Partner Content by Baker Steel

ESG versus performance? For investors in mining it shouldn’t be a choice

Has ESG changed Baker Steel’s investment process?

While the level of interest and coverage for ESG issues among investors has surged in recent years, for Baker Steel it is far from being a new concept. Given the active and bottom-up nature of our investment research process, ESG factors have long been built into our analysis, but may have fallen into different categories, such as during analysis of project risk or management competency. However, with the advent of ESG research as a distinct area of analysis it became clear to us that a formalisation of our team’s ESG research was appropriate.  It is our firm belief that the formation of our ESG framework has enhanced our ability to deliver superior risk adjusted returns relative to our benchmarks and peer group. Through increasing the scope, detail and discipline of our ESG research we believe we have further strengthened our stock selection process and risk management.

The strongest commitments to ESG in our investment approach have been the decisions to become UN PRI signatories and to classify our award-winning UCITS sub-funds, BAKERSTEEL Precious Metals Fund and BAKERSTEEL Electrum Fund, as Article 8 compliant funds under the Sustainable Finance Disclosure Regulation (“SFDR”). This means that Baker Steel’s UCITS sub-funds are committed to promote environmental and social characteristics, with details published regarding these activities (in line with SFDR Article 10). We believe this level of integration of ESG objectives is an appropriate reflection of the research and engagement on ESG issues undertaken as part of these strategies.

Our processes have also been informed by external sources and organisations, including the UN PRI, in recognition of the importance of its guidance on responsible investment activities, and the Church of England initiative on tailings safety. We have also been encouraged in recent weeks to see that both of our UCITS sub-funds have been awarded an ESG label by the Luxembourg Finance Labelling Agency (LuxFLAG) ¹. To our knowledge Baker Steel’s UCITS sub-funds are the only globally diversified mining funds to have received this label, a strong endorsement of the high level of ESG engagement by our team.

Baker Steel’s ESG framework – a vigorous assessment of miners’ ESG progress

Baker Steel’s enhanced ESG research framework integrates ESG into various stages of the investment process. At the core of this strategy is our in-house proprietary screening and scoring process, for assessing companies’ ESG performance within our investible universe.