We’ve talked a lot about Sarasin’s thematic investment approach and looked at various corporate characteristics they consider, sharing examples of relevant companies within the portfolios. Next, we thought it would be interesting to walk you through the considerations involved in the full assessment process for a single company.
Zebra Technologies provide enterprise (i.e. ‘Big Business’) level data capture and automatic identification solutions – they are an obvious contender for investment under Sarasin’s automation theme. Zebra’s technology serves the need for increased connectivity, enabling businesses – from retail and industry to healthcare – to track goods and inventory.
Fundamentally, Sarasin have invested in Zebra because the demand for warehouse automation solutions is growing and their technology can also drastically improve patient outcomes and hospital efficiency within the healthcare sector. But a lot of research went into the decision to invest in the first place – a total of 137 different questions in fact.
Sarasin’s engagement is primarily focused on board diversity and ESG targets for management. You can see the key factors and how Zebra measured up in this ‘traffic light’ analysis:
Each of these 15 factors is analysed using quantitative and qualitative data from both the investment prospect (Zebra) and secondary sources. Once any impact issues are identified, the next step is to create an engagement strategy to work with the company to mitigate any risks.
The factors considered are grouped into the main ESG themes – Environment, Social and Governance. Here’s a closer look at the Environmental components taken into consideration:
Sarasin consider the contribution the business makes to climate change, through direct and indirect emissions of greenhouse gases and damage from poor land and resource use. They examine plans for the transition to net zero emissions and assess if science-based targets are in place.
Sarasin consider the products’ lifecycle, from raw materials, through processing, packaging and pollution, to end of life. They look for policies on repair, refurbishment, recycling and incentives to prevent waste. Harmful practices of planned obsolescence are identified alongside environmental impact strategies and plans to separate growth from the consumption of resources.
Sarasin explore the use of land resources and the resulting impact, including potential challenges such as deforestation, factory farming, use of antibiotics, pesticides and chemicals. Any potential impact on endangered species and protected areas is considered, as well as how the business assesses, monitors and controls the risks at play.
Sarasin look at both the impact of water sourcing on the local area and any potential water pollution occurring. Water consumption targets are explored and the implications for marine environments and biodiversity are considered. Use of dams or hydroelectric power generation is also factored in.
Sarasin assess the contribution the business makes to air quality, examining measurement and disclosure of emissions and air quality targets. They also explore activities that result in electromagnetic radiation and any heat, noise, light or dust.
(The consideration of CO2 emissions is dealt with under climate change).
As you can see, the decision to invest in a business is not taken lightly – it is analysed from all angles. Next time we’ll explore the social factors Sarasin consider in their assessment process.