Ausbil Investment Management has recruited an ESG specialist, Mans Carlsson-Sweeny, as a dedicated resource with the aim of adding alpha through deep research on the ESG performance of companies.
Carlsson-Sweeny, who was most recently senior ESG research analyst at AMP Capital, started as head of ESG research at Ausbil late last month. He takes on the responsibilities which formerly fell mainly on Adam Dixon, an associate director of equities who has championed the ESG space at Ausbil and was instrumental in the recruitment of Carlsson-Sweeny.
Ausbil has several “highly ESG sensitive clients,” according to Ross Youngman, who joined Ausbil this year as head of institutional business. Youngman, a former senior BT Funds Management executive and the founder of boutique Five Oceans, is also no stranger to the space. He is a former committee member of the Australian Investor Group on Climate Change.
The firm uses a mix of negative screens and positive research in its ESG process, but Carlsson-Sweeny said: “If you want to get alpha you need to do deep research, you need to talk to more of the stakeholders.”
He believes that ESG is a proxy for the quality of a company’s management. “The ‘E’, ‘S’ and ‘G’ are linked. Over the last 20 years more value has come from analysing the intangible assets of a stock. The ‘S’ is the most intangible but you can study how the company deals with suppliers etc.”
The make-up of boards is a topical issue about which there is more evidence about various influences and more readily available data to study. Studies of the proportion of women on boards and ethnicity and diversity of backgrounds, have shown positive correlations between diversity and performance. A more diverse board is more likely to better understand a company’s customers, Carlsson-Sweeny says. But a board also needs the right balance of skills. Independent directors are particularly important for the interests of minority shareholders.
He believes that screening out stocks on ESG grounds gives a manager a better pool of stocks to research. Most managers do some refinement of their investable universe, he says. “In my experience this gives you a better pool to work with on ESG grounds.”
With its negative screens, Ausbil distinguishes between different types of fossil fuels, for instance, punishing thermal coal used in power stations more than coking coal used in making steel. If you exclude only thermal coal you are not making such a significant bet against the index.
“ESG should always be a part of fundamental stock research and we are active managers,” Carlsson-Sweeny says. “It’s rare, though, that an ESG issue is so material that it overrides everything else.”
Youngman said that with the extra ESG research capability Ausbil might look at having a specific ESG fund down the track.
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