this has always been important to us, in more ways than one, and we tend to do it to amongst the very highest standards of our peergroup*
this has always been important to us…..in more ways than one
Sustainable risk-adjusted returns from sustainable businesses, managed and run on sustainable principles and setting standards for their industries globally, in a fund strategy that investors may more readily find they can sustain for the long-term. *(MorningStar Sustainability Ratings).
The heart of the Endeavour investment process has always been the search for sources of return that the managers feel can be sustained over the long-term, from businesses that they believe can be relied on to deliver to expectations, the most dependable. These businesses are typically operating in secular growth markets with strong positions and possessing brand, technology, price, or cost leadership, with high barriers to entry or regulatory frameworks. Seeking out the consistency of dividends, the security of bond coupons and steady growth, at least as a starting point, the Endeavour process naturally captures a lot of businesses where management strategy and culture reflect the highest operational standards, including increasingly environmental, social, and governance.
Environmental, social and governance (ESG) issues rank increasingly prominently and often distinguish these companies as leaders in their fields precisely because they do. The managers of the Endeavour Fund do not negatively screen for ESG investments based on a sense of historical or subjective ethical judgement, rather the starting point for them is that company management set their goals and responsibilities prioritising the interests of the widest stakeholder community and, with pragmatism, should set the standard in their sectors for how they go about it.
Pragmatic & Progressive
The managers take a pragmatic and progressive approach to the sustainability of the companies they invest in and the issues they engage those companies with as shareholders. Here are some examples of this thinking on the principal ESG issues as they are developing.
The managers do not consider the oil and gas sector as unethical or uninvestable per se. Far from it, it would in their opinion actually be unethical to withhold capital investment from an industry that is today the mainstay of affordable energy and the basis of 100 years of relief from poverty and improved living standards for billions. However, they should also rightly be expected to be progressively shifting their operations towards cleaner fuels and investing in the development of the next generation of sustainable, renewable energy sources and committing to the optimal and credible timelines to do it in the best interests of all stakeholders.
Likewise, it is not all carbonated drink and snack food makers who contribute to the inexorable rise in obesity and diabetes rates globally; some are leading the way with healthier ingredients, lower sugar content and replacement products and in educating their customers into new consumption habits.
Nor is tobacco empirically evil, and certainly not illegal, though the managers would say generally of little utility to society and the companies themselves admit to their products shortening normal expected lifespans. The manager happens to believe this is not a very sustainable business model long-term and would go so far as to suggest the products would be made illegal if it wasn’t for the aggressive lobbying and tax revenues in the industry.
Gambling and alcohol may alternatively be considered evil by some, but in moderation the managers believe they are also a welcome right to enjoy for mature self-determining adults and can have a healthy role to play in social cohesion.
Defense and military hardware manufacturers in and of themselves may not be considered unethical investments as defense capability in our opinion has always played a vital part in the framework of international peace. That said, some defense companies and some defense products supplied to some countries and regimes may well be considered unethical, in the managers’ opinion, and avoided as investments.
Diversity of people and cultures, perspectives and talent is always a good thing for any business and is increasingly to be expected for businesses with themselves diverse markets and customers. However, pejorative quotas of diversity the manager does not feel to be constructive for companies to answer to, facing as they already do the tremendous challenges in the market for talent.
Almost needless to say, the managers of the Fund would abhor the thought of any of their investments being involved in modern slavery or pornography. The managers go to reasonable lengths to ensure these standards in investee companies, bearing in mind the Fund is relatively concentrated, overwhelmingly large market capitalised, very well covered by market analysts, and forensically scrutinised by sustainability industry research providers whose ratings are woven directly into the Endeavour investment process.
A philosophy of stewardship
We are fortunate in western democratic countries to have the structures of government, institutions and accountability to trust that what is legal in our societies is broadly and increasingly – and ultimately – ethical. We believe our investment and corporate engagement process makes a modest but relevant contribution to that evolution: seeking out the probable rather than speculating the possible – a philosophy of stewardship rather than outright performance. Endeavour naturally appears to capture a lot of ESG characteristics: by country and by capitalisation, by dividend and by growth, by conviction and by success, the Endeavour Fund appears to have captured more ESG factors than over 90% of the Morningstar rated fund universe in the years since their service was launched in 2015 (source: Morningstar, Tellsons, Sustainalytics).
Probably one of the most naturally sustainable funds available in a much greenwashed market today, it is ESG that seems to have found Endeavour.