SGA is a signatory to the United Nations Principles for Responsible Investment. Our team recognizes that environmental, social and governance (ESG) factors can impact a company’s financial performance, competitive positioning, brand equity and other determinants of long-term shareholder value creation. As a result, we strive to integrate ESG issues into our investment analysis and decision-making process while fulfilling our fiduciary duty to all clients. SGA’s focus on ESG is reflected in three areas of our investment process:
We regularly engage the management teams of businesses we consider for investment in discussions regarding corporate governance, the sustainability of their business models, management incentive arrangements and their plans for maximizing shareholder value. SGA’s investment process is focused on the long-term, and we are attracted to businesses that share a long-term perspective and are thoughtful stewards of their resources, both financial and otherwise.
Each company’s response to such questions from our analysts is considered as SGA evaluates management quality and whether it is sufficiently focused on generating long-term shareholder value in an appropriate manner.
SGA has also engaged independent, third-party ESG research provider Sustainalytics to provide ESG analysis and rankings for all companies within our Qualified Company List to complement our own bottom–up research and analysis. These considerations are then taken into account along with our analysis of revenue predictability, global runways of growth, sustainability of earnings growth and valuation before we ultimately decide whether to invest client capital in a company stock.
SGA does not take positions in companies expecting to implement activist positions, nor do we invest based on our moral or ethical opinions. We do, however, engage in detailed discussions with company managements to better understand their long-term objectives and challenges, and how ESG and other factors fit within their operating and decision-making frameworks. We are proactive in providing our thoughts to management teams regarding their business strategies, governance and reporting when needed and will decline to purchase or hold shares in a company if we determine that it fails to meet our business quality expectations.
Given SGA’s long-term focused approach to investing in businesses, and our unique perspective, we have found that management teams often value our views on pertinent topics as opposed to more short-term investors who are less concerned with strategic business direction and long-term wealth creation.
We seek to represent our clients’ interests through a thorough and responsible implementation of our proxy voting policy.
SGA’s proxy voting procedures are designed and implemented in a way that is expected to ensure that proxy matters are conducted in the best interest of the clients.
The policy and procedures are updated as appropriate to take into account developments in the law, best practices in the industry, and refinements deemed appropriate by SGA.
Material conflicts are resolved in the best interest of the clients or in accordance with specific client directives.
SGA’s policies and procedures incorporate a review of legislative materials, studies of corporate governance and other proxy voting issues, analyses of shareholder and management proposals and other materials helpful in studying the issues involved.
We consider the litmus test of any proposal, whether it is advanced by management or by one or more shareholders, to be whether the adoption of the proposal allows the company to carry on its affairs in such a manner that the clients’ best interests will be served. Judgmental issues are reviewed by senior investment professionals to determine if adopting the proposal is in the best interest of our clients.
Accurately understanding long-term business quality is key to the success of SGA’s investment process. The way in which a management team stewards the financial and non-financial assets of a business, and the incentive and governance structure they are operating under each play a large role in determining that business quality. Our emphasis on correctly and objectively understanding these factors through subjecting each business to the scrutiny of two analysts (the primary and secondary) as well as the evaluation of our Investment Committee members and incorporating the views of ESG research provider Sustainalytics, underlines SGA’s commitment to fully understanding business quality and all its ESG and other components.