Environmental, Social, and Governance

LM Capital Group, LLC recognizes the importance of social, environmental and governance factors and their potential link to value creation for our clients. As fixed income investors, we understand that the circumstances and risks facing issuers change over time. We understand that sometimes history moves slowly, and that sometimes it moves quickly. We look back on history and see that societies and governments prosper and fall, based on environmental, social and governance factors.

In the same way that societies and governments prosper and fall, smaller organizations within those societies are often especially sensitive to these same factors. It is imperative to understand the factors that are developing and receding around us to fully understand the investment risks in the fixed income universe and to fulfill our fiduciary duties to our clients.

Our approach to responsible investment is consistent with our overall investment approach. As globalization evolves, the world’s capital markets are becoming increasingly interrelated and interdependent, with political and social events often playing a significant role in economies around the world.

One facet of our ESG Integration is that we consider the social costs that issuers and their customers impose on society. As time passes and society recognizes these costs, we expect the costs to be pushed back onto the issuer. This process will affect the credit profile of issuers, as we have seen as the social costs of fossil fuels are pushed back onto issuers and their customers.

Other facets of our approach include avoiding issuers in countries that lack sufficient Rule of Law, avoiding issuers with material involvement in tobacco and firearms production, avoiding issuers that are particularly vulnerable to low probability-high cost event risk and seeking issuers that we expect to benefit from the transition away from fossil fuels.

LM Capital utilizes a global, macroeconomic approach when examining fixed-income markets. With every investor in the markets having the same access to financial statements, the key to successful investment is understanding the factors and pressures on issuers and their management that will affect how the market perceives their risk.

LM Capital uses ESG factors across all of our assets under management. We believe that ignoring ESG factors is an unacceptable way to conduct fundamental investment analysis. We can better understand the risks facing fixed income issuers if we use all of the relevant information available to us.