ESG Policy

Policy as at:

Understanding our Approach & Current Thoughts

Our view

With our investment time horizon of at least five years, we must consider the possibility that changing consumer habits and regulations will determine the success of companies in the portfolio and, subsequently, the returns we can deliver to shareholders. However, ESG has never been the starting point in our investment process. It’s simply a by-product of our pursuit of long-term returns.

We draw on a broad range of sources to gain insight, from company visionaries to academic experts and data providers. They help inform, support, or challenge our contentions about companies' long-term prospects. This includes risks and opportunities associated with their governance structures, approaches to climate risk and the energy transition, as well as corporate sustainability.

Our approach

We believe it is impossible to understand these complex issues using metrics and tick boxes alone. Therefore, we take a qualitative approach and do not rely solely on these simplified measures.

We believe the need to create a more sustainable world represents a huge upside opportunity for companies at the forefront of change and a material downside risk for those who are not. We engage with our companies on these matters, not because it has become fashionable but because these areas have always contributed to the strength of a company’s investment case over the long term.

We believe Scottish Mortgage is in an exceptional position to provide patient capital to innovative companies enabling societal and economic progress. 

ESG Integration

The Board of Scottish Mortgage believe that it is in the shareholders’ interests to consider environmental, social and governance (ESG) factors when selecting and retaining investments and has asked the Managers to take these issues into account.

The Managers’ approach to investment is based on identifying and holding high quality growth businesses that enjoy sustainable competitive advantages in their marketplace. To do this it looks beyond current financial performance, undertaking proprietary research to build up an in-depth knowledge of an individual company and a view on its long-term prospects. This includes the consideration of sustainability factors (environmental, social and/or governance matters) which it believes will positively or negatively influence the financial returns of an investment.

Whilst consideration is given to sustainability matters, there are no restrictions on the investment universe of the Company, unless otherwise stated within in its Objective & Policy. Baillie Gifford & Co can invest in any companies it believes could create beneficial long-term returns for investors. However, this might result in investments being made in companies that ultimately cause a negative outcome for the environment or society (see Section 172 statement).

More detail on Baillie Gifford’s approach to sustainability can be found in its ESG Principles and Guidelines document.

Environmental, Social and Governance Policy

The Company believes that it is in the shareholders’ interests to consider environmental, social and governance (ESG) factors, including climate change, when selecting and retaining investments and has asked the Managers to take these issues into account.

The Managers do not exclude companies from their investment universe purely on the grounds of ESG factors but adopt a positive engagement approach whereby matters are discussed with management with the aim of improving the relevant policies and management systems and enabling the Managers to consider how ESG factors could impact long term investment returns. The Managers’ statement of compliance with the UK Stewardship Code can be found on the Managers’ website. The Managers’ policy has been reviewed and endorsed by the Board.

Standards & Codes

The Company’s Managers are signatories to the United Nations Principles for Responsible Investment and the Carbon Disclosure Project and are also members of the International Corporate Governance Network and the Asian Corporate Governance Association.

Baillie Gifford also became a supporter of the Taskforce on Climate-related Financial Disclosures (‘TCFD’) in May 2020 and published its firm-wide TCFD-aligned report in June 2022. The Company's own TCFD report can be found on the Company's webpage. It explains Scottish Mortgage’s approach to addressing climate-related risks and opportunities through our investment process and describes a view of how they may impact the portfolio. It also includes data and metrics to provide additional information.

The Managers’ annual Stewardship Report, which explains how the 2020 UK Stewardship Code has been applied, can be found on the Managers’ website.

The Company considers that it does not fall within the scope of the Modern Slavery Act 2015 (‘Act’) and it is not, therefore, obliged to make a slavery and human trafficking statement. In any event, the Company considers its supply chains to be of low risk as its suppliers are typically professional advisers. A statement by the Managers under the Act has been published on the Managers’ website.


The Managers believe that they have a responsibility to behave as supportive and constructively engaged long-term investors. The approach favours a small number of simple principles which help shape interactions with companies: Prioritisation of Long-term Value Creation; Sustainable Business Practices’; Fair Treatment of Stakeholders; A Constructive and Purposeful Board; Long-term Focused Remuneration.

The Managers believe that ‘active ownership’ is as important as selecting the right investments in the first instance. The Managers have adopted a set of guidelines to provide an insight on its approach to voting and engagement. More detail on these guidelines can be found in the Company’s Stewardship Report.

The Company has given discretionary voting powers to Baillie Gifford & Co. The Managers vote against resolutions they consider may damage shareholders’ rights or economic interests and report their actions to the Board. 

A summary of votes can be found in the Company’s Proxy Voting Disclosure Report, available publicly via a link on the Scottish Mortgage homepage.

Section 172 Statement

Having regard to the Company being an externally-managed investment company with no employees, the Board considers that the Company’s key stakeholders are its shareholders, its externally-appointed managers (Baillie Gifford) and other professional service providers (corporate broker, registrar, auditors and depositary), lenders, wider society and the environment.

Whilst the Company’s operations are limited (with all substantive operations being conducted by the Company’s third-party service providers), the Board is keenly aware of the need to consider the impact of the Company’s investment strategy and policy on wider society and the environment. The Board considers that its oversight of environmental, social and governance (ESG) matters is an important part of its responsibility to all stakeholders and that proper consideration of ESG factors sits naturally with the Company’s long-term approach to investment.

The Managers believe that a company cannot be financially sustainable in the long run if its approach to business is fundamentally out of kilter with changing societal expectations. The Managers consider a number of potential adverse impacts in the context of its focus on long term investment performance. The Managers expect all holdings to operate in accordance with the principles and standards set out in the United Nations Global Compact. When a company’s performance on any material issues is significantly below what is expected, making it a material risk to the long-term performance of their business, and potentially society as a whole, the Managers will engage with management with the aim of improving the relevant policies and management systems. More detail on Baillie Gifford’s due diligence approach to consideration of principal adverse impacts can be found in its Principal Adverse Impacts Due Diligence document.