Baillie Gifford Positive Change team: Our beliefs

The managers of Baillie Gifford Positive Change fund explain why a patient, long term approach to investing is needed to address social and environmental challenges.

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  1. Baillie Gifford Positive Change Team

Businesses and investors have the ability – indeed, the responsibility – to help steer our world onto a more sustainable path. Government funding and philanthropic donations, though hugely welcome, will not be sufficient: trillions, not billions, of investment will be required to address the numerous challenges that our world is facing.

We believe that inclusive capitalism is part of the solution and has the ability to improve lives. It is the beneficial impact of businesses and of human entrepreneurial spirit that we seek to harness in our bid to help our clients make attractive investment returns while contributing towards a better world for current and future generations. Change takes time. Social and environmental challenges such as persistent poverty and climate change cannot be solved with a short-term mind-set.

If the financial capital required to solve these issues is to be effective, that capital will need to be patient. By taking a long term approach to investing we aim to support companies making decisions and taking actions that will be beneficial for their business, society and the environment in the coming years and decades.

The investment case

We believe companies whose core business activities are addressing global challenges will experience rising demand for their products and services: they will be growth businesses. We believe that a subset of those companies will enjoy sustainable competitive advantages such as loyal customers and motivated employees: they will be high quality companies. We believe that owning shares of exceptional businesses whose products and services are having a positive impact on society is a more effective way of delivering positive change than avoiding those doing harm: we take a positive and proactive approach.

Based upon these beliefs, the Positive Change strategy has two objectives of equal importance: to deliver attractive long-term investment returns (2% ahead of MSCI ACWI, a global equities index) and to contribute towards a more sustainable and inclusive world. There are no compromises – each holding must be able to deliver on both objectives.

We pursue these objectives in line with the active, long-term, growth investment philosophy that has been tried and tested over Baillie Gifford’s 111 year history. Core to our philosophy is a belief that investment returns and impact are complimentary, so both are considered throughout our investment process.

Companies in the portfolio are organised into four themes which aim to address key global challenges. These themes are Social Inclusion and Education, Environment and Resource Needs, Healthcare and Quality of Life and Base of the Pyramid.

Reporting progress

Each year we publish a document dedicated to reporting the progress the strategy has made towards delivering positive change.  We expect the content of our annual Impact Report (found here on Baillie Gifford’s website) to evolve over time in our constant bid to improve – after all, a willingness to experiment and change is key to progress. While we would be disappointed if we didn’t enhance our process overtime, one thing you can be sure that won’t change is our philosophy. Our team is passionate about our dual objectives and the role that our investment strategy has in helping drive positive change.

In the report we introduce the challenge and opportunities associated with each theme, demonstrate how companies in the portfolio are addressing the themes, and include a Case Study to give greater depth on some portfolio holdings. At the end of the report are Portfolio Snapshots which illustrate overall portfolio impact across some key metrics. We also include the contribution to the UN Sustainable Development Goals (SDGs).

We believe that reporting impact is a fundamental part of impact investing. We continue to evolve our approach and to engage with the companies in the portfolio to encourage them to do the same. Over time we hope to be able to report the impact that Baillie Gifford has had – through our engagement, our support of companies’ long-term goals, and through engaging with the wider industry.

Our Positive Conversations document (found here on Baillie Gifford’s website) is an accompaniment to the report.  Here we focus on the business practices of the holdings in the portfolio, so how the companies in which we own shares operate. The Impact Report, meanwhile, focuses on the impact of the products and services of the companies in the portfolio, so essentially what they are selling. The title Positive Conversations reflects that we are exploring hot topics of conversation with our clients and the industry more broadly, as well as the conversations we aim to have with the companies held in the portfolio.

We aim to own shares in exceptional companies who operate with honesty and integrity, who treat their stakeholders well, and who are leaders within their respective areas. We also recognise there is no perfect company, and there will inevitably be setbacks along the way. We engage with management teams to both support long-term ambitions and to challenge where we wish to see improvement, always with a view on the long term.

More information on Baillie Gifford Positive Change Fund is available here.

Important Information

The views expressed in this article are those of the Baillie Gifford Positive Change team and should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect personal opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.

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