Environmental Factors

One of the main reasons why Evenlode analyse environmental and climate-related risks is that they have evolved into business risks, with studies suggesting that companies with high ratings for ESG factors have a lower cost of capital in terms of debt and equity, as the market deems them to be 'lower-risk'.

Evenlode actively engages with companies on numerous environmental factors such as deforestation, use of plastics, pollution, biodiversity and use of water.

As part of their ESG analysis, they have identified climate change and reducing carbon emissions, as one of the biggest systemic risks to their portfolios. The emission footprint of a company is an indicator of its impact on the global climate but also of the impact the low-carbon transition might have on the company. High-emission companies can expect to be impacted more heavily by carbon pricing and other forms of climate regulation. Evenlode started to measure measuring the greenhouse gas emissions of their portfolio companies and published their first portfolio emissions report in early 2020 (Carbon Emissions Report - see above).  In 2020, they built on the carbon analysis and further refined their methodology by aligning it to guidance by the Partnership for Carbon Accounting Financials (PCAF). This analysis plays an important role in their engagement with companies.

Social Impact

Evenlode actively engages with companies on social impact issues such as human rights, human capital management, labour conditions and their supply chain. As part of Evenlode’s risk management framework, they measure and score companies on their social impact.  The analysts, with the help of the stewardship department, try to answer the following questions such as : “Does the company provide a positive social impact through its business activities?”, “Does the company align its business activities to the UN Sustainable Development Goals?” and “Has the company had any material social controversies in its supply chain ?”.

Discussion is had around the resulting score which is presented at the weekly investment meeting. Independent discretion is useful as it eliminates a mechanical decision-making process and instead creates a more collegiate discussion driven by the team.  Going forward, Evenlode is looking to aggregate this score into an overall ESG risk score.

Governance and Engagement

Evenlode actively engages with investee companies on all governance-related matters such as long-term strategy, culture, remuneration, board make-up and succession planning.

Evenlode has developed an 'Engagement Tracker' which has a 4-step process covering: Initiation, Acknowledgement, Discussion and Action. Recording each step of the engagement allows Evenlode to record, analyse, measure and monitor the successes of their engagements. As the information is kept in a centralised database, it enhances transparency and spreads the knowledge in the team, whilst eliminating the risk of sending conflicting messages.

They vote on all their holdings using their own in-house analysis which has been collected and amalgamated over many years. They do not rely on any proxy research advisors and gather the information needed to make an informed decision themselves, using annual/sustainability reports, in-house analyses and the results of previous company engagements.