Schroeder has released a report titled “Sustainable investing in Europe, three years of lessons”, which contains two tools for sustainable investing, “Sustain Ex” and “CONTEXT”. Schroder Investment Management Co., Ltd. (Schroder IM) published a Japanese version on March 11 with examples of sustainable investing using both tools and lessons learned.
In SustainEx and CONTEXT, SustainEx assesses a company’s positive or negative impact on society, while CONTEXT assesses opportunities and risks arising from a company’s relationship with its stakeholders. Among them, SustainEx is an original ESG assessment tool developed in 2019 to assess the positive and negative social impacts that companies have on society, which are not reflected in corporate performance. By using both, a sustainability perspective can be incorporated into a range of investment review stages. The firm explained that from its experience over the past three years, the two tools have taught three important lessons for sustainable investing.
The first is Getinge from Sweden, a medical device and life sciences company. When they first turned their attention to the company in the early 2000s, the two tools gave different answers. SustainEx achieved good results against the backdrop of medical supplies and wage levels, while CONTEXT was well below the average of its competitors. “The main reason is that we didn’t have a good relationship with the regulators under the former management team, who were aggressively pushing for cost savings,” Schroeder explained.
Schroeder has worked with Gedginge’s Quality and Regulatory Compliance Officer to respond to FDA warnings about quality control issues and to update quality standards across the organization. I understand that it has been introduced. This new quality standard provides a basis for reviewing business structures, thereby reducing waste and efficiency in the production process. This has also led to a new investment decision-making process that focuses on higher growth areas of the business.
For context, Schroeder said, “I feel that improvements in corporate culture and organizational restructuring have not been properly reflected in share prices. In this context, sustainable investing should not be limited to best-in-class stocks. It also reinforces It is our way of thinking. Transformation, innovation, and major change companies can also be investment targets.” From a sustainable development perspective, the company cited the balance of E (environment), S (social) and G (governance) as It sees its tools as an area of investment decision-making advantage. “Naturally, an environment that is relatively measurable and visible will play a leading role in the topic of sustainability, but due to its good governance and high social awareness, it is forbidden to assume that it is environmentally friendly.”
For example, a manufacturer of wind turbines has high environmental confidence in switching to clean energy and promoting emissions reductions. However, issues related to consistent quality control and future warranty costs, supply chain and raw material issues arise when all stakeholders are considered. In some cases, the lack of management performance is worrying.
“We should reiterate that sustainability is not just about the environment. The ESG debate is evolving, and the Covid-19 disaster has highlighted the vulnerability of labor and supply chains. We focus on sustainability. Even with investment, a focus on inventory levels will support all The right decision.”
Another area where companies and customers can provide added value is engagement activities that encourage company change. You can leverage detailed results from your own sustainability tools and use them as the basis for targeted engagement. From corporate strategy and compensation to climate change, human capital management and contentious responses.
One example is Volkswagen, the German automaker that fell into a governance crisis in 2015. In the case of fraud that came to light as the so-called “dieselgate” case, it was clear that the entire organization was engaging in unsustainable conduct.
While closely monitoring progress, Schroeder’s team of analysts encourages positive change by working with companies at all stages of the process, helping to turn past risks into future opportunities. As a simple change, it allows whistleblowers to use languages other than German. Conversely, there have also been changes in the management of factories in China’s Xinjiang Uyghur Autonomous Region, re-education of all employees involved in electric vehicle manufacturing from machinery production lines to electrical components production lines, organizational restructuring, and non-core assets. “The road to regaining trust is long and steep, but the greatest pain is also the greatest opportunity for change,” the company said.
“The challenge of engagement is finding the right balance. Focusing on what’s most important to the company drives the most meaningful change, while meticulously covering up the germs of future controversies. By learning from past experiences and valuing future engagements Using their attitudes, it will be possible to make highly accurate investment decisions.”
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