Good stewardship has always been a part of Cantab’s approach to investing. Responsible investing is a rapidly growing area of the wealth management industry and one which has experienced increased interest from clients. ESG is a broad area and clients often have different preferences. All client directors have experience of managing portfolios for clients with unique preferences; this is done at an individual level and portfolios can be bespoke.

Our ESG team remain informed of the latest developments and trends in this constantly evolving area, enabling us to provide our clients with the most suitable solutions.

Over the long-term, we believe that sustainable business practices should correlate with better company economic performance. However, we remain cautious in the context of significant growth in ESG mandated funds and advise clients to carefully consider the screening and methodology being used.

Our ESG portfolios employ Cantab’s overarching investment principles, with a bias towards active management and achieving diversification through geography and asset class. In this space, we believe actively managed funds are better able to align their portfolios with investors’ interests than passive alternatives. Fund managers can oversee clearly defined mandates, exercising oversight on focused portfolios of companies that are continually reviewed to ensure they are in line with the ESG mandate of the fund. As with all our portfolios, diversification is essential to risk management. Each ESG portfolio is constructed in line with clients’ risk tolerances, whereby asset allocation underpins the portfolio’s risk rating. As well as asset class and geographic diversification, we select a blend of investment strategies in order to minimise correlation within portfolios.

What is ESG?

It is easy to feel confused about ESG investing today. The media, and investment industry, are awash with differing interpretations of what is often being portrayed as a relatively new style of investing.

We see it differently. To us, ESG is merely a modern interpretation of an age-old concept that companies are not run purely for the benefit of their shareholders – there are other stakeholders to be considered.

Specifically, corporations are becoming increasingly aware of their Environmental responsibilities in terms of, for example, carbon emissions and waste management – future generations are the obvious stakeholders in this regard. Companies are also coming under increasing pressure to show Social awareness in their treatment of their own workforce and the wider community. Finally, good Governance aligns the interests of boards and management teams with shareholders and other stakeholders.

How does ESG fit into the Investment Process?

It is important to recognise that, while the media may focus on one specific aspect of these ESG building blocks at any point in time, as investors we need to maintain a balanced approach to all the stakeholder issues a company might face.

From an investment perspective, while the above considerations are embedded into our investment process, our overriding aim is to generate superior investment returns for our clients.

In this context we see the investment opportunity set as a spectrum ranging from Responsible investing, which seeks to protect capital by avoiding poor ESG practices, through Sustainable investing, which adopts progressive practices that may enhance value, to Impact investing, which addresses ESG challenges that may or may not generate financial returns.

ESG – The Investment Opportunity Set

 

  • Responsible
    Mitigate risky environmental, social and governance practices in order to protect capital value.
  • Sustainable
    Adopt progressive environmental, social and governance practices that may enhance value.
  • Impact
    Address societal challenges that may generate competitive financial returns for investors.

Cantab has the full opportunity set available and will endeavour to blend portfolios to the best advantage for clients on a risk-adjusted basis.

Find out more about Cantab's ESG investing
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Risk warning:
The value of investments and the income therefrom is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment, you may get back less than you originally invested. The value of overseas securities will be influenced by the rate of exchange which is used to convert these to sterling. The opinions expressed herein are those of Cantab Asset Management Ltd and should not be construed as investment advice. Past performance is not a guide to future performance.

ESG performance warning:
It is important to note that in selecting ESG investments, a screening out process has taken place which eliminates many investments potentially providing good financial returns. By reducing the universe of possible investments, the investment performance of ESG portfolios might be less than that potentially produced by selecting from the larger unscreened universe.

give careful thought to the paths for your feet and be steadfast in all your ways