FSSA ESG Report 2023:
highlighting our Environmental, Social and Governance (ESG) activities and company engagements  

At FSSA Investment Managers we seek to invest in quality companies and hold them for the long term. To us, “quality” and “ESG” are synonymous; therefore, we have embedded ESG analysis within the team and have integrated it into our fundamental company research. 

Our newly published FSSA ESG Report 2023 highlights our ongoing engagement with companies. Generally, we have found that our investee companies are open-minded and receptive when we offer examples of best practice and suggestions for improvement. We believe this is due to our longstanding share ownership and the relationships we have built with management over time.

For example,  on corporate governance and strategy we engaged with Thailand’s leading commercial bank, and sent a letter suggesting some tough reforms were needed. Similarly, at a Southeast Asian food and beverages company, we wrote to the management about our concerns on its capital allocation strategy. In both cases, we were reassured by the response.

On climate change, we report on China’s largest home appliances company, which has been leading the transition to eco-friendly refrigerants in its air-conditioners. And we highlight the cutting-edge chips, made by the world’s largest dedicated semiconductor manufacturer, which power almost everything from iPhones to electric cars and enable them to be more efficient while consuming less energy. These products are contributing to energy savings globally and play an active role in the transition to a low carbon economy.

We also provide an update on our progress in decarbonising our portfolios. As long-term investors, protecting and growing our clients’ capital requires us to understand how our investee companies are adapting to a lower carbon future. Our decarbonisation process aims to reduce the total amount of carbon emitted by companies in our portfolios and includes an ongoing review of our portfolios’ carbon footprints as well as their weighted average carbon intensity1.  

We continued to review our investee companies’ net-zero ambitions, covering 78% of our assets under management as at 31 October 2023. Encouragingly, more of them had expanded disclosure on climate-related information and announced climate and environmental targets. For those that had made efforts to embed it as an ordinary part of their businesses, we noted the presence of long-term minded management teams who helped to push the agenda forward.  

From a people and communities’ perspective, we spotlight the Philippines and the non-governmental organisation (NGO)-led projects that we visited with Manan Trust2. These trips beyond the corporate world provide us with nuanced perspectives on the challenges faced by companies in Asia and help us gain a deeper understanding of the countries in which we invest – a key reason in-person visits are an important part of our due diligence process. 

These are among the case studies and progress updates we’ve chosen to highlight in this year’s report. Through these examples it is clear, in our experience, when a company has embedded sustainability principles throughout its business, or if it is just paying lip-service to the matter. 

That said, we believe that there is no such thing as a perfect company. ESG is a complex subject, and the markets we invest in are at varying stages of development. Instead of penalising companies in the early stages of incorporating ESG measures, we focus on the direction of travel and engage with companies to encourage them to improve. Ultimately, we aim for our engagement efforts to improve their trajectory, help them achieve their long-term objectives, and align those goals with their key stakeholders.

To find out more about these case studies and others not included in this article, please download the full FSSA ESG Report 2023.

 

The weighted average carbon intensity (WACI) of a portfolio calculates a weighted average of each company’s greenhouse gas emissions intensity (Scope 1 & 2) per $million of revenue, weighted by the value in the portfolio using a mix of reported and modelled data. We compare this to the weighted average carbon intensity for the companies in the aggregated benchmark.

2 FSSA sponsors social impact initiatives through the strategic philanthropic work of Manan Trust.

Source: Company data retrieved from company annual reports or other such investor reports. Financial metrics and valuations are from FactSet and Bloomberg. As at June 2024 or otherwise noted. 

Important Information

This material is for general information purposes only. It does not constitute investment or financial advice and does not take into account any specific investment objectives, financial situation or needs. This is not an offer to provide asset management services, is not a recommendation or an offer or solicitation to buy, hold or sell any security or to execute any agreement for portfolio management or investment advisory services and this material has not been prepared in connection with any such offer. Before making any investment decision you should consider, with the assistance of a financial advisor, your individual investment needs, objectives and financial situation.

We have taken reasonable care to ensure that this material is accurate, current, and complete and fit for its intended purpose and audience as at the date of publication. To the extent this material contains any measurements or data related to environmental, social and governance (ESG) factors, these measurements or data are estimates based on information sourced by the relevant investment team from third parties including portfolio companies and such information may ultimately prove to be inaccurate. No assurance is given or liability accepted regarding the accuracy, validity or completeness of this material and we do not undertake to update it in future if circumstances change.

To the extent this material contains any expression of opinion or forward-looking statements, such opinions and statements are based on assumptions, matters and sources believed to be true and reliable at the time of publication only. This material reflects the views of the individual writers only. Those views may change, may not prove to be valid and may not reflect the views of everyone at First Sentier Investors.

To the extent this material contains any ESG related commitments or targets, such commitments or targets are current as at the date of publication and have been formulated by the relevant investment team in accordance with either internally developed proprietary frameworks or are otherwise based on the Institutional Investors Group on Climate Change (IIGCC) Paris Aligned Investment Initiative framework. The commitments and targets are based on information and representations made to the relevant investment teams by portfolio companies (which may ultimately prove not be accurate), together with assumptions made by the relevant investment team in relation to future matters such as government policy implementation in ESG and other climate-related areas, enhanced future technology and the actions of portfolio companies (all of which are subject to change over time). As such, achievement of these commitments and targets depend on the ongoing accuracy of such information and representations as well as the realisation of such future matters. Any commitments and targets set out in this material are continuously reviewed by the relevant investment teams and subject to change without notice.

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