Sustainability

The future of investing, is sustainable.

Sustainable businesses can offer better long-term returns, with less risk.

It’s clear that issues like climate change, biodiversity loss and social inequality pose a serious threat to long-term economic growth.

However, this situation is inspiring innovation and adaptation in technology and business processes, and it’s all focussed on having positive social and environmental impacts. The transition to sustainable economies represents a huge investment opportunity.

We’re dedicated to sustainable and ethical investment

Our screening processes have always looked beyond just the financial data. 

We’ve integrated the analysis of Environmental, Social and Governance (ESG) factors into our decision making from day one; we recognise the potential it offers to mitigate risk and maximise long-term returns.

We’ve identified strong potential for outperformance because ESG risk factors are not widely analysed, this means they’re not accurately priced by the market. In a similar vein, companies who are top performers on ESG criteria tend to have a more positive culture, which can boost staff morale, productivity and retention.

The depth of our research is our competitive advantage, and we’ve discovered the companies that will lead into the future are inherently sustainable.

Our approach to ESG

Sustainability is our competitive advantage

We assess companies from all angles. We go beyond financial factors to assess the Environmental, Social and Governance (ESG) factors that are relevant to specific companies. This gives us a 360 degree view of the risk and opportunities of a business.

Our Responsible Investment Philosophy

We recognise that sustainable environmental practices are vital to support a prosperous economy.

An inclusive society will allow more people to participate in the economy, to drive vibrant markets and in-turn, to healthier investment returns.

Good governance is founded on honesty and ethical behaviour, and long-term sustainability is only possible when markets operate with fairness and respect.

We do invest in:
(A selection of our Positive Screens)

  • Battery technology
  • Renewable energy production, and related technology
  • Healthcare
  • Artificial intelligence
  • Low-cost and innovative financial services
  • Sustainable agriculture
  • Business efficiency platforms

We don’t invest in:
(Negative Screens)

  • Polluting commodities (such as oil, coal, copper or gold)
  • Weapons or defence
  • Gambling
  • Alcohol and tobacco
  • Any media harmful to psychological well-being

Our approach to ESG

Sustainability is our competitive advantage

We assess companies from all angles. We go beyond financial factors to assess the Environmental, Social and Governance (ESG) factors that are relevant to specific companies. This gives us a 360 degree view of the risk and opportunities of a business.

Our Responsible Investment Philosophy

We recognise that sustainable environmental practices are vital to support a prosperous economy.

An inclusive society will allow more people to participate in the economy, to drive vibrant markets and in-turn, to healthier investment returns.

Good governance is founded on honesty and ethical behaviour, and long-term sustainability is only possible when markets operate with fairness and respect.

We do invest in:
(A selection of our Positive Screens)

  • Battery technology
  • Renewable energy production, and related technology
  • Healthcare
  • Artificial intelligence
  • Low-cost and innovative financial services
  • Sustainable agriculture
  • Business efficiency platforms

We don’t invest in:
(Negative Screens)

  • Polluting commodities (such as oil, coal, copper or gold)
  • Weapons or defence
  • Gambling
  • Alcohol and tobacco
  • Any media harmful to psychological well-being

Company engagement on sustainability issues

We feel all investors have a duty to be responsible stewards of capital. We work with companies to ensure they’re managing any material ESG risks, while also helping them identify opportunities and maximise their potential. Activity includes:

  • Assessment of company reactions to sustainability issues as they arise.
  • Proactively engaging with companies on their sustainability issues they currently face including bringing unattended sustainability issues to their attention, assisting with development of sustainable policies, and requesting data and greater transparency. 
    • In 2020 we assisted Hypebeast in the development of its ESG policy. 
  • We always prefer to engage with companies, to encourage them to improve their practices, but when this fails, we may need to divest from companies not meeting our sustainability standards. 
    • In 2019 we sold Facebook due to its unwillingness to address privacy and disclosure issues. 
    • In 2018 we sold Amazon. With the proceeds, in 2019, we bought The Trade Desk that improves people’s privacy, and SolarEdge, a leader in advancing the global transition to renewable energy. 

For more details on our sustainability analysis, see our ESG POLICY HERE.


Continuous improvement of both process and impact

We are committed to a process of continuous improvement in our approach to sustainable investment.

A key part of this is leveraging our memberships with both the UN supported Principles for Responsible Investment (PRI) and Responsible Investment Association of Australia (RIAA). This helps us to:

  • Improve our method of sustainable analysis (sources of data, key metrics, risk identification).
  • To engage with the wider investment community contributing to the sustainability discussion and progression of sustainable investment as a mainstream practice.

pri logo
responsible investment association logo

Company Case Studies

Presented below are a series of case studies outlining our Environmental, Social, and Governance analysis on some of our company research and also Facebook, a company we sold due to ESG concerns.

SolarEdge – One of the worlds largest and most innovative solar panel and inverter manufacturers. Solar edge in actively transitioning the world towards sustainable energy usage.

The Trade Desk – An independent media buying platform that has scaled to a size where it is actively challenging the dominance of Google and Facebook by offering a completely unbiased, transparent service that protects the privacy of the consumer.

Appen – Human-annotated datasets for machine learning and artificial intelligence deployed by some of the world’s biggest companies and governments. Appen is enabling artificial intelligence that, when applied ethically, can help to accomplish many of the UN Sustainable Development Goals (Vinuesa, et al., 2020).

Adyen – A single solution payment gateway, fraud protection, data capture and reporting tool for merchants. Adyen improves society by enabling omnicommerce, reducing or eliminating the potential for fraud, and creating greater business efficiency.

Paycom – Efficient human management tool. Paycom allows employees to manage their own onboarding and training which greatly improves their efficiency and engagement. Cost savings to the business can be redistributed to innovation that drives greater employment and social benefits (Malloy, 2012; Martin & Kemper, 2012).

Facebook – ESG analysis uncovered critical social issues inherent in social media and failures by management of Facebook that forced us to exit a position we had held for some time.


Internal governance

Blue Oceans not only identifies companies with sound sustainable policies but actively imposes them on the management of our own business. In managing internal ESG issues, we follow the standards as set out in the ESG Reporting Guidelines for Australian Companies as set by the Financial Services Council.

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References:

Malloy, C., 2012. “Wall Street Doesn’t Understand Innovation.” Harvard Business Review.

Martin, R., Kemper, A., 2012. “Saving the Planet: A Tale of Two Strategies.” Harvard Business Review.

McKinsey Quarterly, November, 2019. “Five ways ESG creates value.” Retrieved from: https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/five-ways-that-esg-creates-value

Vinuesa, R., Azizpour, H., Leite, I. et al. “The role of artificial intelligence in achieving the Sustainable Development Goals.” Nat Commun 11, 233 (2020). https://doi.org/10.1038/s41467-019-14108-y