Sustainability at Aristotle Boston
At Aristotle Capital Boston, our investment philosophy is grounded in the belief that long-term business fundamentals ultimately determine company equity values. We apply a fundamental, bottom-up research approach—focused on companies that we believe can create shareholder value—to identify businesses we believe possess quality management teams, attractive industry dynamics, strong or improving financials, and attractive upside potential and limited downside risk. In identifying these companies, we consider relevant environmental, social and governance (“ESG”) factors, as we believe they support our on-going analysis of the quality of a business and the investment opportunities and risks over the long term.
ESG factors are generally most relevant in our assessment of the quality of the management team as well as various industry considerations for each company. In this fashion, ESG is a valuable input—but not a driver—of our stock selection process.
In helping our clients achieve their investment objectives, we will apply client directed restrictions into their investment portfolios. The objective of our approach is to strike a balance between meeting a client’s bespoke needs and having an investable universe that seeks to maximize returns. Any removal of certain companies or industries from consideration for investment, as directed by our clients, are generally based on ESG specific criteria, reflecting a client’s values and beliefs. While we do not have a standard ESG exclusion list or apply ESG screens across our investment selection process, we may from time to time exclude or purchase companies where our thesis (positive or negative) is influenced by ESG factors.
Throughout our process, we often find that companies with poor ESG characteristics (for example, an egregious polluter in the Energy sector) may have an elevated risk profile compared to a company that has taken steps to ensure it is conducting business in a responsible manner. Our focus on what we believe to be higher quality companies with durable business models and lower risk profiles has historically resulted in a portfolio with stronger ESG characteristics relative to the benchmark.
Engagement with companies is not only vital to the understanding of business dynamics and company management styles but are also useful in providing the team with established benchmarks for success that can be referenced in the future. We believe the overall depth and quality of information gathered throughout our process leads to robust and meaningful analysis upon which we can better assess business fundamentals and valuation.