Investing for a steady income in retirement
Our investment objective is to provide you with a comfortable retirement income. So that means we think about the long term whenever we’re making decisions about where to allocate your savings.
Long term investing isn’t just thinking about asset valuations or the direction of the economy. It’s also about making sure that the returns you’re getting on your investments are sustainable.
- What does investing for a sustainable income mean?
- Why is it important to manage environmental, social and governance risks?
What does investing for a sustainable income mean?
A business that’s overly focused on generating short term results to keep shareholders happy, might neglect long-term opportunities that don’t necessarily deliver profits in the near term.
Even worse, some companies might do things in the short term such as cut corners or chase market share, which could do real damage to their long term sustainability.
Our investment team actively engages with companies to help their management understand that we’re long-term investors. We encourage them to think about long-term value creation, which is about long-term growth and profitability.
And we let them know when we disagree with their strategy, although we find it’s usually more productive to do this privately and consistently than by shouting from the rooftops.
Sometimes that could mean voting against the Board’s recommendations at annual general meetings, and in extreme cases, we exclude certain companies and industries from our portfolios.
A good example of this is the tobacco industry, where we think the long term investment risks are so great, and the business so damaging to consumers, that we’ve instructed our investment managers to avoid investing in the industry altogether.
Why is it important to manage environmental, social and governance risks?
Part of having a sustainable, long term business model is about looking after the environment.
This is something we pay a lot of attention to when we’re making investments, particularly property and infrastructure investments that we expect to hold for a long time.
All our investments are screened to assess the impact of environmental, social and governance risks.
How will climate change affect this investment? Does it cause damage to consumers, their workers or the community in which it operates? And do the management and Board show the appropriate respect for the interests of shareholders, or are they more focused on feathering their own nests?
These issues are rarely black and white, and of course, risks evolve over time. It’s important that we stay on top of things, and so the monitoring process is ongoing.
It’s difficult to totally remove environmental, social and governance risks in a diversified portfolio. Our focus is on managing these risks, and encouraging the management of the companies we invest in to make long-term, sustainable decisions. We believe this will support your ultimate investment goal, which is to earn a steady income in retirement.
