.svg){kind=logo}
Philosophy: stakeholder management as a key value driver
The Team’s investment focus is on identifying companies that can grow free cash flow sustainably at above average rates across a cycle. We have a long-time investment horizon when we assess businesses, focusing on expected business and industry evolution over ten plus years. The types of businesses we gravitate towards, include higher quality businesses that are capital light and carry higher margins.
We think of companies and industries as existing in an ecosystem and that a company’s treatment of its stakeholders, including employees, suppliers, customers, and the communities they operate in, will define how successful they are in the long run.
In our view, Environmental, Social and Governance (ESG) factors can materially impact both a company’s financial performance and its valuation in the market. As a result, we incorporate ESG factors in our research and portfolio management process to target attractive risk-adjusted returns.
Process: integrating ESG risks and opportunities in the top-down and bottom-up analysis
We identify and evaluate financially material ESG factors in our investment process, which is a combination of a top-down and bottom-up approach.
From a top-down perspective, we aim to identify structural changes in the economy and avoid those businesses and sectors most at risk, while also considering new opportunities that may arise. For example, we believe that the energy transition to a low carbon economy exposes traditional energy companies to material financial risks while it also creates key investment opportunities for those businesses that enable the transition.
From a bottom-up perspective, we first study each company to identify ESG strengths and weaknesses, through primary research. This involves studying a wide variety of sources, such as regulatory filings, corporate sustainability reports, news and social media searches, conference calls, and discussions with management. Secondly, we assess the financial materiality of the ESG factors we identified to understand how these factors impact a company’s ability to generate free cash flow, or the prospects of growing that free cash flow over time. We aim to integrate this assessment in our valuation model assumptions such as growth rates, capital requirements, operating expenses to determine the impact on fair value. When the Team identifies ESG issues that can alter the investment thesis, the Team may also consider engagement as an effective tool to manage the risk.
Every member of the Bluewater team integrates financially material ESG factors in their due diligence processes for all current and prospective investments. As a longstanding core component of the investment philosophy, investment team members have extensive experience in assessing ESG-related issues that we believe are material to long-term business and stock performance.
Learn more about the Bluewater team’s funds here
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The content of this page (including facts, views, opinions, recommendations, descriptions of or references to, products or securities) is not to be used or construed as investment advice, as an offer to sell or the solicitation of an offer to buy, or an endorsement, recommendation or sponsorship of any entity or security cited. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it.