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About This Strategy - [Return to Top]
Assets Under Management (AUM): $9.3M (in US$ millions)
Required Minimum: $1M
Benchmark used: Russell 2000
Strategy type: Equity Mid-Small Cap
Strategy description:
The Riverwater ESG Micro Opportunities Strategy seeks to provide attractive risk-adjusted returns versus its benchmark, the Russell 2000 Index. The Riverwater ESG Micro Opportunities Strategy holds 25-40 micro cap companies with market caps under $500 million at initiation. The Riverwater philosophy is centered around the fact that we are business owners not stock traders. We seek high quality businesses with exceptional CEOs, attractive valuations, and a focus on social responsibility. It is our goal to ensure your assets are invested for the long-term and given the opportunity to align with businesses that enhance our world for the next generation. Riverwater employs a disciplined Three Pillar Approach to investing; superior business, distinguished management and attractive valuation. They believe opportunities to acquire positions usually occur due to market weakness or short-term issues impacting the company. Riverwater looks through these short-term issues and focus on what drives success over the long-term.
Strategy web link: External Link
About The Company - [Return to Top]
Institution Name:
Riverwater Partners
Approach to Sustainable & Responsible Investment:
Riverwater Partners was founded in 2016 as an ESG focused relative-value manager offering two concentrated, long-only separate account equity strategies (large and SMID) with a micro-cap strategy launching in 2018. We actively manage portfolios utilizing our Three Pillar Approach to evaluate companies based on: (1) Superior Business Strategy; (2) Exceptional Management Team; and (3) Attractive Valuation. We integrate environmental, social and governance (ESG) criteria within our investment process, as well as actively engage with portfolio companies on ESG issues. To align our investment philosophy with the firm’s culture, we became a Certified B Corporation in 2018.
Riverwater Partners uses a Three Pillar Approach when evaluating a company’s ESG efforts:
Riverwater Partners Three Pillar Approach to Responsible Investment
I. Due Diligence
Riverwater Partners screens for certain negative business practices and therefore avoids companies that derive a significant portion of their profits from tobacco, pornography, illegal drugs, gambling, and unconventional weapons.
Riverwater Partners analysts and portfolio managers research current ESG efforts of companies, gathering information from sustainability reports, financial statements, corporate disclosures, and press releases. In addition, we inquire about ESG efforts when we speak with management directly. We seek best-in-class ESG efforts generally.
Riverwater Partners considers a company’s ESG efforts, and willingness to work toward greater ESG efforts, as part of its decision to establish, maintain, or eliminate a position. We consider a company’s industry, size, age, peers, and willingness to do more, when evaluating their ESG policies and practices. For example, a Financial Services company may not be able to make as significant an impact with its Environmental efforts as an Industrial company can; however, its Social and Governance efforts may have a significant impact.
Riverwater Partners maintains a proprietary database of the ESG efforts of the companies in which we hold positions, those under consideration, and peer companies. Companies receive points for having a sustainability report, for inclusion in ESG Indices, and for the nature of their business being socially responsible, and are scored on a variety of ESG Factors. Companies receive a score (maximum of 25) reflecting their ESG efforts. Scores are then weighted by industry, allowing comparison of efforts based on industry relevance. Scores are then weighted by company size, recognizing that ESG efforts are costly and time consuming, particularly for smaller companies. Data is used to compare companies and track progress toward ESG impact.
II. Engagement
Riverwater Partners engages company Executives and Boards regarding their ESG efforts, or lack thereof, to assist them in understanding the benefits of a focus on, and in initiating and/or improving their ESG efforts. It is our goal to promote greater impact over time with respect to improved corporate governance, fair treatment of all stakeholders, improved environmental practice, and ultimately, superior financial outcomes and real economy benefits.
Riverwater Partners documents and follows up on our engagement efforts. If a company is unresponsive or unwilling to improve its ESG efforts, we will consider selling our position. Riverwater Partners votes proxies of portfolio companies according to our Proxy Voting Policy, which favors management and shareholder resolutions that align with our ESG views. We inform companies of our position and rationale when we vote against them.
III. Collaboration
Riverwater Partners collaborates with local, regional, and national organizations to inform and become informed regarding ESG issues and practices, and to increase our collective impact in moving companies toward business practices that reduce risk and enhance opportunity, benefit all stakeholders, and ultimately result in superior financial performance and real economy benefits. Riverwater Partners is a member of US SIF, CDP Worldwide, Seventh Generation Interfaith Coalition for Responsible Investment, ICCR, Ceres, and is a signatory of United Nations PRI. In addition, Riverwater Partners is a Certified B Corp. Membership in these organizations provides us with thought leadership on best practices, current trends, and impact, which enables us to focus our ESG lens effectively.
We believe that each of our Three Pillars is imperative to the success of Riverwater’s ESG strategy and that the combination provides a competitive advantage over our peers. Performing our own due diligence and using our proprietary ESG scoring methodology ensures that we are evaluating the ESG factors most salient to each company and allows for comparison to peers and progress over time. Our robust engagement practice influences companies to work to improve the factors most important to their business and all stakeholders. Collaboration with thought leaders keeps us informed about important ESG factors, allowing us to focus our efforts where we can generate the greatest impact on our portfolio companies, society, and ultimately our clients.
Total AUM in SRI: $$57.9M (in US$ millions)
Research conducted: Internally
Researcher name: Entire Research Team
Contact info:
1433 North Water Street Ste 303
Milwaukee, WI 53202
USA
Phone: (414) 858-8000
Email: mdrvaric@riverwaterllc.com
Web: https://riverwaterpartners.com/asset-management/ (Opens in a new window)
Specific Screening Information by Category - [Return to Top]
Environment
- Climate / Clean Technology: Positive Investment
- Pollution / Toxics: Combination of Positive and Restricted/Exclusionary Strategies - Riverwater seeks companies that are attentive to reducing their emissions and waste.
- Other Environmental: Combination of Positive and Restricted/Exclusionary Strategies - Riverwater considers other factors such as energy consumption, water use, recycling programs, and supplier environmental standards.
Social
- Community Development: Positive Investment - Riverwater seeks companies that give back to the community.
- Diversity & Equal Employment Opportunity: Positive Investment - Riverwater seeks companies that have broad employee diversity.
- Human Rights: Combination of Positive and Restricted/Exclusionary Strategies - Riverwater seeks companies that are attentive to supply chain human rights issues.
- Labor Relations: Combination of Positive and Restricted/Exclusionary Strategies - Riverwater seeks companies that emphasize worker and product safety.
- Conflict Risk: Combination of Positive and Restricted/Exclusionary Strategies
Governance
- Board Issues: Combination of Positive and Restricted/Exclusionary Strategies - Riverwater seeks companies with broad board diversity, board chair and CEO separation, and companies with stock ownership requirements for executives and board of directors.
- Executive Pay: Combination of Positive and Restricted/Exclusionary Strategies - Riverwater seeks companies with executive pay tied to performance.
Products
- Alcohol: No Investment
- Defense/Weapons: No Investment
- Gambling: No Investment
- Tobacco: No Investment
Other
- Shareholder Engagement - Shareholder Resolutions: Filed or co-filed with companies on environmental, social or governance issues
- Shareholder Engagement - Private Dialogue: Conducted with companies on environmental, social or governance issues
- Proxy Voting: Actively voted by my institution for this investment strategy in support of environmental, social or governance issues in accordance with formal guidelines