For the past four years, Catella has deepened her work on sustainability. The basis of our investment philosophy and process lies in the belief in a connection between a sustainable business model and endurance in the company's profitability and growth.
Today’s global challenges are fertile ground for both profitable business models and new circumstances. We are able to transform this into value creation in our funds. As portfolio managers, we seek out erroneous pricing in the market. By taking greater account of a company’s sustainability profile, we turn another stone and thereby enhance our ability to identify underestimated structural trends or overestimated cyclical trends. We believe that we improve the accuracy of our assessment, and that this helps us to avoid a number of undesirable risks. Consequently, sustainability and value creation go hand in hand at Catella Fonder, and benefit our fund unitholders.
A greater focus on sustainability influences our investments in several ways. We analyse the business opportunities and sustainability-related risks of each company, giving us a better understanding of its long-term qualities. This analysis enables us to identify specific sustainability-related investments. In our absolute return funds, we select and take larger positions in sustainability-driven companies, and take short positions in companies with unsustainable characteristics. We completely avoid investments in controversial products and services, and in companies that violate international conventions. Last but not least, we work on advocacy with companies that we believe have the potential to improve.
Catella Sverige Aktiv Hållbarhet and Catella Småbolagsfond are our flagship when it comes to sustainability. Here, sustainability is a decisive factor for all investments, and we place emphasis on companies where sustainability is part of the business concept. From 2018, all funds are free from investments in controversial products such as tobacco, alcohol, commercial gaming, weapons and coal. As of last November 2019, all Catella's funds are also free from investments in fossil fuels. However, Catella Hedgefond has the opportunity to capitalize on falling stock prices for companies that produce, process or transport fossil fuels by allowing the fund to go short in these sectors. Read more about our exclusion policy here.