Lion Global Investors (LGI) is one of the largest asset managers in Southeast Asia. Affirmed by more than 30 years of investment expertise, we are dedicated to managing various investment strategies that span across different asset classes for our institutional and retail investors globally.
Our Sustainability Beliefs
We believe that material environmental, social and governance (ESG) factors impact the risks and returns of the investments we manage and such ESG considerations should be integrated into our investment process to maximize the risk-reward of each investment decision we undertake. This aligns with the investment philosophy to take into account all material factors to provide the best performance for our clients’ investment portfolios.
Demonstrating our commitment to responsible investing, LGI has started out with two distinct moves.
- In January 2020 LGI became a signatory of the Principles for Responsible Investment , putting the organization on a committed path alongside the broader ESG investment community in this ESG journey and maintaining the trust that clients have in our ability to deliver long term sustainable risk-adjusted returns.
- LGI has also created an ESG department to provide dedicated resources in this area. The ESG department works with various departments across the organization on ESG matters such as ESG analysis and reporting for investment portfolios, ensuring compliance with regulatory requirements, and other ESG-related initiatives.
Our Sustainability Approach Across Various Investment Products
Equity and Fixed Income Funds
From an ESG perspective, we focus our resources on ESG factors that have a material effect on our overall portfolios’ performance. These can vary in scope and scale across individual securities, sectors, countries and time horizon.
Hence, rather than reinventing the wheel, material ESG factors are integrated into the existing investment process. This approach has two merits. Firstly, it allows investment teams to apply a holistic view when thinking about the investment risks and opportunities as a whole for the portfolios under management. Secondly, in security selection, the investment teams are the key experts with regard to the securities in the markets they invest in; the investment teams are best suited to make the assessments on what constitutes material ESG factors that each issuer face and how well each of them are managing these factors. Material ESG factors are considered alongside other considerations that are integral to each security’s performance, including but not limited to factors such as financials and strategies, management capabilities, growth catalysts and valuations. Issuer engagement forms an important part of the integration process in understanding the materiality of these ESG factors and how companies are addressing them. Besides having ESG considerations that form part of an initial investment decision, post investing, the investment teams would continue to evaluate and monitor the ESG quality of the issuers as part of the ongoing portfolio construction and risk management.
Time Horizon and ESG Risk Considerations
Our investment teams expect to generate an outperformance from security selection over the medium term (i.e. a three years investment horizon). Any ESG risks that impact the performance of our investments within this period would form a key part of the overall investment assessment. For instance, where the investment teams expect to gain from improvements in ESG quality of an investee company but had not witnessed sufficient improvements across a period of up to three years, limits would be imposed on the exposure to the company.
Besides assessing ESG risks when making an investment decision, investment instruments that are pro-environment and within the respective investment universes would be considered for investment. This includes but is not limited to green and sustainability-linked bonds, as well as equities of companies that would benefit from the transition towards a greener global environment. LGI is also open to managing dedicated green funds and is in the midst of building a track record in managing a dedicated green bond fund for one of our clients, taking into account the green properties of each security and their broader risk and return characteristics.
Sustainability Risk Management
As part of our portfolio performance and risk management, the Risk & Performance department and ESG department generates and monitors the ESG quality based on data that is generated from third party ESG data providers on a monthly basis. The information in turn provides a feedback loop to our Board, senior management and investment teams, and may lead to further improvements in our sustainability-related strategies and ESG integrated investment processes over the longer term.
Besides the investment teams, the Risk & Performance department and ESG department, we also have the Compliance department and Internal Audit department that help to ensure our ESG-integrated process is adhered to.
ESG is a journey and we aim to improve on our sustainability risk management process over time. Specifically on environmental risk management, we expect the carbon footprint of our investments to reduce over the next few years and target to display carbon metrics (such as the weighted average carbon intensity) that are superior to the universe benchmark at the overall firm level. This is monitored for progress by our investment teams, ESG department and overseen by the CIO.
Building Capacity on ESG
As part of our ESG journey, and as ESG thinking in the investment industry continues to evolve, continuous learning is an important part of improving the technical abilities of our employees and have a direct influence on the quality of ESG integration. Our employees are trained on responsible investing through courses launched by reputable third party ESG focused organisations.
Our Stewardship Role in the Broader Community
LGI seeks to play an active role in the creation and development of a sustainable capital market. At an organization level, as a member of the Investment Management Association of Singapore (IMAS) and a signatory of the Principles for Responsible Investment (PRI), we look to learn from peers and are open to sharing our views and experience to assist in raising sustainable investment standards in the industry.
At the investment level, LGI is also open to joint collaborations in engagement activities with other like-minded investors to push for improvements in companies that we have an interest in. In such instances, it could lead to a more efficient and effective approach to raising sustainability standards that benefit our clients’ portfolios.
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