At Milford, we have a Sustainable Investment team that undertakes detailed sustainability research in two main areas:
1. Best practice environmental, social and governance (ESG) performance across the industries we invest in, and
2. Emerging investment opportunities in the transition to a more sustainable future economy.
We do this in pursuit of two objectives; to maximise the risk-adjusted returns of our funds and to actively engage with the companies we invest in to drive them to be more sustainable.
Milford has built its investment performance on a deep understanding of the companies we invest in, and this has always involved regular communication with company management teams and Boards. We have developed this into a formal stewardship and engagement approach in the past few years, as our understanding of the urgency of the climate crisis and our role as good stewards of capital has grown.
Engagement, our communication with companies to push for change and demonstrate the importance of sustainability in our investment decisions, can be difficult. Science cannot yet determine the precise impact of individual behaviour on the climate. This allows subjectivity and evasion. And while adapting a business model to be more sustainable and meet changing regulation and demand is just good business, there can be short-term economic costs that influence decisions.
Our research allows informed conversations with companies. Without an understanding of the capacity for change via technology, demand, the economic cost and the regulatory outlook, our ability to influence would be severely diminished.
However, there is a point at which we need to rely on the principle of simply doing the right thing.
We have recently developed Stewardship Principles to communicate our values and underpin our engagement and proxy voting activities. These principles reflect our understanding of a sustainable and just transition and demonstrate our commitment to finding the best outcome for all stakeholders, aligned with generating shareholder value. We take a collaborative approach and understand change can take time but expect companies to progress a more climate-friendly and socially-just future while upholding good standards of governance and disclosure. This is doing the right thing for shareholders, employees, customers, the environment and future generations.
We report our engagement activities and outcomes in a semi-annual report on our website. We are building our engagement capability and will grow our activities and influence, in line with our Stewardship Principles, over time.
Milford’s Stewardship Principles
We believe in driving change, not simply avoiding harm.
We acknowledge that ‘transition’ means change over time, not change overnight. We target ongoing improvements from our engagements, and believe these activities support risk adjusted returns.
We accept that the sustainable transition will require compromise. We invest in crucial transition activities and expect companies to minimise any negative impacts to ensure sustainable, long-term business models.
|Environment Principles||Social Principles||Governance Principles|
Global warming is an existential threat and must be addressed. Further, the warming impact of atmospheric GHG emissions is compounding, meaning time is of the essence.
We expect companies to set decarbonisation targets aligned with the most current and credible guidance offered by climate science, which is at present Net Zero operations by 2050.
Protecting ecosystems and biodiversity is key to the sustainable transition. We expect companies to prioritise pollution, water and waste management alongside emission reductions.
We believe in a ‘just transition’ that promotes sustainable development in a fair and equitable way for all members of the global population.
We expect companies to maintain their social licence to operate by actively addressing the scope of their social impact on their customers, employees, local communities, and society as a whole.
We expect companies to identify modern slavery risk in their supply chains and to take action to address this risk.
We believe effective boards are crucial to deliver long-term company performance. This is best delivered by prioritising a Board’s skill set, capability, capacity and diversity.
Appropriate remuneration structures should be aligned with shareholders, incentivise management to excel and build long-term shareholder value.
We promote transparent disclosure as this attracts shareholder capital, provides confidence to all stakeholders, and demonstrates integrity and a positive culture.