ESG at Nutshell

When we started Nutshell we wanted to do things differently by creating a top-tier global equity strategy within an ethical framework.

 

To achieve this, we analyse the environmental, social and governance (ESG) behaviours of individual companies and put this at the heart of our investment process.

 

Not only is this the right thing to do, but research shows companies with better ESG considerations tend to have higher profit margins and more stable returns*.

 

Investing in high-scoring ESG companies can therefore make both ethical and financial sense.

ESG ratings consider:

  • A company's environmental impact through its energy, pollution and treatment of animals.

  • Social criteria including treatment of employees and diversity.

  • Governance which looks at investment and accounting practices, along with any potential conflicts of interest among board members.

Companies with high scoring ESG ratings tend to have higher profit margins and more stable returns. 

How do we do it?

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ESG factors give a more complete picture of a company and its ethos.

  • We actively exclude companies involved in controversial activities and sectors (such as fossil fuels, mining, weapons, pornography, gambling and tobacco).

  • We then run our usual financial based factor reduction method to get approx 10,000 global companies down to around 300.

  • The quantitative part of our research process includes the use of third-party ESG ratings of companies in our investible universe from independent services providers.  Companies in the top third of the rankings are scored positively in our process, and conversely companies in the bottom third are scored negatively. Rankings are therefore adjusted changing the probability of gaining portfolio entry, and weightings within the portfolio.

  • Our in-depth discretionary analysis of a company will also include a further examination of its ESG credentials, which may also result in a discretionary adjustment to its ranking. Including a more micro focus on factors such as GHG/Revenue (Total Greenhouse Gas Emissions/Million Revenue) 

  • Finally we retain the ultimate discretion to still exclude an investment if we still feel uncomfortable. This happened in Oct 2020 with a UK online retailer.

Off the pitch

Our goal is to continually improve our own ESG credentials. Our values focus on integrity, community and charity. These 3 pillars will provide the foundations for what we think is important. At the community level we have recently sponsored HC Knole Park. We have engaged with several charities and are actively looking for further opportunities to help.  

Planting trees