Our Approach to ESG
Trilogy Global Advisors incorporates Environmental, Social and Governance concerns (ESG) into our investment process. To the extent a company is pursuing such policies and practices we believe are harmful to the value of the company and its reputation; those policies are factored into our investment decision/process. We do this through our scenario analysis by: 1-attempting to quantify the impact on current earnings; 2-attempting to quantify the impact on the long-term growth of earnings from penalties and customer perception; and 3-attempting to quantify the impact on the valuation from continuing to pursue these policies. In the same manner, we factor into our investment decision/process the extent a company is pursuing such policies and practices we believe benefit the value of the company.
We seek to be proactive in identifying these issues by periodically screening our holdings for global controversies. Trilogy uses a third-party service provider, MSCI Impact Monitor, to evaluate companies on their strategies as well as their performance with respect to ESG. To the extent that companies score poorly on these screens, we review the impact of the specific issue on revenues, profitability, earnings, capital requirements and valuation. Companies are scored monthly and those that receive the lowest scores require additional evaluation by Trilogy Research Analysts. Analysts use MSCI Impact Monitor to review specific issues that have affected the score. Further evaluation is conducted using the Sustainability Report of the company in question as well as through direct contact with the company. Analysts raise relevant issues during our visits with company management throughout the year.
The Global Reporting Initiative’s (GRI) Sustainability Reporting Guidelines provide a good summary of the factors considered in our screening process and analysis:
- Environment – land use & biodiversity, toxic spills & releases, energy & climate change, water management, operational hazardous waste, impact of product & services and supply chain management
- Human Rights & Community Impact – adverse impact on local communities, support for controversial regimes (Burma, Sudan and other countries), freedom of expression & censorship and human rights abuses
- Labor Rights & Supply Chain – labor management relations, employee health & safety, supply chain child labor, collective bargaining & unions, discrimination & workforce diversity and supply chain other contraventions
- Governance – business ethics: bribery & fraud, controversial investments and governance structures
Trilogy is a signatory to the United Nations Principles of Responsible Investing (“UNPRI”). The UNPRI is a global network of international investors, asset managers and service providers who have committed to considering the investment implications of ESG factors where appropriate and consistent with their fiduciary duty. The UNPRI provides a voluntary framework by which signatories can incorporate ESG issues into their decision-making and investment process in order better to align their objectives with those of society at large. Trilogy’s most recent assessment can be found here:
Two of Trilogy’s most senior analysts, Brad Wilds and Jim Tschudy, serve as our dedicated ESG team. They ensure that ESG issues are fully considered by Trilogy’s investment team of 15 portfolio managers and investment analysts. Tom Masi, Trilogy’s Director of Research, is responsible for oversight of the firm’s ESG practices. Companies being considered for inclusion in the portfolio go through a screening process which includes both quantitative and qualitative factors as well as ESG factors. Companies have ESG issues highlighted so that they can be raised during our engagement meetings with company management. Brad and Jim keep abreast of ongoing developments in ESG research and ensure our research process reflects these. They ensure that each analyst researching a company, as well as the portfolio manager constructing the portfolio, has assessed the relative importance of ESG factors in determining their likely impact on future share price performance.
Brad Wilds, Investment Analyst
Start Date: 2/04 Experience: 34 years
Brad is responsible for the global research coverage of sectors such as Health Care and Biotechnology. He also serves as a member of Trilogy’s dedicated ESG team. Brad joined from CitiGroup Asset Management, where he was portfolio manager and research analyst focusing on Health Care and Biotechnology. Previously, Brad was a portfolio manager and research analyst at Mellon Private Asset Management. Brad also worked at Lehman Brothers and Bessemer Trust earlier in his career. He earned a B.S. in Finance from University of Connecticut and is a CFA charter-holder.
Jim Tschudy, Investment Analyst
Start Date: 5/05 Experience: 18 years
Jim is responsible for the global research coverage of sectors such as Industrials and Energy, Materials, and Utilities. He also serves as a member of Trilogy’s dedicated ESG team. Jim joined Trilogy in 2005, the result of a merger with BPI Global Asset Management, LLP. Prior to BPI, Jim was with Morgan Stanley. Jim earned a B.A. in Marketing from the State University of New York at New Paltz.