Social factors can benefit investors by improving the businesses they are targeting, suggests Gabrielle Boyle, investment director and head of research at Troy Asset Management (Troy).
Ms Boyle manages the firm’s Global Equity fund, which considers fintech and technology businesses to be primary targets for the portfolio.
She told Fundtruffle that while the ‘S’ in ESG was less clear than questions around governance and the environment, it did provide clear opportunities for investors beyond just ethical considerations.
In her view, social factors have enabled these businesses to develop and work together in a way that benefits consumers and investors. She believed a credible strategy for social factors could provide a susntailable competietive advanctange.
Ms Boyle said: “The social aspect is complex, it's a particularly important issue for us because we invest in a number of technology businesses where regulation and concerns around social issues are a particularly major risk. So, we have done a lot of work in that area. It's highly complex and very detailed, but it's one that's very important.”
Citing examples of the value of a strong social focus, Ms Boyle noted that Visa, one of the fund’s top 10 holdings, has successfully provided the financial ad payment rails for burgoeing FinTech businesses such as Revolut and Intuit. This has resulted in a top holding boosting companies with a clear social agenda, that look to provide consumers ith exciting options in a burgeoning sector full of competitors.
Commening on the role Intuit plays in the financial market, she said: “They do unbelievable research with their engagement with their customer, where they'll go into people's homes and they really try and understand the tax challenges that individuals have.
She also spoke positively about the investment benefits of Unilever’s sustained focus on both social and environmental issues for since Paul Polman’s tenure between 2009-2018 as CEO, and Nestle’s considerate development of Nespresso.
Ms Boyle explained: “It’s taken years to build Nespresso, just to get to a billion of revenue took them years,. They've subsequently seen that revenue grow to well over 5 billion, but they had the patience and the fortitude and longevity to do that.”
In order to achieve this, she said they had to engage in social improvements, which can benefit investors beyond mere ethical concerns or box-ticking.
The head of research concluded: “It is part of that social contract of doing right by your customers, doing right by the people who work for you, and doing right by your suppliers. It's not just to do the right thing for ethical sakes but actually also because it's good for business. We think that's a very important point.”