ESG EQUITY STRATEGY.
Across equity markets, Baldwin Brothers takes a long term perspective, and seeks to invest in underlying business, not trade stocks.
Within our US equity strategy, we seek to generate attractive risk adjusted returns by buying great businesses for good prices and holding them for the long-term. To that end, we invest in:
- Companies which we believe can generate sustainably strong returns on invested capital
- Companies which we believe trade at a discount to intrinsic value.
- ESG leaders and ESG improvers.
ESG INTEGRATION.
We believe companies with informed Environmental, Social and Governance (ESG) practices typically exhibits operational excellence, capitalizing on growth opportunities and mitigating exposures to risk, while aligning with stakeholder interests.
We regard ESG integration as a holistic understanding of a company’s exposure to environmental, social and governance criteria that may enhance or impede investment performance.
Our View: The Forest & The Trees
An Integrated Approach to investing
Portfolio Construction Process
Our equity strategy serves to provide U.S. large-cap public equity exposure through a concentrated portfolio of 30 to 50 stocks primarily found in the S&P 500 based on proprietary bottom-up and ESG-integrated analysis.
Security Selection Process
Our security selection process is driven by fundamental, bottom-up investment research. We underwrite prospective investments against our growth, quality, value and ESG criteria. Those security selection criteria dovetail with our long-term approach to equity investing. We typically underwrite new investments using a 3-5 year+ investment horizon. Our ideal holding period is forever.
We view the understanding of ESG criteria as an extension of fundamental analysis and, subsequently, an additional layer of risk mitigation.
Risk Mitigation
Most positions are sized between 2% and 5% of portfolio value. However, we can deviate from that range. We prioritize security selection over sector bets and aim to keep the strategy fully invested over a market cycle. We employ a sell discipline that includes trimming or selling outright stocks that have:
- Exhibited a material change to our investment thesis
- Moved adversely for an extended period versus normal volatility
- Illustrated weaker characteristics than a recommended replacement
The Four Keys
To Our Fundamental Research
- Earnings Growth Potential
- Reasonable Valuation
- Robust Quality Characteristics
- Comprehensive ESG Profile
ESG Criteria
Environmental
- Efficient use of energy, including resources dedicated to alternative energy, energy efficiency and green initiatives
- Resource utilization, including efforts to minimize pollutants, reduce waste and employ sustainable resources
Social
- Corporate culture, including thoughtful supply chain practices, constructive labor relations and workplace safety
- Community engagement, including improving localities and creating affordable real estate
Governance
- Good governance practices including strong board oversight, appropriate executive compensation, and diversity across senior leadership
We believe our focus on ESG integration is a natural complement to our long-term quality-oriented philosophy. That is rooted in our conviction that underwriting companies’ approaches to environmental, social and governance issues can give us a more complete understanding of the breadth of their competitive moats, and the strength of their business models.
Download our fact sheet below to learn more about ESG integration.