From the interview with Wytze Riemersma:
Governance is one of the key criteria that Netherlands-based fund manager Trustus considers in its selection of investments for its €45 million frontier-focused investment funds. The group has refined its stock selection process to include an explicit screen for environmental, social and governance (ESG) criteria, carried out by research firm Sustainalytics.
Wytze Riemersma, co-manager of the fund, told the Journal that the screen will be applied to all existing investments on a quarterly basis. During the first analysis, three of the 75 companies in the fund’s portfolio didn’t pass the ESG review. Telecom group MTN was “removed right away because it didn’t comply with our standards,” Riemersma said. The fund also sold its position in Barclays Kenya because the screening report raised concerns over the company’s business ethics, and it put Dangote on a watchlist. “If a company is on our watchlist, we won’t buy more, but we give them nine months to repair the issues,” Riemersma added.
As well as hoping the ESG focus will attract socially-focused investors, Trustus views the ESG screen as a risk management tool, helping to reduce the chances that its portfolio companies will be embroiled in litigation over issues such as environmental damage or child labor.