ESG factors are among the many drivers considered by FI’s IPC and Analysts throughout the investment process.
FI monitors key social policies driving wealth creation and economic growth, including infrastructure investment, tax policy, free trade, property rights, government reform, and social factors. Political factors affecting these social policies are integral to top-down analysis (election cycles/legislative gridlock), while maintaining regulatory risk awareness. Environmental factors frequently influence FI’s macro-economic research. FI monitors advancing energy efficiency, especially within Industrial/Technology companies, nuclear power risks, resource extraction implications (labour strikes/resource nationalisation) and litigation risk tied to environmental impact, among other factors. These ESG factors are incorporated into the sector weight preferences as well as individual security selection.
FI routinely evaluate governance issues and off-balance-sheet risks during security selection. These include consideration of company auditors’, whether opinions are qualified or have potential conflicts of interest, shareholder concentration, regulatory filings reviews, and reviews of news flows for ESG concerns.
FI then performs qualitative, fundamental research on prospective investments identifying securities with strategic attributes consistent with FI’s top-down views and with competitive advantages relative to their peer group. This research process involves reviewing and evaluating ESG factors prior to purchasing a security to identify securities benefitting from ESG trends. These factors include corporate stewardship, environmental opportunities/liabilities and human/labour rights controversies.