Is this part of "Value Investing"?

[Image: 51227#ixzz2m0IAvBd7]

Crafting the Right Approach to Sustainable Investing


My previous post on sustainable investing introduced the concept and concluded that making sustainability a focus or a part of your investment criteria can help reduce risk, while generating better risk-adjusted returns. In fact, earlier this year, Harvard University "agreed to create a senior position at its investment management arm to consider the environmental, social, and corporate governance (ESG) aspect of its holdings." (Source: The Boston Globe, Business Section, Article: "New VP will scrutinize Harvard's investments" February 19, 2013 by Todd Wallack). But a question remains: How can individual investors incorporate sustainability into their own investment approach?

The truth is that sustainability is a broad concept that varies greatly by individual. And this means that implementing a standardized practical approach can be difficult. That said, a good first step might be to consider the current environmental, social, and corporate governance record of your holdings. Evaluate what plans or strategies each company (holding) has in place to address issues such as resource scarcity, environmental degradation and social injustice.

By analyzing a company's ESG strategies, we can gain insight into their willingness and ability to plan for both the present and the future. Facing challenges such as climate change, resource depletion, and demographic and social shifts, companies that plan accordingly should be able to reduce risk over time, lower the cost of capital, and improve both short-term and future risk-adjusted performance. On the contrary, a company with inadequate or poor ESG strategies suggests that performance in the short term may be at the expense of acceptable long-term performance. (Source: Sustainability in Investment, We Need a Bigger Boat, August 2012, Towers Watson)

In addition to evaluating ESG factors, I like to look at a company's ability to innovate. Does management have a track record of being able to effectively change course, break with past practices in order to deliver new products, and processes and drive internal change? A company that demonstrates an ability to innovate and change suggests that they take an intergenerational approach to delivering value, thus a more a sustainable investing approach.

For a long time investors have been able to ignore sustainability factors when developing an investment plan. In fact, I am sure that many investors will continue to generate excellent above market returns without considering the sustainability of the businesses in which they invest. However, as the world continues to change at an ever increasing pace, I believe that those companies with transformational sustainability strategies and risk management frameworks will outperform, while those that attempt to survive by continuing to adapt incrementally will simply be unable to keep up.

NB:- How about replacing the Word Sustainable with Survivability? Is there any difference for you as an investor?

(29-11-2013, 09:47 AM)Temperament Wrote: [Image: %20Crafting%20the%20Right%20Approach%20to%20Sustainable%20Investing]

Off-topic:

Uncle Temperament,

For the image to display properly, you need to insert the right image URL between the [img][/img] tags.

One way to get the right image location is :
1. Point the mouse at the image.
2. Right click the mouse.
3. You will see several options available, one of them is "Copy Image Location" or "Copy Image URL"
4. Choose that option and the image URL will be saved in the computer memory.

Then you can insert the image URL between the tags with Control-V.
Hope this may help.

(29-11-2013, 11:23 AM)cyclone Wrote:

(29-11-2013, 09:47 AM)Temperament Wrote: [Image: %20Crafting%20the%20Right%20Approach%20to%20Sustainable%20Investing]

Off-topic:

Uncle Temperament,

For the image to display properly, you need to insert the right image URL between the [img][/img] tags.

One way to get the right image location is :
1. Point the mouse at the image.
2. Right click the mouse.
3. You will see several options available, one of them is "Copy Image Location" or "Copy Image URL"
4. Choose that option and the image URL will be saved in the computer memory.

Then you can insert the image URL between the tags with Control-V.
Hope this may help.

Thanks . Let me try to put it right.

Depends on definition of sustainability. Many companies advanced their sustainability credentials through CSR and marketing. But sustainability can also be applied to business models whereby firms find ways to create value without using more resources. The latter would have a place in my world of value investing.

keep it simple. buy when there is big MOS to your valuation.

throw in these 'touchy-feely-save-gaia" considerations only makes things complicated.

But Corp Gov is important coz I want credible (i hope) people to look after my money.

Sustainability is not part of the capitalistic equation; survival of the strongest does not look at long term ecological or social impacts. That's not a critique. That's a fact as it is. Sustainability is inherently not profit maximization. The basis for arguments is basically whether these tendencies need to be curbed

Corporate governance is only important to minorities in so much as there are laws against bullies. But having good CG at least have self enlightened interest with higher PE.