better awareness around slavery in the investor community.

In researching supply chains and the risks of modern slavery, Carlsson-Sweeny has travelled extensively for primary research and information gathering on working conditions in countries such as Bangladesh, Cambodia, China and Thailand.

Ausbil has been at the forefront of human rights and modern slavery issues in its engagement programs having developed a statement on modern slavery for Ausbil in 2016, highlighting how modern slavery is an investment risk and what it would like to see companies do to mitigate the risk of modern slavery in global supply chains and operations.

Since then, Ausbil has engaged actively on modern slavery, including the following:

• In 2017-18, Ausbil engaged with the Australian government about the Modern Slavery Act, including how investors can make an impact through leverage and engagement. Ausbil has also made a submission on the proposed legislation.
• In 2018-19, Ausbil was appointed to a panel of experts providing assistance to the Australian government in producing the guidance for the Modern Slavery Act.
• In 2018, Ausbil chaired a sub-committee of RIAA’s (Responsible Investment Association of Australasia) human rights working group, which produced an investor toolkit on human rights, suggesting ways investors could engage constructively with companies on how to mitigate human rights issues. This included a number of practical business cases that have had positive impacts on human rights, and how to spot modern slavery and human rights abuses in the supply chain.

The 2019 Anti-Slavery Australia Freedom Awards were the first since the Modern Slavery Act came into effect in Australia at the start of this year. Mr Carlsson-Sweeny noted that Australia’s mandatory requirement for corporates and investors to review and report on modern slavery in their supply chains meant that Australia’s modern slavery laws were stronger than those enacted in other nations, such as in the UK.

“Investors can play a big role through leverage with the companies in which we invest, and institutional investors have high expectations about how corporate Australia should behave in helping reduce the incidence of modern slavery,” Mr Carlsson-Sweeny said.

“We believe that companies that do better in terms of corporate practices are in a better position to deliver better, and more sustainable, investment returns,” he said. “Ultimately, it comes down to earnings sustainability. A business model that relies on underpaid workers, weak regulation, weak enforcement of laws or even illegal activities like slavery is not sustainable.”

The rating indicates that Lonsec believes the fund has substantial potential to outperform over the medium to long term and that management is of a high calibre.

Lonsec stated it considered the fund to be suitable for inclusion on most approved product lists (APLs).

Paul Xiradis, Executive Chairman, Chief Investment Officer and Head of Equities at Ausbil Investment Management, said: “We believe ESG performance is a lead indicator of operational performance, and the way companies deal with these types of issues is also a good proxy for management and earnings quality, and future growth.”

“Furthermore, we believe the ESG integration in our investment process, and our strong active company engagement on ESG issues, helps improve these businesses, and reduces our investment risks.

“We’re prepared to back our ESG view through active allocation of capital and in actively exercising our voting rights when needed.”

The Lonsec report said that the Ausbil Active Sustainable Equity Fund investment philosophy had a true to label ‘active ownership’ approach that engenders a substantial degree of ESG integration and that Ausbil’s dedicated internal ESG research team provided considerable depth and consistency.

Ausbil is a leader in ESG, with a dedicated in-house research department, which it believes makes a difference to capturing investment returns.

Måns Carlsson-Sweeny, Head of ESG Research at Ausbil, said that while the market was saturated with discussion about ESG issues, many investors were missing a crucial point about this increasingly important aspect of investing.

“Investors whose sole focus is on identifying the ESG leaders of each industry are likely to develop a portfolio of expensive stocks and miss the potential for growth that comes with the early identification of improving ESG momentum,” said Mr Carlsson-Sweeny.

He said investing in companies with positive momentum in their ESG performance could also help to capture alpha through rising valuations as the market recognised improved performance. Likewise, this principle could apply in reverse if a company began to slip in their ESG performance. ESG issues and companies are dynamic, and experience and complete focus was essential to actively keep ahead of the curve in this area.

“Investors are also increasingly recognising that among similar companies, one with a good ESG profile should be valued with higher earnings multiples and trade above that of a similar company with a poor ESG profile,” said Mr Carlsson-Sweeny.

He added that ESG integration in Ausbil’s investment analysis and decision making was about making better informed investment choices for superior risk- adjusted returns. Investors looking at ESG factors were also looking at more variables than just earnings and valuations. “Companies that do better in terms of ESG tend to do better in terms of risk-adjusted investment returns – it is that simple,” he said.

]]> Research house Lonsec has given a ‘recommended’ rating for the Ausbil Active Sustainable Equity Fund.

The rating indicates that Lonsec believes the fund has substantial potential to outperform over the medium to long term and that management is of a high calibre.

Lonsec stated it considered the fund to be suitable for inclusion on most approved product lists (APLs).

Paul Xiradis, Executive Chairman, Chief Investment Officer and Head of Equities at Ausbil Investment Management, said: “We believe ESG performance is a lead indicator of operational performance, and the way companies deal with these types of issues is also a good proxy for management and earnings quality, and future growth.”

“Furthermore, we believe the ESG integration in our investment process, and our strong active company engagement on ESG issues, helps improve these businesses, and reduces our investment risks.

“We’re prepared to back our ESG view through active allocation of capital and in actively exercising our voting rights when needed.”

The Lonsec report said that the Ausbil Active Sustainable Equity Fund investment philosophy had a true to label ‘active ownership’ approach that engenders a substantial degree of ESG integration and that Ausbil’s dedicated internal ESG research team provided considerable depth and consistency.

Ausbil is a leader in ESG, with a dedicated in-house research department, which it believes makes a difference to capturing investment returns.

Måns Carlsson-Sweeny, Head of ESG Research at Ausbil, said that while the market was saturated with discussion about ESG issues, many investors were missing a crucial point about this increasingly important aspect of investing.

“Investors whose sole focus is on identifying the ESG leaders of each industry are likely to develop a portfolio of expensive stocks and miss the potential for growth that comes with the early identification of improving ESG momentum,” said Mr Carlsson-Sweeny.

He said investing in companies with positive momentum in their ESG performance could also help to capture alpha through rising valuations as the market recognised improved performance. Likewise, this principle could apply in reverse if a company began to slip in their ESG performance. ESG issues and companies are dynamic, and experience and complete focus was essential to actively keep ahead of the curve in this area.

“Investors are also increasingly recognising that among similar companies, one with a good ESG profile should be valued with higher earnings multiples and trade above that of a similar company with a poor ESG profile,” said Mr Carlsson-Sweeny.

He added that ESG integration in Ausbil’s investment analysis and decision making was about making better informed investment choices for superior risk- adjusted returns. Investors looking at ESG factors were also looking at more variables than just earnings and valuations. “Companies that do better in terms of ESG tend to do better in terms of risk-adjusted investment returns – it is that simple,” he said.

The post Ausbil Active Sustainable Equity Fund ‘recommended’ by Lonsec appeared first on AdviserVoice.

Måns Carlsson-Sweeny

Måns Carlsson-Sweeny, Head of ESG Research at Ausbil Investment Management, said 2018 was a significant year in terms of ESG developments for Australian businesses.

“Over the year we saw the Royal Commission on Misconduct in the Banking, Superannuation and Financial Services Industry, a Government Inquiry into the franchise industry, various shareholder resolutions on ESG issues and the passing of the Modern Slavery Act by the Australian and NSW governments. Several of these developments have had a major impact on the views of investors on how to fully value companies,” he said.

Modern slavery was particularly topical in 2018. According to the UN, 40 million people, worldwide, live in modern slavery conditions, with an estimated 24.9 million of these in forced labour. It is estimated that in Australia alone, some 15,000 people could be living in modern slavery conditions. This is one example where ESG engagement with corporates across global supply chains can help redress some of these human rights abuses.

In 2018, Ausbil actively engaged in 22 ESG areas across 17 different GICS industry sectors, with chairs, chief executives, and other corporate leadership, from the biggest companies in Australia to fast growing mid and small caps. Over 60% of ESG engagement meeting attendees were chairs, board directors and executives.

The past year has also seen companies implement a range of measures to act on climate change.

“Several companies have now adopted the Taskforce on Climate-related Financial Disclosures (TCFD) reporting framework, which provides better transparency on the risks and opportunities from climate change. The Climate Action 100+ initiative has also grown to a major engagement initiative with significant scale and leverage,” he said.

As of December 2018, 310 investors with more than US$32 trillion in assets under management have signed The Climate Action 100+.

In terms of corporate governance, Mr Carlsson-Sweeny said 2018 witnessed a historically high number of strikes against remuneration reports at AGMs, as shareholders took a particularly hard line on misalignment of remuneration and outcomes.

“During the AGM season in 2018, fund managers (including Ausbil) exercised their right to vote against several remuneration reports,” Mr Carlsson-Sweeny said. While our approach is collaborative, Ausbil actively exercises fund voting rights in ESG where it believes there is a need to formally register disagreement.

“While some individual companies have made significant changes to their executive remuneration structures, we believe these large ‘against’ votes, combined with continuous engagements, will hopefully lead to further improvements in governance in the coming year,” said Mr Carlsson- Sweeny.

This year, Ausbil exercised its voting rights on 881 resolutions at 145 annual and general meetings, including voting on remuneration reports, a number of which Ausbil voted against.

Investors increasingly focusing on ESG risks

According to a recent survey1 of 1,100 financial professionals around the world, ESG risks are increasingly becoming a key factor in investment decision-making.