ESG Investing

Investing in People, the Planet and Profits.
Environmental, Social and Governance (ESG) investing refers to an investment framework that incorporates additional, non-traditional considerations into investment analysis which are related to environmental, social or governance issues. Specifically, it looks closely at how a company measures and manages ESG related issues in its own business. These issues vary by company and industry.



WHY IS ESG INVESTING COMPELLING?

Sustainable, ESG and Impact Investing have grown to over $8.72 trillion1 traceable to the following:
  • ESG enables investors the opportunity to align portfolios with their personal values and address real global problems.
  • A 2015 study by Harvard Business School suggests that companies which invest in material sustainability issues have better long term economic performance.2
  • Investor belief in the importance of investing in companies that exhibit corporate responsibility.
  • Belief that a company which transparently manages ESG issues has better risk management relative to its peers.
  • Increasing demand from both institutional and individual investors.
  • Net result: weighing ESG factors helps to consider additional risks and opportunities, and may lead to greater alpha.
  1. Source: US SIF:Forum for Sustainable and Responsible Investment, 2016 Report on Sustainable and Responsible Investing Trends
  2. “Corporate Sustainability: First Evidence of Materiality” by M.Khan, G.Serafeim and A. Yoon, Harvard Business School. 2015

GAMCO'S ADVANTAGE IN ESG

GAMCO's involvement in socially responsible investing started in 1987 and we understand the needs and objectives of such investors. Our expertise and success in ESG investing is due to:

  1. Intense, independent research-driven culture with core competencies in industries and companies where we have accumulated deep knowledge.
  2. Long term investment horizon with low turnover enables us to invest in companies where ESG gearing may improve value after several years.
  3. Fundamental, active investment perspective that is looking to identify opportunities that most investors are missing or the market is mispricing.
  4. 30 years of experience managing values aligned investment portfolios.
  5. An investment process which includes meeting regularly with company.
Integrated ESG investing is about explicitly evaluating certain non-financial criteria in addition to traditional financial metrics. This requires skill to understand these connections and understand the relevant ESG issues to the company and potential financial impact. We have these skills and expertise.

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Gabelli ESG Fund

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ESG INVESTMENT APPROACH

GAMCO's overall investing objective is to earn superior, long-term investment returns for our clients. Our ESG investing approach is summarized as follows:

  • Key ESG issues - We carefully examine certain ESG criteria across environmental, social and governance issues.
  • Materiality - We evaluate the materiality of the issue to the industry and company. While we primarily do our own research, we utilize ESG specialist research sources to help supplement our research.
  • Understand Impact - We seek to understand the long term impact of various ESG issues to take a more informed, holistic view of the company's business operations, its industry dynamics and its long term business strategy. This includes looking at risks and opportunities.
  • Connect to Financial Valuation - Our objective is to identify whether and where an ESG issue has the potential to affect the financial valuation of our forecast. The relationship and connection is part of integrated analysis.
  • Thematic - We examine and invest in long term themes that may take many years to fully surface.
  • Connect to Portfolio Decision - A portfolio decision to include or exclude a stock based on financial evaluation along with ESG related issues is made by the investment team.
  • Custom - We have been managing custom values aligned portfolios since 1987 for investors.

ESG Investing Basics

Explanation of ESG integration and benefits to investors

The Evolution of SRI

Recent White Paper written by Portfolio Managers Christopher C. Desmarais & Kevin V. Dreyer

Kevin V. Dreyer joined Gabelli in 2005 as a research analyst covering the consumer sector. Currently he is a Managing Director and Co- Chief Investment Officer for GAMCO Investors, Inc.'s Value team. In addition, he currently serves as a portfolio manager of Gabelli Funds, LLC and manages several funds within the Gabelli/GAMCO Funds Complex, including ESG strategies. Mr. Dreyer received a BSE from the University of Pennsylvania and an MBA from Columbia Business School.

Christopher J. Marangi joined Gabelli in 2003 as a research analyst. Currently he is a Managing Director and Co-Chief Investment Officer for GAMCO Investors, Inc.'s Value team. In addition, he serves as a portfolio manager of Gabelli Funds, LLC and manages several funds within the Gabelli/GAMCO Funds Complex including ESG strategies. Mr.Marangi graduated magna cum laude and Phi Beta Kappa with a BA in Political Economy from Williams College and holds an MBA with honors from Columbia Business School.

Christopher C. Desmarais joined the firm in 1993 and is currently a Managing Director and Portfolio Manager on the Gabelli's ESG/SRI strategy. He has been Director of Socially Responsive Investments since 1987. Chris earned a BA from Fairfield University.

Christina L. Alfandary re-joined Gabelli in 2016 and previously worked at the firm from 2000-2005. She is a Managing Director for ESG and Sustainable Investments, overseeing the company's ESG integration efforts. Christina earned a BA from Lewis & Clark College and an MBA from Columbia University.

ESG POLICY STATEMENT

We believe in and are committed to the idea of corporate responsibility. Today, companies have a unique set of Environmental, Social and Governance (ESG) challenges in a world where resources are diminishing. This, along with changing customer preferences across industries, presents both business challenges and opportunities. As long term investors, we need to better understand the ESG issues that affect the companies in which we invest.

COMMUNICATION

GAMCO has been focused on corporate management's role to create shareholder value since its founding in 1977. In this effort, our investment professionals spend many hours meeting with management to support transparency across many issues. We actively vote over 3,000 proxies annually. We believe in strong governance that benefits shareholders over the long term.

CAPABILITY

We are active investors that utilize our own deep, fundamental research based on our Private Market Value with a CatalystTM investment methodology. We leverage ESG research services to enhance our process. GAMCO has the ability to manage All Cap and Small Cap portfolios with a customized ESG framework. Our capability can incorporate fossil free mandates as well as integrate certain sustainable themes.

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Examples

ENVIRONMENTAL

  • Air & Water Pollution
  • Biodiversity
  • Carbon Footprint
  • Waste Management
  • Water Scarcity
  • Land Use
  • SOCIAL

  • Product Safety
  • Employee Safety
  • Labor Standards
  • Employee Development
  • Supply Chain
  • Diversity
  • GOVERNANCE

  • Board Independence
  • Board Diversity
  • Corruption
  • Transparency
  • Ethics
  • Shareholder Alignment