Sustainability Statement
As an investor, Dalton aims to find companies exhibiting superior Environmental, Social and Governance (ESG) standards, as it believes these companies tend to exhibit higher long-term sustainable operational performance. We also apply this lens to our own firm and aim to adopt best-in-class principles.
Alignment of Interest
A key element of Dalton’s investment philosophy is our belief that investing in companies where the firm’s decision-makers have an alignment of interests with minority shareholders may lead to superior risk-adjusted results. The main alignment of interest we find is where the key individuals at a company have material ownership in their company. We call these firms “owner-operators.”
Dalton is also an “owner-operator” firm, with the company’s equity held entirely by its employees (and their related entities). We are currently in the process of broadening this ownership across a larger number of employees to instil the “owner mindset” in more of the Dalton team. We believe that being independent allows Dalton to make long-term focused decisions, which might be challenged under external or public ownership structures.
The second way in which Dalton aligns interests with its clients is to encourage that its investment team members have a material portion of their net worth invested in the firm’s strategies alongside clients. Each year, the investment team members are requested to reinvest at least 50% of any pre-tax variable compensation in Dalton’s funds. Our team’s alignment of interest is monitored at least annually. Investment team members are also strongly discouraged from buying individual stocks in their personal accounts. We believe that this concept of “eating your own home cooking” aligns the interests of Dalton’s investment team with those of its clients.
Human Resources and Talent Management
Dalton believes strongly that having team members with a wide range of backgrounds and experiences leads to better decision-making, both in the management of our client portfolios and in the management of our business. We also believe that a variety of perspectives – shaped by factors such as age, gender, personal background, education and work experience – enhances our effectiveness. Dalton’s workforce is highly representative, with 17 nationalities and 19 languages spoken across the team. The composition of the firm’s senior executives (including individuals from different backgrounds in the Chairman, CEO, CCO, and CFO/COO roles) also reflects our commitment to broad representation. However, we recognize there is always more to do and remain focused on attracting talent from a wide range of backgrounds and challenging our internal assumptions.
Dalton’s Management Committee monitors the composition of its staff using voluntary and anonymous surveys, as well as a voluntary (but not anonymous) survey for partners of the firm. We also take steps to broaden our candidate pool by considering a wider range of educational and professional qualifications, using blind resumes, offering job flexibility, and keeping job postings open longer to encourage participation from individuals who may be underrepresented in our industry.
Dalton understands that simply having a range of backgrounds on our team is not enough, so we take active steps to create a welcoming and supportive work environment. We believe that an atmosphere where all employees feel valued and able to contribute fully is essential to Dalton’s long-term success. As such, we provide training on topics such as workplace respect and addressing unconscious biases. We have also aligned our firm policies to support the career growth of all team members – for example, by offering flexible work arrangements, parental leave, and support for continuing education. Finally, we have implemented a mentoring program for new employees, with particular attention to supporting those from backgrounds less commonly represented in our industry. Our senior executives also participate in professional organizations to encourage the next generation of talent.
Well-Being
Dalton takes the well-being of its employees seriously, as it believes a healthy working environment is more productive for both the firm and our clients. We encourage our employees to take regular breaks (including in our communal areas, which have a wide range of complimentary healthy-eating options provided) and are also supportive of our employees taking time off to recharge on vacation. Finally, we provide a healthcare allowance (to be used on a gym membership or home fitness equipment) to support the physical well-being of our employees.
Travel
Given Dalton’s focus on in-depth due diligence of Asian and emerging market companies, as well as our global client base, we view travel as a necessary part of our business for investment and client service purposes. We, however, encourage our employees to evaluate their travel arrangements and, where possible, develop efficient travel itineraries and/or use alternative forms of communication, such as video and teleconference technologies. In addition, we purchase Carbon offsets from Cool Effect (more information here) to compensate for the emissions resulting from our team’s air travel. Cool Effect is a non-profit dedicated to helping individuals, organizations and businesses of all sizes reduce their carbon emissions then offset what remains with the highest quality carbon offsets on the planet.
Environmental Policy
Dalton takes active steps to minimize its environmental footprint in its Santa Monica office. The office building is currently LEED Gold certified and holds an excellence rating by Energy Star. The facilities provide access to recycling, including e-waste, and provide highly efficient air filtering to ensure a healthy working environment. Within our own office space, we take a range of steps to ensure employees recycle where possible and encourage staff to reduce the use of resources, such as paper and single use plastic products, unless absolutely required.
Managing Risk at Dalton
Dalton’s Management Committee is responsible for the firm’s major day-to-day tasks and projects, including ultimate oversight of the risk management function via the Risk Management Committee. The Management Committee is made up of Senior Executives, including the Chief Executive Officer/President, Chief Research & Sustainability Officer, Chief Marketing Officer, Chief Compliance Officer/Counsel) and Chief Financial Officer/Chief Operating Officer.
Dalton’s Risk Management Committee (the “Risk Committee”) supervises all Firm risk functions and consists of the CEO/President, COO/CFO, CCO/Counsel, Co-Founder, Chairman and CRO/CSO. The Risk Committee generally meets on a quarterly basis to review risk-related reports produced by members of the Compliance, Operations and Accounting teams.
Dalton’s compliance team monitors and elevates exceptions, issues on client portfolios, and various internal Firm controls directly to the Risk Committee. The CRO/CSO generally monitors and reports market, liquidity, credit and counterparty risk to the Risk Committee. Summaries of the Risk Management Committee’s sessions are reported to Dalton’s Management Committee. Any material changes to the Firm’s risk policies are reviewed and approved by the Management Committee.
As well as internal oversight from the Risk Committee, Dalton uses external parties to assess and control firm-level risk. An independent controls audit is undertaken on Dalton annually by Grant Thornton, which seeks to record and assess the efficacy of Dalton’s stated control processes and publishes a SOC-1 report (available upon request). Dalton also uses an external party to test internet security controls (ACA Aponix) and to implement a mock SEC audit and an email surveillance program on an annual basis (ACA Compliance Consultants). Finally, Dalton welcomes the operational due diligence assessments of its large institutional clients and their consultants, viewing these assessments and feedback as an opportunity to make improvements and minimize risk.
Net Zero and Alignment to the Paris Agreement
Dalton is committed to an investment approach that aligns with the central goal of the Paris Agreement. This landmark agreement aims to “hold the global average temperature to well below 2°C above pre-industrial levels” and pursue efforts “to limit the temperature increase to 1.5°C above pre-industrial levels.” To limit global warming to 1.5°C, greenhouse gas emissions must peak before 2025 and decline by at least 43% by 2030.
Dalton will align with the agreement by seeking to implement investment portfolios that will achieve a reduction in emissions of 43% by 2030 against the base year of 2025. At this stage, we monitor emissions within the portfolios and will track year-on-year emissions changes. Where no tangible emissions goals or targets exist, we will actively engage companies to implement sufficient policies and targets to align with the Paris Agreement. By 2050, we aim to transition our portfolios towards net zero emissions.