At FSSA, we seek to invest in quality companies, as defined by the strength of their management, financials and franchise. We are long-term investors and measure success over years, not quarters. As a result, we look for management teams that are well-aligned with minority investors and respect all stakeholders, both in good times and bad. The pursuit of immediate gains through short-sighted strategy and reckless conduct, or the exploitation of labour, tax loopholes, legislative arbitrage or the environment, runs contrary to our definition of quality.
- Air quality and polution
- Climate change
- Energy use
- Waste and conservation
- Water management
- Community initiatives
- Diversity & equal opportunity
- Employee engagement
- Health and safety
- Labour and working conditions
- Supply chain risks
- Accountability and audit
- Directors, experience and quality
- Effective communications
- Management functions
- Risk management
Our approach to responsible investing has been shaped by an emphasis on stewardship and the belief that quality managers and good governance should ensure that environmental and social concerns are rightfully addressed.
Initially, we believed that the greatest risks to client capital were rooted in poor management and inadequate or conflicted board oversight, though we gradually moved to a more holistic approach – focusing on additional factors we considered to be material and relevant to our investee companies.
"To us, sustainability is not just a label, but a set of values by which we operate. As a firm, we have been signatories to the Principles of Responsible Investment (PRI) since 2007 (we view it as a minimum standard) and are constantly striving to better understand how ESG and sustainability issues impact long-term investment performance."
We recognise that our investment activities can have an impact on society and the environment – and good governance is the foundation on which great companies are built. Over time, our understanding of the broader issues has improved; yet, we realise it is an incredibly complex subject and there is no single approach or path to prescribe to investors or companies – rather, it is the direction of travel that is more important.
As long-term investors, we are focused on identifying companies that are intelligently driving sustainable outcomes. We typically look for founders and management teams that have high governance standards and whose interests are well-aligned with minority shareholders. Strong franchises that have the ability to deliver sustainable and predictable returns, comfortably in excess of the cost of capital.
Climate change is a key consideration in FSSA’s investment process. We accept the science of climate change and that a transition to a low carbon global economy is underway. We consider it our duty to assess the related risks and opportunities in our investment decision-making and ownership practices, and look to invest in companies that are actively taking steps to solve the climate change problem.
Our investment process and focus on quality means that we only invest in companies where we perceive the management operates the business effectively and in the interests of all stakeholders. Companies that do not look after their customers, employees, suppliers and the larger community are unlikely, in our view, to be rewarding long-term investments.
We recognise that as a long-term shareholder, we are in a position to influence the environmental, social and governance performance of companies via constructive engagement with management teams and boards of directors, and through the exercising of proxy votes.
Our approach to responsible investment includes a commitment to supporting and upholding the fundamental principles of human rights. We will not invest in companies that have been identified by credible third parties as being involved in the manufacture of anti-personnel mines and cluster munitions. In addition, we do not invest in manufacturers of tobacco or tobacco-related products, nor in casinos or gambling companies.