We invest for the long term in a diversified portfolio of high quality and growing energy, metals and mining companies from around the world.
Our portfolios are actively managed using a fundamental, bottom-up stock selection process. The team's investment philosophy is consistent across each of the global resources portfolios that it manages.
We construct a diverse portfolio of quality companies with larger-than-average margins and resilient balance sheets, combined with exploration and development stage companies with strong growth potential.
Our experience since 1997 (the inception of our Global Resources flagship strategy) is that this approach delivers positive returns over the full commodity price cycle, without taking on excessive risk.
"Where company management does not respond adequately to our engagement, it will have a negative impact upon our risk assessment and cause us to review the attractiveness of the investment."
"Our best investment tool is a hard hat. Through visiting sites and meeting with operational company management, the team are able to see first-hand the implementation of practises on the environment and the local community."
Our Global Resources team is made up of eight investment professionals who are amongst the most experienced in the industry. We are a technically-oriented team with backgrounds spanning multiple sectors, including mining and petroleum engineering, metallurgy, physics, chemistry and economics.
We operate in a collegiate environment and sector responsibilities are allocated to each team member, in addition to their portfolio management roles. All members of the team understand the key reasons for investing in every stock in the portfolio and are aware of any stock specific catalysts for share price movement.
Tal Lomnitzer, a portfolio manager with over 19 years' investment experience, is the team's RI lead.
By engaging on ESG issues with the companies in which we invest, we believe that we are able to identify potential risks and opportunities in companies, determine the materiality of those risks, and what is being done to manage them.
We believe that there is a correlation between companies with good governance practices and strong, sustainable shareholder returns. Consequently, we seek to positively inﬂuence companies towards ESG best practice for the ultimate beneﬁt of our investors. This is primarily achieved through direct meetings with company management.
An assessment of companies' commitment to sustainability, the integration of governance policies in the organisation, and the adoption of appropriate disclosure practices provides an additional view of management quality.
Assessment and monitoring
Rigorous analysis of ESG factors and risks has been a core part of our investment process and philosophy since the flagship fund's inception in 1997. The framework is focused on better understanding the risks related to health and safety, industrial relations, community, environmental performance, board structure, compensation and the alignment of all stakeholders.
Although we use various independent ESG research tools, we find that the clearest understanding of ESG risks come from our site visits. We have conducted more than 1300 site visits to 76 countries since the inception of our flagship fund. These visits enable us to use our expertise to gain a more detailed and comprehensive assessment of the magnitude of these issues and risks. For some companies the key risks will be external and need to be considered in a regional context, for example political risk, permit challenges, or lack of infrastructure.
An ESG assessment, based on internal research and complemented by external research providers such as Sustainalytics, MSCI and Reprisk, forms an integral part of the formal stock review process. These reviews are undertaken annually and are supplemented by ongoing monitoring of company announcements and meetings. We believe that this will lead to better risk/return outcomes for our funds and deliver improved long-term returns for our clients.
Engagement on ESG issues is primarily carried out directly with company management and indirectly through our proxy voting process. Where company management does not respond adequately to our engagement, it will have a negative impact upon our risk assessment and cause us to review the attractiveness of the investment.
As a result of being part of a large and highly regarded organisation, we find that we tend to get good access to management. In general, we prefer to engage in a constructive two-way dialogue with key decision makers in a company. This way our opinions are taken into consideration and we are able to develop a deeper understanding of the issues and the constraints.
"We believe that there is a correlation between companies with good governance practices and strong, sustainable shareholder returns. Consequently, we seek to positively inﬂuence companies towards ESG best practice for the ultimate beneﬁt of our investors. This is primarily achieved through direct meetings with company management. "
"The clearest understanding of ESG risks come from our site visits. We have conducted more than 1300 site visits to 76 countries since the inception of our flagship fund."
|Average turnover across all funds
(Five years annualised)
|Stock name retention over five year period||35%|
|% of portfolio companies met with||100%|
|Top five holdings
(as at 31/12/2016)
|BHP Billiton Ltd
Glencore International Plc
Rio Tinto Ltd
|Top five active holdings
(as at 31/12/2016)
Wholesale Global Resources Fund
|Rio Tinto Ltd
Vale SA ADR
Concho Resources Inc
Performance and investment characteristics are as at 31/12/2016
Performance is quoted pre-fees and in $A terms.
Source: First State Investments
Please follow this link for information on how our RI and Stewardship Measures are calculated.
|Portfolios outperforming their relevant benchmark over five years
(Weighted by size of fund)
|Weighted average of outperformance (Five years annualised.
(Weighted by size of fund)
|Absolute return over five years
Wholesale Global Resources Fund
The following tables incorporate third party information to provide additional context. We believe that providing an independent view of some typical ESG issues facing the industries and countries where we invest helps to emphasize the importance of considering ESG factors, as well as the value that this approach can add to investment outcomes. These risks are not company specific, but are relevant to the team's larger industry and country exposures.
This contextual information should be considered alongside the description of the team's approach to integrating and engaging on ESG issues, and the company-specific case studies provided. Taken together a more complete view can be formed on how the team is able to generate value through responsible investment and stewardship.
Typical ESG Risks by Sector
The bar chart below counts the number of times different risks have been flagged by Sustainalytics as being material for the different sectors the team invests in. The line graph does the same, only as a weighted average based on the value of the team's holdings in each sector across all portfolios. These risks are generic for the industry and may be different for individual companies. They also don't reflect how individual companies are managing the risks.
Sector exposure percentages are as at 31/12/2016
Source: Sustainalytics (sector risks)
The section below provides additional, team specific information on climate change. Further information on our approach to climate change can be found in our climate change statement.
In addition to a statement from the team, we have provided information on the fossil fuel and carbon exposure across the team. Information on how these are calculated can be found in the Explaining Our ESG and Carbon Metrics section.
Team Climate Change Statement
As investment managers, we encourage all of our companies to lower their carbon footprint. We do invest in the producers of oil, gas and coal, as we believe that the market for these commodities will continue to be relevant to global energy requirements for some time. It is our belief that the transparency and reporting requirements demanded by the shareholders of a publicly listed company provides an incentive to be responsible operators.
In their absence, the demand for these products would otherwise be met by less regulated private operators, often with lower standards of safety and environmental practices. Our approach of investing in companies with low costs and strong balance sheets ensures that the companies in which our clients' money is invested should be the most capable of adapting to the ever-changing regulatory environment. In addition, we seek investment opportunities in listed alternative and renewable energy companies, as this sector offers attractive growth prospects. As the market for electric vehicles grows, we anticipate significant increases in demand for enabling metals such as copper, nickel, cobalt and lithium.
Holdings in companies with material fossil fuel revenues
The table below outlines the companies which the team invests in which have exposure to fossil fuels. There is no revenue, cost curve or other threshold applied and so the fossil fuel exposure should not be seen as a guide to the risk of stranded assets, however it is reasonable to expect that the attention paid to the risk of stranded assets by teams will correspond to their fossil fuel exposure.
|Number of Companies||% of Funds|
|Number of companies||91||100%|
|Fossil Fuel Companies inc gas||36||62%|
|Companies with Gas Reserves||16||28%|
The table below provides an overview of the team's carbon exposure. The first measure provides an equity ownership approach to accounting for the emissions, while the second set of numbers provides a guide of how efficient the average company held is versus other companies in that industry group. The chart in the opposite column shows the difference between the two.
The carbon emissions, fossil fuel and revenue data have been provided by MSCI. 23% of the carbon emissions data has been estimated due to gaps in company disclosure and 5% were not covered. Please see the RI and Stewardship Measures page for more information on how these and other metrics have been calculated.
|Equity Share Carbon Emissions||Number of Companies Team||Average Team Company Intensity||Number of Companies (GICS) Industry Group (Global)||Average Industry Group Intensity (Global)|
Difference Team Average Intensity vs Industry Average Intensity
Fossil Fuel and carbon information are as at 31/12/2015 (most recently available), holdings information is as at 31/12/2016
The team's live proxy voting record is available here
Proxy voting history by type of resolution
The table below contains the proxy voting history for the team by issue type. The chart provides the same information for 2016.
The chart below shows the number of times the team have voted against management recommendations, our proxy advisors recommendation or against both. The purpose of this table is to show the independent judgement which is applied by the team when making voting decisions.
Votes by Region
The chart below shows the number of times the team voted in each region and the percentage of votes against management recommendations, against our proxy advisors' recommendation, or against both. The purpose of this table is to show the regional difference in voting patterns and governance concerns.