"Improvement isn't forthcoming, so they're left with no choice but to offload their assets."
The Pictet-Water Fund, a leading investment vehicle focused on water quality and sustainability, is making waves in the financial world. This fund, which centres around company-specific engagements, is drawing increased attention from clients who are eager to understand the types of initiatives it undertakes.
Whether it's ESG (Environmental, Social, and Governance) controversies, corporate strategies, or the pursuit of the United Nations Sustainable Development Goals (SDGs), clients are keen to learn about the Fund's involvement. The Pictet-Water Fund is not shy about transparency, clearly outlining how ESG influences their investment process and philosophy.
Beyond company-specific engagements, the Fund can also pursue broader, cross-segment ideas. Collaboration with other teams, such as the Global Environmental Opportunities Strategy, enables cross-sectoral water treatment initiatives.
In the corporate realm, many CEOs are embracing sustainability, taking concrete steps such as establishing a sustainability committee, appointing a Chief Sustainability Officer, or ensuring ESG has a direct reporting line to the board. Companies are encouraged to view ESG as a fundamental part of their business.
The Pictet-Water Fund is particularly vigilant when it comes to human capital. It has aggressively voted against executive remuneration that benefits from temporary layoffs, reflecting a growing emphasis on human capital in the workplace.
Environmental aspects are a key focus for the Fund, with discussions about water quality and waste management being common. However, there is no one-size-fits-all solution for ESG engagement, as each company faces unique challenges.
In the past, Cédric Lecamp, the Fund's lead, has engaged with companies like Veolia and Xylem. Currently, he focuses on companies involved in water technology and infrastructure, including Danaher and Ecolab. The Fund engages with companies, voting against the board at shareholder meetings if necessary, writing letters, and having conversations with the board.
The Fund also monitors management's responsiveness to external factors and their input. Companies are more responsive to feedback now compared to previous years in various industries.
The Fund never sells a position as part of ending an engagement, but may do so if they see no change for the better and significant risk. For instance, the Fund has been engaged with a large multinational corporation for years, advocating for changes in board oversight and the use of sustainability metrics in executive compensation.
Good ecological and social practices can be implemented through governance, and aligning executive remuneration with scientifically robust environmental and social goals ensures that leadership pays attention to these issues. The Fund conducts thorough due diligence before investing to ensure investments are likely to be long-term under most conditions.
The Fund has been invested in many companies longer than the current management has been in place, reflecting a commitment to long-term partnerships. ESG issues are recognized as impacting a company's reputation, employees, and stock price.
Recently, a company introduced a compensation package tied to sustainability criteria, based on metrics linked to numerous UN Sustainable Development Goals. This move reflects the growing interest clients have in the fundamental impacts the Pictet-Water Fund can have as an active, engaged investor.
In conclusion, the Pictet-Water Fund is a pioneer in the field of water and sustainability, engaging with companies, advocating for change, and fostering long-term partnerships. Its proactive approach to ESG issues is resonating with clients who are increasingly interested in the impact of their investments on the environment and society.
