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"Our Investments and Stewardship

To analyze and manage the risk of modern slavery in our investments, we rely on our established and robust ESG-integrated investment due diligence process. We are also active owners of the companies in our portfolios and proactively engage companies where risk – or allegations of – modern slavery exist.

Integrated ESG analysis is central to the investment process of a value manager precisely because we are examining companies experiencing pain. Sometimes this pain is the result of a poorly managed ESG risk which created the buying opportunity in the first place. It is our job as a value manager to understand what went wrong and focus our research on whether the company can remediate the issues. As shareholders we are also active owners, voting proxies and maintaining a dialogue with company management on key issues, remediation of risk and the path towards earnings recovery. We spend a large proportion of our research effort after investment continually monitoring risk factors as well as revisiting and testing our assumptions against a company’s realtime earnings progression. Assessment of emergent challenges and opportunities is core to our process.

As this relates to modern slavery concerns, it is our view that certain industries are naturally more exposed to risks or allegations of modern slavery than others. The most common industry risk factors include reliance on low-cost labor, and/or opaque and complex supply chains. Industries where these risk factors are more common include engineering & construction, agriculture and apparel manufacturing. We pay particular attention to modern slavery when researching companies in these industries. We will also research and evaluate any instance of modern slavery that may present itself in other industries, even if the common risk factors were not present.

In terms of our approach to due diligence, we evaluate company modern slavery disclosures, policies, and procedures and proactively engage management to understand how they think about these risks. This applies to new positions and existing positions in the portfolio where an allegation of modern slavery may appear during the course of ownership. As appropriate and where necessary, we engage management to understand the nature of the allegations and advocate for changes to a company’s actions.

Finally, some manifestations of ESG risk may not have a clear financial impact on earnings but are deemed material societal risks. In these cases, we approach the issues as we would material financial risks. We consider child labor and/or involvement in human trafficking as such a risk regardless of the impact on company earnings and therefore will engage management if instances or allegations of these activities exist. We plan to continually evaluate whether we should add additional issues to this list in the future.