New Martin Currie Strategy for long-term investors

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As part of its investor pathway of building new solutions, Martin Currie has announced the launch of the Martin Currie Australia ‘Sustainable Equity’ strategy. The strategy is designed to provide higher returns than the index over the long term, while considering – and positively influencing – the sustainability practices of the companies it invests in.

Kimon Kouryialas, the specialist active equities manager’s Melbourne-based co-head of global distribution, said: “The development of this solution is a direct result of discussions and engagement with investors, who have told us that they increasingly want to align their investments with achieving a more sustainable environmental, social and economic future, but also do not want to forfeit economic returns.”

The ‘Sustainable Equity’ strategy builds on Martin Currie’s long-term experience in integrating ESG into Australian Equity portfolios and combines its unique multi-lensed research process with portfolio construction that tilts towards companies that score highly on its proprietary ‘sustainability’ assessments, he says.

The strategy will be managed by portfolio managers Will Baylis, Naomi Bant and Matt Lambert, drawing on fundamental analysis and stewardship activities of the 17-member Martin Currie Australia team. Martin Currie believes that companies that are on a ‘sustainability pathway’ towards healthier outcomes for all stakeholders – such as employees, communities, customers and the broader society – will, in fact, prove to be more successful financially over time, Kouryialas says.

“Importantly, Martin Currie highlights that ‘Sustainable Equity’ is not an ‘SRI’ strategy with negative values screens, believing that simple screens can have limitations for benchmark-relative strategies. While we wouldn’t call our approach ‘impact’ investing, we approach this from a positive mindset, engaging with companies to identify investments that can provide net benefits,” he says.

Will Baylis, the lead portfolio manager for the strategy said: “We invest on the basis of a forward-looking evaluation of sustainability and economic returns, not on past performance. We believe that negative screens put undue precedence on the past activities of a company and penalise those who are in fact moving in the right direction.”

As such, the strategy intentionally has limited exclusions and instead focuses on identifying and scoring companies that:

  • provide more benefit versus harm to society
  • have a management that focuses on their sustainability risk, and
  • have a clearly articulated pathway towards a Sustainable environmental, social and economic future.

Martin Currie also believes that the managers can positively influence a company’s pathway to improve their sustainability practices through active ownership, which is embedded in the investment process for all Martin Currie strategies.

Reece Birtles, Martin Currie Australia’s long-standing CIO, said: “Companies can be nudged in the right direction, and as a significant asset owner in Australia, Martin Currie can and do use our position to actively engage with company management and boards to influence positive change towards Sustainability. Each year, the investment team conduct over 1,000 meetings with company management, and also their competitors, customers and suppliers, and this gives them an ability to influence corporate behaviour to change for the better.”

Poor-quality companies that cause net harm to society, or have business practices that have high sustainability risk, will be penalised on their fundamentals by Martin Currie Australia’s portfolio construction process. This results in a larger investment universe and optimal expected return and risk characteristics relative to the benchmark considering both Sustainability practises and financial returns, Birtles says.

The Sustainable Equity strategy will form part of Martin Currie’s A$9 billion in Australian equity assets under management. In total, Martin Currie manages more than A$20 billion for clients worldwide, as at March 31 this year.

– G.B.

Note: Martin Currie is a sponsor of Investor Strategy News. Any opinions expressed may be those of the author, not necessarily those of Martin Currie.

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