Environmental, Social and Governance
“Since the inception of Value Partners in 1993, corporate governance has been one of the three major considerations deeply embedded in our investment philosophy: to identify the companies with the 3Rs: the Right business run by the Right people and at the Right price. The Group’s emphasis on the Right people addresses the governance quality analysis, which we believe is crucial to act in the best interest of shareholders, and also a key driver for business’ sustainability and value creation. As markets evolve and more corporate disclosures have become available, environmental, social and corporate governance (“ESG”) considerations have become an intrinsic part of the Group’s investment process, as it is our belief that ESG factors will increasingly play a crucial role to differentiate risks and opportunities among our investees in the region.”
Dato’ Seri CHEAH Cheng Hye MAoF
Co-Chairman and Co-Chief Investment Officer
Value Partners Group Limited
We believe that Environmental, Social and Governance (“ESG”) issues have a material influence on a company’s long-term fundamentals, which in turn affect the performance of our investment portfolios. In line with this, environmental, social and corporate governance (“ESG”) considerations have become an intrinsic part of the Group’s investment process since 2019, and we undertake a holistic approach to ESG analysis in our investment process:
Step 1 – Risk-based exclusion
At the initial stage, Value Partners applies negative screens to define the ESG-considered investible universe. Based on ESG ratings acquired, we produce a list of significant ESG violators. Risk exposure levels are rated between “AAA” (lowest ESG exposure) and “D” (highest ESG risk exposure). Companies with a D rating will fall into our exclusion list that we would rule out of contention for investment.
Step 2 – Proprietary ESG risk assessment
We incorporate ESG assessment into our fundamental research and engage with our investees. This is implemented through our proprietary ESG Scorecards, which were formally integrated into our investment process.
To quantify and properly reflect our ESG research outcomes, a score from 1 to 5 is assigned for predefined governance, social and environmental issues. The portfolios’ scorings, which are an average of the full portfolio holdings, are reported to the ESG Committee to facilitate benchmarking and monitoring.
Step 3 – Post-trade monitoring
To ensure there is no breach of ESG investment guidelines, the exclusion list is enforced on the order trade level. Portfolio scores and the level of ESG risk rating are regularly reviewed by the ESG Committee. The Committee will also seek the portfolio manager’s explanations and justifications for the ESG risk undertaking.
For more information, please click to download our Responsible Investing Policy.
Engagement and Stewardship
Engagement is crucial for us to bring a positive impact to our investees. We serve our obligations as stewards and our commitment to influence the investees for the better, and our approaches to discharging ownership responsibilities include risk assessment and proxy voting.
The Group has a detailed Proxy Voting policy that guides formal approval or disapproval through voting on resolutions and proposing shareholder resolutions. We believe that voting is essential to promote good corporate governance, which aligns with our interests and goals as long-term investors. In line with our fiduciary obligations, we vote diligently and prudently, based on our reasonable judgment of what will best serve the economic and reputational interests of our clients. We also published a complete Proxy Voting Policy to guide our voting rationale and decision on a range of ESG issues.
For more information, please click to download our Proxy Voting Policy.
ESG Governance Structure
The Board of Directors provides the overall direction on the management of sustainability issues and ESG risks. The implementation of ESG initiatives are carried out by the ESG Committee (“the Committee”) and the Company Secretary with approval by the Board. The Committee meets on a monthly basis and is chaired by the Head of ESG Investment. To ensure a comprehensive oversight and governance on ESG-related subjects, the Committee is composed of key internal stakeholders, including the senior members form investment management team, finance, compliance operation, sales and marketing units.
In July 2019, we formally became a signatory of the United Nations Principles for Responsible Investment (“UNPRI”), and are committed to actively support and promote responsible investment initiatives in the markets that we operate in.