At Cushing Asset Management, LP (“Cushing”), we believe environmental, social, and governance (“ESG”) factors are important drivers of long-term company value and performance. ESG factors are material, nonfinancial metrics not included in traditional financial reporting. The consideration of ESG factors in association with our traditional investment analysis enhances our ability to provide better risk-adjusted returns to our investors. By incorporating ESG factors into our investment process, we can identify risks and opportunities not captured by traditional investment analysis to enhance our security selection, sector allocation, and portfolio construction. Additionally, through engagement with company managements and proxy voting we can influence companies to mitigate risks and pursue opportunities to enhance value.
Cushing’s Approach to ESG
Cushing utilizes MSCI ESG Research, LLC (“MSCI”) to assess ESG risks and opportunities for Cushing’s investment universe. When MSCI ratings are not available, Cushing may use other third-party services or its own internal evaluation to determine specific ESG factors for a particular company.
A sample of ESG factors we evaluate include:
- Corporate governance and business ethics
- Corporate culture
- Stakeholder relations
- Product, customers and supply chain
- Environmental impact
Our ESG Committee of research analysts, portfolio managers, and compliance and risk personnel meets regularly to discuss and analyze company-specific ESG issues and ratings changes.
Once relevant ESG risks are identified, we engage with company managements to encourage them to mitigate ESG risks and pursue ESG opportunities. As long term investors, we are generally patient with companies, giving them time to change on their own terms. Meanwhile, we are persistent to ensure they acknowledge the relevant risks and opportunities and adopt sound practices that support long term value creation.
Benefit to our Clients
Cushing believes traditional investment analysis complemented by ESG assessment and engagement improves our ability to find favorable investment opportunities for our clients.