Mid Wynd International | ESG

The Company is not marketed as specialist sustainable investment product and our Manager, Lazard Asset Management Limited, does not explicitly target environmental, social and governance (ESG) outcomes as part of portfolio construction. However, the Board expects Lazard to invest in companies, which can provide long-term value for our shareholders, without damaging either society or the environment. Lazard analyses financially material ESG factors along with many other risks and opportunities in our investee companies, with the objective of improving shareholder returns. This will frequently lead to active engagement with the management of those investee companies. The Board reviews Lazard’s approach to stewardship and receives regular updates on stewardship activities.

As a Manager of shareholders’ capital, Lazard’s foremost responsibility is to act in the best interests of shareholders, with a resolute focus on protecting capital and maximising long-term returns. The Company has adopted Lazard’s flagship Global Quality Growth strategy. This strategy aims to invest in “Compounders” – quality companies that generate high returns on capital with the ability to reinvest at similarly high returns to drive future growth. This involves the assessment of a broad range of factors which have, or could have, an impact on value, including sustainability considerations.

Lazard integrates ESG considerations into the fundamental analysis conducted on every potential investee company. When evaluating potential Compounders, Lazard is focused on how ESG opportunities and risks may affect a company’s competitive advantages, the sustainability of its financial productivity, its reinvestment opportunities, and its valuation. Lazard also has access to third party data sources to augment this proprietary fundamental research.

Lazard’s research paper, The Link between ESG and Financial Productivity, suggests that Compounders tend to have attractive environmental and/or governance attributes. This has generally resulted in the portfolio having a positive sustainability profile i.e., significantly lower carbon emissions, lower carbon intensity, and lower ESG risk versus its reference comparator index, the MSCI All Country World Index. This is an outcome of stock selection, not a target objective.

The Lazard Global Quality Growth strategy formally excludes investment in controversial weapons. Furthermore, the strategy’s focus on financial productivity generally precludes investments in energy, basic materials, utilities or tobacco.

Lazard undertakes regular due diligence with investee company managements on matters such as strategy, operational performance, capital allocation, and material sustainability considerations. In addition, Lazard investment professionals may lead engagements with company management to influence change, with priorities based on what Lazard believes will maximize shareholder value. Collaborative discussions with management are enabled by Lazard’s insights into companies and industries and Lazard’s reputation as a long-term, active fundamental investor.

The Board has given discretion to Lazard to exercise the Company’s voting rights. Lazard’s Proxy Voting Policy aims to maximise sustainable shareholder value through long-term investment, representing a vote in the best interests of Mid Wynd’s shareholders. Lazard is a signatory to the UK Stewardship Code, reflecting its commitment to transparency and efforts to act as effective stewards of client capital. Lazard’s UK Stewardship Code Submission can be viewed here.

Lazard engages at the industry level with industry bodies and policy makers to improve the landscape for sustainable investment and stewardship in the markets in which it operates. Lazard is a signatory to the PRI, a supporter of the International Corporate Governance Network (ICGN), a member of the Institutional Investors Group on Climate Change (IIGCC), a supporter of the Task Force on Climate-Related Financial Disclosures (TCFD), a member of the Net-Zero Asset Manager Initiative, and a member of the Taskforce on Nature-Related Financial Disclosures (TNFD), for example. Lazard - also participates in industry-wide initiatives that help promote best practice. For a summary of recent industry involvement, please refer to the Annual Sustainable Investment Report.

The Manager, as part of parent company Lazard Ltd., supports local communities through charitable contributions and hands-on volunteer activities, as well as providing financial support to nonprofit organizations around the world through the Lazard Foundation. Further information can be found here.

Further information on how Mid Wynd’s Board discharges its responsibilities is given in the s172 Report within the Strategic Report of the latest Annual Report and Accounts.

The Lazard website contains details on the investment strategy. Stewardship reports, including the Active Ownership Report, Annual Sustainable Investment Report, and ESG policies can also be found here.