Sustainable Investing

Recognition of Climate Change as a significant global threat is growing. Governments, scientists, corporations, and the general populace are pressing for a shift towards a lower-carbon world. This pressure is driving changes across industries, policy, and consumer behavior.

The Energy Transition theme includes a thorough analysis of climate change and the impact of global physical changes. It also includes ways that companies and governments are working to reduce emissions through new or alternative processes and technologies, and the impact of government policy put in place to accelerate this transition. It also covers an outlook on the energy framework that is required to replace fossil fuels as a primary energy source, and the associated industries, technologies, and raw material requirements.

This theme addresses the challenge of balancing continued healthy economic activity, including improving the quality of life for people across the globe, with sustainability and ecosystem conservation. Humanity already puts considerable pressure on the Earth’s resources and ecosystems and, with an increasing global population, continued growth in developing countries, and high resource intensity of developed nations, it means a focus on sustainability is vital. Government policies and investor engagement are putting pressure on corporations to do better.

There is a continued push towards clean water and air, waste reduction, conservation of resources, and protection of forests and other fragile ecosystems. Proposed solutions include increased recycling, development of a circular economy, improving resource efficiency, and construction of green infrastructure. This must all be accomplished while providing quality education, jobs, healthcare, and security of food supply.

This theme focuses on the importance of diversity and equality of people, thought, perspectives and experience, both inside and outside the organization. There is a growing body of evidence showing that increasing the gender, ethnic and cultural diversity of an organization, particularly at the executive level, leads to improved financial performance1.

In addition, companies need to maintain a strong social license to operate by ensuring respect for communities, human rights, and land rights to build sustainable operations.

1. Hunt, Vivian., et al. Diversity Wins: How Inclusion Matters. McKinsey & Company, Mai 2020, How diversity, equity, and inclusion (DE&I) matter | McKinsey.

As companies continue to innovate, we want to ensure that they are doing so in a responsible way, limiting the adverse effects on society, safety, and the environment.

This is especially important in areas such as information technology, where innovation can sometimes be too fast for regulation to keep pace, or society to understand the long-term impacts.
In addition, the importance of understanding the full life cycle of a new product can help limit environmental damage.

Strong governance is something that Letko Brosseau has always supported. We believe the voting right is one of the most important rights inherent to shareholding. We take very seriously our responsibility of ensuring that proxies received are voted and that the decisions taken represent the long-term interests of shareholders.
In general, we promote equal treatment of all shareholders and vote against restricting the composition or conduct of the board of directors. We also seek to ensure that executive compensation and option plans are fair, reasonable, and do not result in excessive shareholder dilution.
Engagement with company management and the board of directors is a key part of our investment approach, and we will challenge them when we believe their actions are not in the best interest of shareholders.