We are in an unusual short-term trading environment in financial markets centred on issues such as the direction of inflation and central bank policy. It helps our investment process that we are longer term investors.
The market needs to allow itself to think about sustainable investing on a long-term and structural basis. These issues will not be changed overnight. These are multi-decade issues, and we are investing on that timeframe. If we consider the World Economic Forum’s most recent Global Risk Report, the current highest economic risk on a two-year basis was the cost-of-living crisis. Unsurprisingly geoeconomic confrontation also escalated, if we think about economic sanctions and increasing trade tariffs. The rest of the biggest economic risks cited in the report were environment related. On a 10-year basis, all the top four risks were all planetary based; the fifth risk was involuntary migration, which is arguably a derivative of environmental risk.
These are not political values-based risks – but economic risks that are long-term issues that we consider. Along with social equity and corporate environmental footprints, they are a core tenet of our investment framework.
The brutal conflict in Ukraine is coming up on a one-year anniversary and has amplified the need to address longer term problems around energy security and energy independence.
We are investing in companies that are at the heart of leading the transition to a more sustainable world. For us, the investment research process focuses on how these companies balance the stakeholder needs of planet, people, profit. We are looking for the very best management teams in the global equity universe who are recognizing, managing and mitigating systemic risks on a multidecade basis.
One of the aspects we try to consider in the investment process is tension around tenure given that the typical management team tenure in the US is four to seven years, and we are looking at a 30-year decarbonisation plan. Therefore credible, actionable, short- and medium-term plans are an important aspect of a business’ ability to meet those longer term targets.
Our investment process is about finding management teams that are addressing that risk and are ahead of the curve. Typically, these kinds of management teams are open to engagement on these issues. We focus on what matters and specifically on issues that are relevant to what a company sells and where they sell it.
More broadly, there is a meaningful resource strain on companies around sustainability reporting, and this includes requiring a high level of disclosure and meeting differing regulatory regimes in Europe, Asia and the US.
It is a complex, nascent and evolving reporting environment for companies. We take a pragmatic approach, focusing on those companies that deliver real world outcomes. Transparency will continue to be an important issue going forward.
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A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.
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