At Reynders, McVeigh, we talk a great deal about the “DNA” of companies in which we choose to invest. We work tirelessly to understand every facet of a business to ensure that we are aware of the material factors we believe can affect risk and performance. Although ESG (environmental, social, and governance) data and strategies have moved into the mainstream, looking beyond the numbers is something we have always prioritized in our investment process. So, while we think that the proliferation and widespread adoption of ESG among mainstream investors is generally a good thing, we also believe that there is some cause for concern for investors. (See our contributed article in Triple Pundit.)
As ESG continues to gain favor within the mainstream, many investors and external stakeholders are pressing companies on environmental and corporate governance topics. These themes are incredibly important, but what often gets overlooked within ESG is the “S” – the social factors that can contribute to a company’s success. After all, a company can communicate about its purpose or its values, but it is the people within each organization that are responsible for bringing those values and that purpose to life.
Company disclosures of social factors are increasing, including those documenting workforce policies. ESG data providers and other sources, such as the Global Reporting Initiative framework, offer some insight on social performance. Availability of data, however, ultimately comes down to information required by regulators and reporting that companies choose to produce, rather than what may be material to the company itself.
This ambiguity is why we choose to go deeper with our portfolio companies. We make an effort to ask the right questions to uncover areas of risk and opportunity, and often have direct conversations with corporate leadership. We seek to work collaboratively with companies – and often with other investors – toward the best solution. Our recent work regarding Paid Family Leave serves as an example of this type of effort.
Human capital and workforce policies have been and continue to be a major focus of our social assessments. We believe that a company’s treatment of its employees indicates how corporate leadership thinks and, to a degree, how its employees and customers view or value the organization. As with most any research we pursue, we want to understand not only where a company is, but, more importantly, where management is looking to go in order to benefit our investment, its employees, and the other stakeholders it works to serve.
To learn more about how we think, please visit our Insights page or contact us directly.
DISCLOSURE: The opinions expressed are those of Reynders, McVeigh Capital Management, LLC as of the date referenced and are subject to change at any time based on market or other conditions. The statements herein should not be construed as personalized investment advice. It should not be assumed that the future results of any specific investment or investment strategy will be profitable. Certain statements may be deemed forward-looking, but any such statements are not guarantees of any future results and actual results or developments may differ materially from those discussed. Past performance is not indicative of future results.