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Eric Sturdza Investments –

Our ESG journey continues...

October 8, 2021

E.I. Sturdza Strategic Management Limited (“Eric Sturdza Investments*”) is an independent investment fund company with a proven track record of offering high conviction, award-winning strategies to institutional and private clients globally.  As a multi-boutique provider of investment funds, we offer European, Chinese, Japanese and Global equities, as well as a global flexible allocation fund and a global total return fixed income strategy.

 

Our purpose is to establish and manage a range of specialist investment funds and portfolios each designed to exceed investors’ expectations regarding investments in a particular market, asset class or investment type. Our business model is to work with specialist dedicated investment advisory firms or teams that we believe are amongst the best in their field to offer investors access to class leading investment products supported by institutional quality risk management frameworks and controls independent from the portfolio management teams.

 

We provide alpha-generating investment managers with the framework to independently and exclusively focus on managing portfolios, whilst giving investors peace of mind by over-laying the autonomous investment teams with rigorous risk management and compliance oversight. We want the portfolio teams to focus exclusively on managing money totally independently, free from any constraining “house view” on economics and market conditions, whilst benefiting from a robust UCITS compliant structure, providing access to markets with speed and ease.

 

Our ESG journey

 

Like everything in today’s world, the ESG landscape continues to evolve at an unprecedented pace.  The COVID-19 pandemic acted as a further accelerant in this regard, solidifying the focus of investors, regulators and the asset management industry on the need to fully embed Environmental, Social and Governance (ESG) metrics as key components in the investment processes of all industry participants.  It is widely acknowledged today that products considering such “non-financial” factors are more resilient from a performance and risk perspective. PwC noted in their November 2020 presentation “2022: The growth opportunity of the century”:

 

“ESG products become more resilient in performance and will, after full implementation of the Sustainable Finance framework, protect better against downside risk linked to sustainability.”

 

We are very mindful of the global issues that we face today and our obligation to take whatever action we can to address these issues. As an Investment Manager we believe we have the opportunity to actively contribute through the investment decisions we make, allocating money to those companies that are able to demonstrate strong environmental, social and governance (ESG) credentials, or those that are actively transitioning their business to ensure ESG considerations are fully integrated within their investment processes.

 

We believe that responsible investment is best embodied by the UN-supported Principles for Responsible Investment (PRI). To confirm our approach to responsible investing, we are a signatory to the PRI, and are committed to its six guiding principles. Our Responsible Investment Process consists of two key pillars; exclusions and ESG Integration.

 

 

 

 

 

As an active Investment Manager, commonly investing with a long-term view in a concentrated portfolio of holdings, we are often able to develop relationships with the companies in which we invest, engaging directly with company representatives and developing an in-depth understanding of a Company’s strategic ambitions, including their ESG position and aspirations. Such an understanding allows us to allocate capital to those companies that have strong ESG credentials, or those that are transitioning their business to fully integrate ESG considerations.

 

We fundamentally believe that the strength of a company’s governance, along with its environmental and social sustainability is central to its ability to deliver long-term growth. Accordingly, such considerations are incorporated within the research process prior to any investment being made. This review helps to identify any ESG risks which may be best addressed through direct engagement with the target company. The engagement with investee companies is undertaken by the Investment Advisers we work with and by utilising research from third party specialist companies.

 

To ensure the Investment Advisers have access to relevant insights in this regard, we have engaged Sustainalytics, who provide ESG risks analysis and research.  Sustainalytics categorises risks across five levels, from negligible to severe, with detailed analysis of each environmental, social and governance risk at a company level. Research obtained via external data providers such as Sustainalytics forms part of the initial and ongoing monitoring of potential and existing portfolio holdings.  Responsibility for this sits with the investment advisory teams; however, is subject to oversight by our ESG committee, which consists of senior representatives from across the business.  The research obtained from external data providers, as well as proprietary research undertaken by our investment teams is fully incorporated as part of the ongoing engagement with investee companies.

 

 

 

Further, and to comply with requirements issued by the French authorities (AMF position DOC-2020-03), not only will we ensure that our funds have a higher average ESG risk rating than the average ESG risk rating of their respective universes, we will also ensure that the proportion of the Fund’s portfolio with an ESG rating is higher than:

 

90% for equities issued by large capitalisation companies whose registered office is located in developed countries, debt securities and money market instruments with an investment grade credit rating, or sovereign debt issued by developed countries;

 

75% for equities issued by large capitalisation companies whose registered office is located in emerging countries, equities issued by small and medium capitalisation companies, debt securities and money market instruments with a high yield credit rating or sovereign debt issued by emerging countries.

 

We recognise the importance of the evolution in ESG initiatives and strive to ensure we meet our obligations, whether these be client, business or morale obligations, today and in the future.  We also recognise that we are still in the early stages of this journey and are committed to evolving our business and infrastructure as necessary to deliver on our objective of providing our investors access to innovative investment ideas, within a framework that seeks to achieve better environmental, societal and governance outcomes.

 

Whilst our recent focus has been on the development of our infrastructure to ensure the Investment Advisers are well positioned to adhere to SFDR, we are also actively working in the background to enhance the reporting we will provide to our stakeholders regarding ESG factors associated with our funds. Work in this regard continues.

 

Adam Turberville, Director of Eric Sturdza Investments commented;

 

“Environmental, Social and Governance (ESG) issues are very important to all of us at Eric Sturdza Investments and we are pleased with the progress we have made to date on our ESG journey, including achieving an Article 8 designation for all our UCITS funds under the European Sustainable Finance Disclosure Regulation (SFDR).“

 

 

 

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Eric Sturdza Investments plants 115,000 trees

 

Being mindful of the global issues that we face today and our obligation to take steps whenever possible to address these we have elected to work with the Eden Reforestation Projects (“Eden”) since 2020, resulting in the planting of 115,000 trees.

 

Eden’s work seeks to address a number of issues caused by deforestation. Deforestation is a global phenomenon caused by a variety of factors. These factors range from large-scale slash and burn practices, to unsustainable agriculture, to daily community forest destruction.

 

Regions that are most impacted by deforestation are commonly poverty-stricken and underdeveloped areas. With few options to support their families, often, members of impoverished communities are forced to destroy their local environment to survive, cutting down trees for construction, fuel, heat, and agricultural purposes. While this solves a short-term problem, long-term consequences arise when forests are cut down and not restored.

 

The impact of deforestation is dramatic, causing severe flooding, erosion, and desertification, resulting in even worse long-term environmental issues.

 

Eden’s approach to tackling deforestation has two key elements; engagement with local communities and funding. Since Eden’s establishment in 2005, over 443 million trees have been planted, and, as a result of consistent employment, Eden’s employees are now sending their children to school and are able to afford food, clothing, and medical care. Eden has active projects in Nepal, Madagascar, Haiti, Indonesia, Mozambique and Kenya, and has recently expanded their work into Central America. Their work has a myriad of benefits, both from an environmental and human perspective.

 

Our initial donation to Eden led to the planting of 50,000 trees in 2020, our commitment has been reinforced in 2021 and will result in the planting of an additional 65,000 trees. The money will be used by Eden and invested where it is needed most across all of their project nations.

 

We are delighted and proud to be able to support Eden in their efforts to find sustainable and long-term solutions that seek to address the environmental and human impacts caused by deforestation globally, becoming a Sapling Partner in 2021.

 

 

Eric Sturdza Investments' Industry Recognitions

 

 

The quality of our Team and the Independent Portfolio Managers with whom we work has recently been recognised with Eric Sturdza Investments being named the 'UK’s Best Boutique Fund Manager' in CFI’s Asset Management Awards, ‘Asset Management Company of the Year, Switzerland 2020’ courtesy of the Global Banking & Finance Awards® and two of our UCITS funds being recognised as 'Top Performers' in the 2021 Investors Choice Awards, having outperformed their peer group in 2020.  This marks the fourth time in five years that Eric Sturdza Investments has been recognised in the Investors Choice Awards and the first time that two different funds have received Top Performer accolades in the same year.

 

 

Andrew Fish, Managing Director at Eric Sturdza Investments commented; “We are delighted to receive the recognition from these prestigious awards, which is testament to the hard work and effective investment approach of our portfolio teams, and confirms our commitment to bringing clients the very best investment ideas in a way that combines performance with sustainability.”

 

 

The Strategic European Silver Stars Fund was recognised as a Top Performer in the ‘Best Fund under $100m – Equity’ category, after delivering an annual return in 2020 of 27%, while the Strategic China Panda Fund’s 23% return led to its recognition as a Top Performer in the ‘Asia Pacific Equity Fund’ category.

 

 

 

To be recognised as a Top Performer in the awards, hosted by fund intelligence platform Allocator, a fund must have delivered a return of at least 20% in the preceding year and be among the top performers in their peer group.

 

 

 

 

 

 

 

 

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