ODIN invests in companies that create value over time. Long-term value creation requires that the companies we invest in have a sustainable business model. We define a sustainable business model as one in which the activities of companies are conducted in accordance with the criteria society applies to social and environmental standards and compliance with accepted guidelines for good corporate governance.
As ODIN seeks to identify companies that create value for its shareholders long-term, we have an incentive to integrate social responsibility into our investment analysis and decisions.
Our fund management integrates social responsibility into its investment decisions based on the belief that companies that operate in a responsible manner also will be those that create the highest long-term return for their owners. Companies that operate in an environmentally harmful manner will eventually meet resistance from the authorities and the consumers. Companies that do not treat their employees well will not be able to attract the best people, and companies that do not treat their shareholders fairly will eventually lose the confidence of the capital markets.
ODIN’s funds have concentrated portfolios, and the managers can thus spend more time on each individual investment in the portfolio. Therefore, our fund managers have the responsibility of integrating social responsibility into our investment analysis and decision-making. A key element of our analysis is access to relevant information. We obtain information on social responsibility primarily from three sources: information in the public domain, conversations with the companies’ management and external specialists on social responsibility.
We have two types of exclusions from our funds: ethical exclusion and risk-based exclusion. Ethical exclusion is based on what the companies do. Companies that manufacture goods and services that are not consistent with generally accepted ethical values will be excluded. Risk-based exclusion is based on how the companies operate. These are companies that operate in a manner that is not sustainable, which entails a risk to the companies’ profit performance over time.
When we identify this type of risk in companies in which we have invested, we will try to influence the company’s management to change the way in which they operates. If the company shows limited interest in change, ODIN will not want to remain an owner.
ODIN wants to invest in companies that create value for their shareholders. We believe that there is a close link between long-term value creation and social responsible business models. That is why we believe that the integration of responsibility into the investment process will give our unit holders a better risk-adjusted return.