In tackling a truly global challenge like climate change, we must maintain our belief in the power of engineering to make a better world. Because (…) our future will depend on engineers who are equipped to push back the frontiers of the possible.

Lord  Browne of Madingley

We invest in quality and value over the long-term.  Quality to us is a company that has a strong and sustainable competitive position, in a good and growing industry, a management with a track record of value creation and a balance so strong as to be able to withstand any adversity.  Value means generating returns of 8-10% per year over five to ten years or longer. 

Each of those words matter, but none more so than ‘sustainability’.  In order to succeed over the long-term and to generate value, companies have to be sustainable themselves, in the products and services they provide, in the sourcing of their materials, in the treatment of their workforce and in their interactions with their customers, suppliers, competitors, regulators, and society as a whole. Perception can matter as much as reality as consumers are increasingly connected and concerned.  To us the question has always been about the disruption of a company’s sustainable competitive advantage by innovation, competition or other factors.  We have innumerable examples, like retail getting disrupted by e-commerce or the automotive industry by electric vehicles and ride sharing, whether through platforms like Uber (itself being threatened by Lyft, Kaptan and other platforms) or through car sharing and driverless cars, pods or drones that are as futuristic to us today as a smartphone or iPad were for some of us when we were at school or university.   

Sustainability and progress are inseparable in our view.  As we continue to integrate ESG thinking into our approach of investing in companies we look to the opportunities that companies have from contributing to sustainability as well as to the risks.  We are informed by the information, data and ratings available from providers, but we base our decisions on our own fundamental assessment of what companies do, which requires us to make judgments that are grounded in facts and realities, and can differ in many ways from more simplistic perceptions and approaches.

We share our conviction in progress with Lord Browne, corporate leader and author, to whom we are grateful for contributing our insight this month.  Lord Browne makes an important argument for engineering as a key to overcoming global challenges, in particular climate change.  Science and engineering have improved the life expectancy and quality of life of millions, by preventing and curing diseases and by creating healthier and safer places for life and work.