Ethical Performance
inside intelligence for responsible business
 

interview

why Aberdeen believes it’s always good to talk

September 2010

In-house research and good working relationships are at the heart of one UK asset manager’s SRI strategy. Mike Scott speaks to Cindy Rose, the firm's socially responsible investment head

For Aberdeen Asset Management, investing is all about relationship management, according to Cindy Rose, head of SRI research at the company.

The same might be said about its approach to dealing with environmental, social and governance (ESG) issues. ‘If a company is a good investment, we will not take it out for ESG reasons. But because we are an active investor, we will talk to them all the time,’ she says.

‘We visit companies again and again and really get to know them. We are interested in their well-being because our success is linked to theirs.’

‘We invest in companies with which we have already established a relationship and which we have assessed on our QV (quality and value) rating,’ Rose says. The ESG team does not assess companies with a view on whether to invest in them or not, but assesses those that the global equities team has already chosen.

Nonetheless, ‘financial value and ESG issues go hand in hand,’ she points out. As a member of the Principles for Responsible Investment since 2007, Aberdeen is committed to looking at all its investments from an ESG perspective, which Rose describes as ‘onerous but a good requirement’.

Because Aberdeen does all its research in-house, ‘it has caused us severe workload issues, but we are taking baby steps – so far we have looked at about 330 out of around 2000 companies and every year we increase the number we look at.’

Keeping the research function in-house rather than using third-party ESG consultants allows the global equities team to have a much more in-depth knowledge of its investments, Rose believes. ‘Third-party research can be very good, but they have to take a very broad approach, covering every company in the world. We only have to research the companies we invest in.’

Aberdeen’s fund managers were quick to embrace corporate governance as a material factor, ‘but it can sometimes be difficult for them to see environmental and social issues as having an effect on the bottom line’. However, this distinction can appear to be mere semantics, in that once an issue becomes material – such as the BP oil leak in the Gulf of Mexico – they class it as a financial risk even if at heart it is an ESG factor.

Rose is careful not to treat particular ESG matters as more important than others, because ‘something that is important to one group may not necessarily be important to another’. Also, she adds, the focus of concern is continually moving. ‘When I first started in ESG eight years ago, the main issue of the day was Burma. Then the focus moved on to corporate governance, then carbon, greenhouse gases and climate change. Every couple of years, something new comes up.’

In addition, different companies and regions have different concerns. ‘In Asia, labour is not an issue, but they talk a lot about what they are doing on the environment, while in Latin America they are also big on the environment but not as concerned about governance. We try to treat every issue on the same plane. Just because it is not in the spotlight, that does not mean it is not important.’




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