Our Environmental, Social and Governance Policy

Somerset Capital Management LLP (“SCM”) is an advocate of fundamental research and selective, longer term stock picking. We have always sought to maintain the highest standard of independence and quality in our research process, striving to improve our research wherever possible and practical. Both the independence and quality of our research is paramount for the maintenance of investment returns. Within the context of client specific mandates the protection of our clients’ long-term risk-adjusted investment returns remains the highest priority for us.

We have reviewed the ‘Environmental, Social and Governance’ investing literature. We believe that our bottom up, fundamental approach to investment is highly consistent with some forms of ‘ESG’ investing but not consistent with others. Specifically, the team has always placed a very high degree of emphasis on non-financial, non-standard categories of analysis such as corporate governance, demographics and the environment. It has and will continue to do this on a case by case basis. Indeed we are proud that our culture of investment analysis goes beyond the narrow definition of non-financial factors found in ESG; it extends the categories of non-standard, non-financial analysis to legal, accounting, political, psychological and anthropological factors. However, although we will use environmental, social and governance factors as categories of analysis, with the exception of the legal boundaries, we make no claim to using environmental, social and governance concerns as tenets of ethics in the fashioning of investment returns.

As part of our fundamental philosophy we have always believed in closely monitoring management and engaging with it where necessary. Travel to company meetings is consistently one of the largest company expenses. The long-term performance of the companies that we invest in can be influenced, to a considerable degree, by their management and their understanding of the long-term drivers of value and the risks inherent to their businesses, which can include social and environmental aspects of the business.


We engage where necessary to discuss issues such as strategy, deployment of capital, performance, remuneration principles, and attitudes to risk – including environmental and social issues that may have a material impact on the financial strength of the company. However, we engage with management on these issues on the understanding that, in general, we are not ‘brought over the wall’, and so despite generally being long term shareholders, we retain the option of selling shares on behalf of our clients. Furthermore, we recognise a tension between ‘responsible’ investment, where that involves one-on-one engagement with management over such issues depending on the nature of the engagement, and the full disclosure and transparency of markets. Finally the end of our engagement, unless specified in client mandates, is the preservation of client investment returns, which often is, but may not be consistent with a social or moral agenda.

We continue to learn from markets and improve our investment process. This process of acquired judgement plays an important role for us in forging close, direct relationships with our clients, which is in turn the bedrock for good governance of the beneficiary-fiduciary relationship.