ESG is an acronym that refers to the environmental,
social and governance factors of the businesses we hold.
If we break this down, it’s fairly intuitive:
environmental factors help to define how businesses impact
the planet, social analysis aims to reveal how businesses impact people,
and governance looks to understand how a business is run.
The long-term, active approach we take to investing at Baillie Gifford
frames how we consider our ESG-focused portfolios.
Because we are long-term investors, we can use ESG factors as another lens
to help us understand the investments we make.
Over the long term, we believe sustainability
and returns can be complementary.
As active investors, we’re engaged in building
relationships with the management teams of
the companies we hold, helping them to remain
focused on their long-term vision.
We think this puts us in the best position
to influence change when needed.
When considering ESG we ask, “What are the one or two material
things that a business is doing which really matter?”
We acknowledge that there’s no such thing as the perfect company,
and so understanding the ESG factors of the investments we make
requires detailed research and, at times, an understanding of nuance.
This is just as true for ESG as for traditional financial analysis.
We are not looking to excel at the box-ticking
approach that is so often used because it looks good or is easy.
There are no shortcuts or rules of thumb to truly
understanding the sustainable credentials of an investment.
We think this must be based on proper, good old-fashioned bottom-up analysis.
It takes time and patience, but those are skills that we have.
We do this very simply because we believe it makes
us better investors, and because it matters.
We do this because we want to hand on the portfolios which
we manage for our clients to the next generation of investors in good shape,
and to leave the world in which we all live in better shape, too.