How does Channel practice its own version of sustainable investing?
At Channel, we provide high-quality, privately originated asset-backed investment products by originating, structuring, and managing investments for leading institutional investors. We specialise in opportunities from issuers in specialty finance and the innovation economy.
For borrowers, we are a trusted partner in growth. Our expertise in structuring tailored financing solutions ensures you get the capital you need to scale, with a streamlined process and terms that work for your business. We are committed to delivering flexible, efficient, and growth-focused funding that empowers your success.
What is ESG Investing?
Sustainable Investing refers to investing which prioritizes optimal environmental, social, and governance (ESG) factors or outcomes. ESG investing is widely seen as a way of investing “sustainably”—where investments are made with consideration of the environment and human wellbeing, as well as the economy. It is based upon the growing assumption that the financial performance of organizations is increasingly affected by environmental and social factors.
At Channel, we pursue sustainable investing, by incorporating environmental, social, and governance (ESG) factors into investment and monitoring decisions as a source of additional data in the private credit market. We seek to identify companies seeking to avoid activities that could harm the environment or society, which in turn can affect borrower reputation, cashflow or solvency, which is key for our lending assessments.
E- Environment
Environmental considerations when choosing the companies, you invest in can be made in many ways. The range of ways it is interpreted is endless. Some investors only avoid the worst obvious offenders and feel they have taken the E factor into consideration, while others go all the way to find the companies who develop and use the latest technologies and knowledge to find the solutions to the most relevant environmental challenges. Fund managers and analysts can look at how corporations are dealing with issues such as energy efficiency, greenhouse gas emissions, carbon footprint, preservation of forest and water life, chemical use etc.
S – Social
Having social considerations in the analysis of corporations in an investment process can involve taking considerations regarding factors such as staff turnover, workers’ rights, how the staff are treated, if they are paid a decent wage, how a country/corporation is respecting human rights, gender diversity, workers health and safety, social impact on the society etc.
G – Governance
Taking governance issues into consideration is the most common and widely used of the three letters by managers. Many fund managers put the G as the most important factor to consider. This is very rational since the G is crucial to obtain the S and the E. Governance issues are usually also of great importance to managers who not necessarily see themselves as ESG-investors. Governance can include independent directors on a board versus insiders only, or a poor record in addressing customer complaints on TrustPilot, or poor mitigation of regulatory or insurance issues on the shop floor.
Why consider ESG
The reasons to invest in the sharpest ESG managers are many.
Avoid scandals -Proper ESG analysis and management will likely make the probability for having a position in a scandal company substantially less. BP’s oil spill and Volkswagen’s emission scandal are examples of companies who most likely wouldn’t have been in a well-managed ESG portfolio even before the scandals, Volkswagen’s leadership and management problems were well known long before the scandal. Empirical evidence shows that equity of these firms were hit hard post the disclosure of the ESG event, whereas asset-backed debt was stable (Brown Brothers Harriman research).
This boom in ESG investing can be attributed to a range of factors. As supply chains become more complex, there is a wider awareness of social, labour, and human rights issues and risks for the business world. Growing concern for environmental issues such as climate change also influence investor decisions. The heightened engagement of groups previously less involved in traditional investing—particularly young people and women—is also thought to have contributed to the ESG investing boom. To reflect these evolving societal values and norms, it is important that organizations adopt forward-looking ESG practices if they want to remain competitors in their industry and contribute to the common good.
Our conviction is that companies perform better when they are deliberate about their role in society and act in the interests of their employees, customers, communities and their shareholders, in order to protect borrower financial reputation, solvency and liquidity.
