As an asset management and research firm, we tailor investment programmes to our clients' objectives. We are primarily long-term investors, seeking to preserve and grow clients' capital over time. We have two decades of shariah compliant investing experience, with particular expertise in the US, Global, Emerging, and ASEAN markets.
Saturna views investing as a business partnership and seeks high-caliber performers operating with integrity and with a view toward the long term. Saturna’s deep-rooted belief in value investing influences all of our investment decisions. We don’t follow trends, we analyze opportunities through detailed research exploring geopolitical developments, industry themes, technology trends, competitive environments, and corporate leadership. We view consideration of environmental, social, and governance (“ESG”) factors as essential in forming portfolios of high-quality companies that are better positioned to reduce risk and identify opportunities. We believe that companies proactively managing business risks related to ESG issues are more resilient and make better contributions to portfolios designed for patient investors.
We seek issuers that demonstrate financial characteristics such as strong free cash flows, attractive growth rates, increasing dividends, and low price volatility. We believe issuers with effective corporate responsibility policies are better positioned to avoid crises that could lead to reputational damage, higher costs, lost production, and fraudulent operations. We favor companies in which management has a meaningful stake. Because we are moderately risk averse, our performance may trail the averages in rising markets, as we seek to minimize losses during falling markets.
Saturna’s research team conducts detailed due diligence in order to understand every aspect of a firm’s operations. Saturna employs a disciplined buy-and-hold strategy with turnover that rarely exceeds 20% annually, an approach that fosters tax efficiency.
Saturna Capital screens more than 5,000 global securities monthly. Roughly half receive a quantitative A rating based on financial metrics and business activities, making them potential investment candidates. Companies with marginal financial metrics receive rankings of B, C, and D. About one-tenth are rejected outright (ranked F), due to prohibited business activities.
After initial screening, Saturna’s analysts begin the investment process with a thorough review of an issuer’s fundamentals, both at the company and industry levels. Our analysts search for companies that feature financial sustainability and avoid excessive debt, which supports Saturna’s long-term investment approach and helps to reduce risk. High debt can point to future problems such as increased risk of bankruptcy, quick fixes that lead to excessive risk taking, and lapses in governance.
Saturna is committed to analyzing an issuer’s strength through a holistic lens and believes that ESG investing must include identifying how a company addresses the key sustainability factors that materially impact its industry. We have developed a proprietary scoring system which provides an assessment of how well a company performs relative to a blend of its industry, sector, and country peers in each ESG category. Using a combination of negative and positive screening, Saturna’s analysts seek issuers who outperform their peers on a variety of ESG metrics.
Saturna’s negative screening excludes firms engaged in:
- Fossil fuel extraction
We positively screen for issuers with low environmental, social, and governance risk profiles which — in addition to material and non-financial ESG considerations, such as carbon emissions, water usage, renewable energy and fair labor and supply chain practices — includes firms that show management stability and diversity, low debt, strong balance sheets, high quality operations, and a long-term focus. Saturna also support the fossil fuel divestment campaign by excluding energy extraction and refining companies.
In order to assess the relevance of the data used to generate our scores, we carefully examine the quantity and quality of reporting for each scoring factor, including how the reporting varies—both in response rates and the distribution of reported data—by industry, sector, country, and region.
Each ESG category is built up from related subcategories:
We evaluate companies according to their transparency (i.e., whether they report data on a given factor) and their quality (i.e., how their reporting compares to their peers). Each factor is weighted by our assessment of its importance within its economic sector, or, when appropriate, by its importance relative to its country or regional peers.
While the quantitative ESG scoring process provides an invaluable stock identification tool, we believe meaningful stock evaluation and portfolio inclusion requires active management — detailed fundamental analysis of industry, financial, managerial, and ESG considerations. Numerous pitfalls challenge quantitative ESG scoring such as a pronounced “large-capitalization bias” since smaller companies, even good actors, may lack the resources to provide detailed ESG metrics. Key performance indicators determining executive pay present another area benefitting from qualitative review. Our belief in active management from a financial perspective applies equally to our ESG analysis.