Investment Approach

Sustainable Investing

Central to my investment belief is the view that sustainable companies will be able to generate positive free cash flow from operations over the longer term. Good governance practices provide the framework for this through the provision of appropriate strategic direction and policy setting. In addition, it is the effective allocation of free cash flow over time that drives long-term value creation for shareholders. To be successful, capital allocation requires astute management and oversight by Boards.

We welcome more recent enhancements to transparency and reporting on Environmental and Social considerations. There is substantial evidence that considering ESG factors in research processes enhance the prospects of achieving attractive risk-adjusted performance over the long term.

— William Priest, Executive Chairman and co-CIO

Epoch has a long tradition of investing with the purpose of providing solutions for our clients. In recent years we noted that many were beginning to explore incorporating ESG considerations into their investment policies. Hence, to further help our clients, Epoch has allocated resources to improve the formal incorporation of E, S & G considerations into our investing processes. In addition, signing the PRI is clear evidence of Epoch’s commitment to responsible investing.

— Philipp Hensler, Chief Executive Officer


Sustainable Investing Report 2020

Epoch’s latest Sustainable Investing Report lays out our approach to ESG while detailing our activities over the past 12 months and highlighting our strategic goals.

View Report

Dedicated ESG team

Ravi Varghese, Head of Sustainable Investing

Maya McFann, ESG Analyst

Epoch’s ESG Policy

Epoch made a strategic commitment to ESG with the adoption of its first formal Policy in 2015. Following extensive research, Epoch is now pleased to formally launch a revised and updated ESG Policy. As noted in our Annual Report, while our focus historically has been on understanding governance frameworks to guide the operation of a business, throughout 2019 we also evaluated other issues within the umbrella of ESG considerations. In particular, Epoch considers climate change an increasingly important ESG factor and has adopted the CDP Global Investor Statement on Climate Change at the core of the revised policy. Our objective is to review and monitor the carbon intensity of our portfolios, focus on the major contributors, and engage with those companies to better understand their business strategy and what actions are being taken to address climate related risks. We have also made a number of other changes to our policy and we plan to develop other considerations to help broaden our understanding of both potential risks and opportunities for the companies we invest in.

Link to ESG Policy

Participation in Strategic Initiatives

Epoch is a signatory of the UN Principles for Responsible Investing. We are evaluating a number of initiatives including partnerships with academia, Non-Governmental Organizations (NGOs) and other associations relevant to the enhancement of our ESG processes and clients’ objectives.

We are pleased to announce that Epoch has recorded significant improvement across all categories from the Principles for Responsible Investment (PRI). Epoch was awarded an A rating for its strategy and governance on sustainable investment. 

Epoch became a Signatory to the PRI in 2018, and remains committed to further integrating ESG considerations into its investing processes and expects to see continued improvements in PRI ratings.

Phillip Hensler, Epoch’s CEO commented:

“We are delighted with the recognition we have achieved from the PRI as we have progressed the integration of ESG considerations throughout our investing processes.”

Principles for Responsible Investment (UN PRI)

Industry Associations

Epoch continues to examine the merits of joining various associations to benefit our investment processes and ESG program. These organizations provide valuable education and opportunities to collaborate. To date, Epoch has become a member of CDP and Ceres.


“CDP (formerly the Carbon Disclosure Project) is a not-for-profit charity that runs the global disclosure system for investorscompaniescitiesstates and regions to manage their environmental impacts. Over the past 15 years CDP has created a system that has resulted in unparalleled engagement on environmental issues worldwide.”
Link to CDP website


“Ceres is a sustainability nonprofit organization working with the most influential investors and companies to build leadership and drive solutions throughout the economy. Through powerful networks and advocacy, Ceres tackles the world’s biggest sustainability challenges, including climate change, water scarcity and pollution, and inequitable workplaces.”
Link to Ceres website


Our Perspectives

The recent surge in start-ups and unicorns reflects the broadening of the digital revolution across industries, and suggests improving productivity and free cash flow. Further, although the digitization of the economy is still in early earnings, we expect digital platforms to represent the majority of market cap by 2025, with tech, health care and communications the most promising sectors.

Inflation risks are at a four-decade high due to today’s combination of a generous Treasury, an overly tolerant Fed, and a reopening economy. While our base-case scenario assumes only a brief period of above-target inflation, investors should brace themselves for more inflation scares, which will likely remain a key driver of equity markets well into 2022.

During the past two years, CBDC has progressed from a bold speculative concept to a seeming inevitability and will soon be a core feature of our financial ecosystem. The rollout of CBDCs will further accelerate the digitization of the economy, which is the key defining feature of markets over the past decade. This paper explores the implications for monetary policy, the FinTech and payments sectors, and the potential disintermediation of significant swaths of the commercial banking system.

The Cambrian explosion of exciting breakthroughs in AI, autonomous driving, 5G, and cloud computing will drive double-digit growth in semiconductor revenues for the foreseeable future. Superstar firms have come to dominate all subsectors of the increasingly concentrated semiconductor industry, which implies pricing power and explains the sector’s attractive operating margins and return on capital. Valuations are reasonable, and we have a constructive view on the semiconductor sector and believe it possesses considerable upside.

Both sides of the political spectrum have been increasing their calls for regulatory action on the Big Tech companies. Here we explain why tech will continue to be the most dynamic sector of the economy, and why we expect greater breadth in tech market leadership and the emergence of entirely new sub-sectors.

More than just our proprietary stock selection model, the Epoch Core Model (ECM) is a rules-based expression of Epoch’s free cash flow investment philosophy. Learn more about the components that make up the ECM and how it’s being used to enhance the firm’s investment processes across strategies, to surface ideas for further research, to prioritize our research queue, and to inform our portfolio construction process.

In understanding the performance of any investment strategy, it is important to pay attention to how real economic events drove that performance, rather than fall back on a set of abstract  factor returns as if they were somehow responsible.

The last six months have been profoundly transformational, with the COVID shock acting as an accelerant for the digitization of the economy. This radical transition is especially advantageous for asset-light business models. All companies will be acutely affected, although the biggest winners are platforms, with their economies of scale and low marginal costs.