Our Approach to ESG
We are bottom-up investors and as such, we believe we have always implicitly integrated what have become known as ESG factors into our proprietary research, fundamental analysis, and the associated assessment of intrinsic value of any company. Our goal is to share how we have been thinking about ESG at Phaeacian Partners. Fundamentally, we found such requests important to address because the investment policy we articulated almost a decade ago, and that, for the most part, has guided our careers as investors for over 20 years, is already anchored in large measure on what we understand are the ideas of ESG investing.
We think considering the types of factors embodied in ESG, it has, in effect, always been at the heart of our investment philosophy. It comes down to looking for businesses that are sustainable over the long term.
In a world gone passive, ESG appears to us to be a partial return by allocators of capital to focusing on business fundamentals. We believe this renewed focus is long overdue and quite healthy overall for the investment management industry. For us, it represents a great opportunity to highlight the merits of our approach to investors who, after years of shifting toward a more passive mindset, are reconnecting with active management through ESG.
From an overall philosophy and process perspective, we are long-term, fundamental value investors and take a bottom-up, research-driven approach to selecting individual investments. That means we dedicate most of our time to studying how industries and companies evolve over time and how adept management teams are at responding to and taking advantage of these changes in business fundamentals. In doing so, we think prospectively rather than looking only at the past to anticipate potential changes. This includes identifying ESG-related opportunities and challenges that we expect could influence the ability of companies to get stronger over the long run. We ask ourselves what issues including ESG dynamics are likely to impact the business’ main value drivers, whether a company has the ability to manage any evolution appropriately, and how that needs to be factored into our assessment of intrinsic value.