NextGen ESG Strategy and Approach
NextGen ESG Strategy’s seeks for companies that actively contribute to the global efforts to limit global warming to 1.5 degrees and shift to a sustainable path for humanity.
The key areas of growth are companies conducting necessary efforts for positive sustainable transformation including the achievement of the climate goals as outlined by the Paris Agreement as well as the improvement of social, governance and gender related performance.
The core element of our philosophy is the belief that ESG factors can directly affect long-term business profitability.
Company selection based on rigorous analysis
The core and main alpha driver of the strategy is company selection. Our experienced team identifies opportunities in each company with an investment horizon of 36–60 months. The team explicitly specify the core assumptions for
each of our selected company.
The company analysis is conducted by ongoing in-person company meetings, site visits, industry conferences, sell-side research, expert discussions and in-depth sector knowledge and experience.
We seek companies where managerial action and/or underestimated operating leverage will significantly increase operating margins and returns. And re-rating of these companies will lead to increase in returns on invested capital. These companies can also have strong economic moats. In addition, re‐investment of returns into the growth of the business from free cash flows will create a higher base from which to value the company.
We aim to identify companies that exhibit the following attributes: absolute ESG impact potential; quality of ESG management; clear and effective engagement levers; and of course business competitiveness.
Thoughtful engagement for growth and impact
NextGen ESG Japan is an engagement-centric strategy. The aim of our engagement-centric approach undertaken is to drive the transformation of companies to more sustainable business models.
We discuss and agree with each portfolio company to assign a number of Environmental, Social and Governance KPIs and these are presented to investee company and tracked over period of 36-60 months. All ESG engagement KPIs have financial leverage for the respective company.
Well-established ESG investment methodology
Our proprietary ESG analysis gives us a broader and more complete understanding of the companies.
In addition, deep understanding of and practical experience in key ESG material leverage points, combined with company-specific climate factors enable us to significantly reduce long-term and ESG tail risks in our portfolios. As a result, the
companies have lower ESG risks and provide better outcomes for a healthy society and planet.
Outstanding global team
We have an exceptional team that includes both award-winning global ESG investment expertise, as well as some of the world’s leading practitioners and policy leaders on sustainability and the Sustainable Development Goals.
*SDG Impact Japan act as an ESG/SDG advisor of NextGen ESG strategy