|What is quality and why does it matter?|
|Walden views quality as both an absolute standard and a set of relative considerations with dynamic characteristics. Higher quality firms, those with more sustainable business models, consistent performance, robust cash flows, transparent financials, and effective management when compared to peers, are most likely to produce durable benefits for investors.|
|Why integrate environmental, social and governance (ESG) considerations?|
Over the years we have found that companies with strong ESG track records often produce good financial results. The connection is straightforward: good ESG performance can help protect companies from reputational and regulatory risks, build positive employee loyalty while enhancing productivity, and create favorable consumer impressions, strengthening brand recognition and contributing to more competitive long term business success.
We have developed methodologies to ensure that all of our client portfolios - those that utilize portfolio screening and those that do not - maintain the same characteristics designed to maximize returns while limiting risk. This sometimes requires identifying companies with above average environmental or social performance in industries with poor reputations in these areas. In other instances, the composition of portfolios may be adjusted to accommodate the risks or opportunities identified in the ESG research process.
|Even portfolios invested in higher quality companies are subject to a variety of risks, including the potential for volatility, security specific events or research analyst bias. Reduced volatility has inherent performance benefits for clients. Portfolio diversification can help mitigate company, industry, sector, region, and other market-specific risks. It is also an effective method to ensure the balance between analyst conviction and portfolio manager humility – a dynamic tension we believe serves our investors well. We thus seek to employ prudent diversification in all of our strategies.