Our approach to responsible investing

At RARE, we consider Environment, Social and Governance (ESG) factors to be important and understand that from time to time can materially affect long-term performance. As such, assessing ESG is an integral part of RARE's Investment Process and a responsibility of the whole investment team.

RARE believes that ESG factors are an important aspect of a company's performance. Since our inception, we have integrated the consideration of ESG within our Investment Process and in May 2010, we became a signatory to the United Nations Principles of Responsible Investing (PRI).

Listen to Co-Founder, Senior Portfolio Manager Nick Langley discuss how assessing ESG can lead to a greater understanding of a range of material issues, which in turn can lead to lower risk and stronger long-term performance of our investment portfolios.

Entrenched in RARE’s Investment Process are the following factors which affect the valuations we place on each infrastructure security;

Company Engagement: An integral component of RARE’s fundamental, bottom-up research is meeting with company management to test existing investment theses and convictions. RARE is in regular, active discussion with company management as well as key industry participants such as regulators on governance.
Use of Sustainalytics: At RARE, we use third-party provider Sustainalytics (an independent provider of ESG and corporate governance research) to produce ESG scores and reports on companies within our investment universe. This data is used by our investment team as input to our research and to aid the pricing of ESG risks and opportunities.

Expected Return: Where appropriate, RARE incorporates ESG factors (for instance the cost of emitting carbon for large power utilities) into our cash flow forecasts for all revenues, expenses and capital expenditure. This may effect the expected return that we require from the infrastructure security. 

Required Return:  RARE incorporates ESG factors into the Required Rate of Return for each infrastructure security. This has the effect of specifically pricing ESG considerations into the returns required for all infrastructure securities. 

    Why consider infrastructure?

    The case for a strategic allocation to global listed infrastructure is compelling. Within a portfolio, infrastructure offers investors the potential for lower volatility, stable cashflow, inflation protection, diversification and liquidity.

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