San Lie: This is how you include frontrunners for a sustainable future

September 24, 2024

_{This column was originally written in Dutch. This is an English translation.}

By San Lie, Director of ASN Impact Investors

Our exclusion of fast fashion recently attracted a lot of attention. I hope that we have really made people think and that this will lead to some improvement in the sector. But we prefer to focus on inclusion: on finding, selecting and actively following sustainable leaders.

My work has many enjoyable facets. I am extremely happy with the great companies that our sustainable experts track down and nominate for admission to our sustainable investment universe.

This admission is preceded by a thorough process, which starts from the pursuit of a sustainable and just world. Based on extensive research and analysis, scientific insights and international treaties and, last but not least, our own principles and beliefs. We have formulated policies and strategies that provide direction in identifying assets for our sustainable universe.

We map the contribution a company can make and also identify the potential risks that its activities can pose for the environment, climate and human rights. What is the quality of management? Does the company fit into a more sustainable future? Don't current activities have a negative impact on the future?

Know what you own

It requires a lot of research. We rely on the knowledge and expertise of many, while this precedes the due diligence required to determine whether a company also fits our financial objectives. After all, we are investors. That's a lot of work, but it pays off once we select and lock in a company.

This way we know what we have at all times: know what you own. To ensure that investments do not come at the expense of a more sustainable future. Inclusion means that as an active investor you consciously enter into a relationship for the longer term.

Performance in the future

You want to know whether the companies in the portfolio are and will remain part of the future, whether they continue to make the investments today that are necessary to deliver solid performance in that future, whether they manage to stay far away from the sustainability risks that other companies face and accept.

Knowing what you own, based on continuous and repeated research, remains the guideline for a sustainable strategy aimed at the long term: we monitor whether a company says what it does and does what it says. If this turns out to be different, we will enter into a conversation to gain deeper insight and determine whether action is needed - for the company or for us.

But again: I'm more into inclusion. Especially when I read another report in which our analysts list the ways in which a company contributes to a good future.

Clean and safe drinking water

In that respect, one of the water companies from our universe plays a major role in that future. Clean and safe (drinking) water is indispensable in a sustainable, just society, but even today it is an increasing challenge.

Anyone who follows the news knows how climate change and environmental pollution are putting pressure on the availability of clean fresh water, while unprecedented downpours cause sewers to overflow, with all the pollution that entails. Water companies must now invest in innovations and climate adaptation to secure current and future water supplies.

Severn Trent

Of the listed players, the British Severn Trent is one that takes its responsibility and invests in, among other things, reducing sewer flooding. This company provides a range of services in the field of water and sewage treatment and recycling and supplies 2 billion liters of drinking water and treats 3.2 billion liters of wastewater every day. While other water companies are almost literally drowning due to climate change, Severn Trent proves how vital clean water can provide good returns for its shareholders.

When I see that the British regulator rated Severn Trent the highest of all water companies last summer in terms of its ambitions and the quality of its business plans, it confirms the value of know what you own: it takes extra work and time, but it pays off.

San Lie is Director of ASN Impact Investors. The information in this column is not intended as professional investment advice or as a recommendation to make certain investments.

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