LIM’s investment objective is to consistently generate strong risk-adjusted returns. Our process is founded on identifying and mitigating risk – seeking attractive return potential opportunities by avoiding underperformers.
LIM analysts incorporate components under the categories of environmental, social and governance (ESG) into their assessment of industries, issuers, collateral and obligors. Evaluating these aspects is not a new phenomenon, but rather have been a part of research for many years. However, as disclosures improve and research continues to confirm, integrating these topics in a more formal and standardized manner makes good investment sense.
The primary objective of LIM’s approach to ESG evaluation is to reduce the possibility of material negative events or impacts on our investments. It also contributes to our valuation assessment. ESG aspects are typically strategic in nature so that organizational responsibility and sustainability shortcomings that avoid an “event” often still result in underperformance over time. In addition to minimizing risk situations, formalizing the process and standardizing documentation of ESG assessments improves LIM’s ability to better monitor issuer trends in (1) recognizing the importance of these issues, (2) mitigating weaknesses and (3) improving disclosures and reporting.