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Built on our long history of expertise in large-cap, value and sustainable investing, the U.S. Large-Cap Sustainable Value strategy seeks to achieve competitive risk-adjusted returns over a full market cycle while providing a margin of safety. This is achieved by investing in a concentrated portfolio of companies that, according to our analysis, generate durable levels of free cash flow, exhibit capital discipline and have attractive valuations. In addition, we like our companies to demonstrate sustainable competitive advantages, more specifically defined by us as Sustainable Cash Flow Advantages (SCFA), where strong ESG execution often extends the duration and lowers the volatility of cash flows.

At Brown Advisory, we have long championed a performance-first mindset, which has enabled us to focus and deliver attractive long- term returns to our clients as well as achieving positive environmental and social outcomes.


The number of ESG-focused funds has mushroomed to meet investor demand. We believe, however, that there is currently a vacuum at the intersection between sustainability and value. Many companies that are traditionally perceived as ‘value stocks’, such as energy and financial services, do not typically fit the traditional mold of an ESG investment and have often been overlooked. In our view, there is room for a strategy that pinpoints those companies traditionally perceived as ‘value stocks’ but where management teams are leveraging sustainability to drive better free cash flow outcomes for the business.

We do not take an exclusionary approach at Brown Advisory andinstead build portfolios from the bottom up. It is the very essence of value investing that makes integrating ESG research into the process such an opportunity—we have the ability to allocate capital to companies that are part of the sustainable transition. The reality is that our clients need a diversified portfolio to optimize the likelihood of positive returns. Plus, our climate and society need all the possible solutions, not just those that sit in a style box.

Brown Advisory's large-cap, value and sustainable investing expertise



The U.S. Large-Cap Sustainable Value strategy brings together Brown Advisory experts across large-cap, value and sustainable investing. Portfolio Manager Michael Poggi, CFA, has 20 years of investment experience as a value investor and is supported by our large and diverse team of sector specialists and ESG experts. We pride ourselves on our ability to integrate fundamental and ESG research in a manner that we believe improves our investment decisions and leads to better performance over time.

It is our view that many companies in the early or mid-stages of their sustainability journey will add value—this gives us an opportunity to allocate our investors’ capital towards these businesses and build a portfolio that can make a difference.

The team works tirelessly to ensure that our investment decisions are informed by our robust proprietary fundamental and ESG research leading to clear insights about a company’s future prospects. Our fundamental and ESG analysts collaborate in an effort to find companies with qualities the market may not yet have noticed. The team uses a unique lens to ensure that we scrutinize potential investments from every angle—identifying companies with sound fundamentals and solutions that drive positive impact, as well as seeking to avoid companies where fundamentals are lacking or ESG risks are deemed too high. We ultimately aim to identify what we refer to as a Sustainable Cash Flow Advantage (SCFA)—or the opportunity to develop one—before we commit a company to the portfolio.

While our extensive history and experience within ESG research can give us an analytical edge when picking stocks, our bottom-up approach to business fundamentals is equally important. Part of our fundamental research includes researching public documents and historical financials, focusing on capital intensity and capital structures. By combining this information with the ESG insights we have learned, we are able to build in-depth financial models to identify a company’s free cash flow drivers and upside/downside potential. Furthermore, within our equity research team, we have a group of investigative analysts, something which we believe sets our research apart. This team use their investigative skills to answer complex questions about specific companies and industries. Their job is in some ways to be a detective, talking to customers and suppliers who use or don’t use a company’s product and gain a deeper understanding of the value that product creates for its customers. The depth of proprietary research this group offers has frequently helped our investment team make better decisions.


The 30-40 companies within the U.S. Large-Cap Sustainable Value strategy are drawn from diverse sectors, ranging from technology to industrials, energy to health care, and are at various stages in their sustainability journeys. They have been chosen for their capital discipline and durable fundamental cash flow, together with an attractive valuation. As fundamental stock-pickers, we also conduct ESG research from the bottom up, enabling us to perform deep analysis on companies and identify dislocations between what the market sees and what we find.


Source: FactSet. Portfolio information is based on a representative Large-Cap Sustainable Value account. Sectors are based on the Global Industry Classification Standard (GICS) classification system. Sector weights include cash and cash equivalents. Please see the last page for a complete list of terms and definitions. Numbers may not total due to rounding.


Every company in the portfolio must either have an established SCFA or an emerging SCFA, that has the potential to be realized within our investment time horizon. When searching for companies that we deem to have an SCFA, we are looking for those that are laser-focused on controlling the controllable. Every
company is exposed to external and uncontrollable factors (e.g., market, political or economic risks). Rather than dwelling on this, we think there are three things a company can truly control—their people (and the culture they drive), their process and day to day operations and their products or services. With that in mind, we have developed our 3P investment filter, which allows us to find companies that are gaining an advantage or reducing risk by improving their ESG practices. If a company can tie one of those 3Ps to a sustainable opportunity thesis, we believe it has a material Sustainable Cash Flow Advantage.

Our ESG philosophy is centred on a holistic view of a company, where we consider how it plays defense on risks and offense with opportunities. We are exclusively focused on companies at the intersection of strong fundamentals and our SCFA analysis, where a company uses ESG to drive outperformance, through its management of people, process and/or product.


Using our 3P investment filter allows us to uncover undervalued companies that others may overlook. To gain our attention, a company does not have to demonstrate a strong SCFA outcome across all three—it could be that they are laser-focused on one but on a clear path to the others.


The energy sector is a fitting example of our 3P attributes. Energy is the foundation of our economy and widely known to be responsible for emissions that contribute to climate change. While the energy sector is often personified as the villain, we prefer to view it as a sector of the economy, not a symbol of good or bad. Intrinsically, energy is an industry upon which the global economy relies, but there is no disputing that it’s an industry with multiple environmental risks. We appreciate the threat that climate change poses, and we seek opportunities in energy security and climate mitigation, and seek to find companies that manage climate risk better than others.

As an example of how our investment approach can help us to pick value stocks with a SCFA, let us look at technology provider ChampionX, which is one of the strategy’s core holdings. ChampionX is a chemicals company specializing in delivering solutions that optimize the extraction and drilling of oil and gas.

Fundamental analysis reveals that despite the perceived cyclicality of its end markets, ChampionX has been a consistent free cash flow (FCF) generator over the last seven years. Over 70% of its revenues are consumable in nature, providing an increased recurring revenue stream. In our view, its leading market position allows it to be a price leader and enjoy favorable margins, even during down cycles. At the end of 2022, it committed to returning more than 60% of
free cash flow to shareholders going forward.

We then use our ESG research to uncover the company’s SCFA,
which is apparent in three ways:

1. Products that extend the life of oil fields: CHX’s reservoir modelling products enhance oil recovery in mature oil fields, extending the economic life of fields in a safe and responsible manner, while simultaneously improving their carbon footprint. This can delay the need to drill new oil/gas fields.

2. Methane leak detection products: CHX is among the first movers in oilfield methane emission detection technologies and measurement. Its focus on continuous monitoring solutions vs. areal fly-by detection provides a more effective solution to methane leaks which serves as another revenue source.

3. Solutions that enable customers to achieve sustainability related goals: CHX offers chemical solutions that help customers achieve fresh water usage goals. By increasing a customer’s ability to use recycled water, CHX’s products can mitigate the impact of fluid problems that can shorten the life
of an oil well (i.e., scale, emulsion and microbial growth). These sustainable advantages add additional meaning to the fundamental valuation of ChampionX and we believe make it more likely to outperform over time.


No company is perfect. Through deliberate and thoughtful engagement, we hope to find something the market and our peers have missed. Many of our portfolio companies and potential targets for the strategy are at an early stage in their sustainability journey, which means that the potential benefits of that journey are not being adequately valued by the market. We believe that the earlier we get involved, the bigger the potential upside. Yet, in the same
breath, early entry also increases the likelihood of our thesis failing to mature. Through our analysis, we seek to tip the risk/reward equation in our client’s favor. This is why we believe engagement is critical. It allows us to monitor a company’s progress but also, where possible, to be part of that progress, using our influence as active managers with a long-term shareholder orientation, as a method to engage with management teams.

While most of our portfolio companies have been identified as having a clear SCFA, we may also invest in companies that are earlier in their sustainability journey and on a pathway to achieving one. Companies with developing SCFA or with higher risks are targeted as engagement priorities and we expect these businesses to bear out our theory that there will be advantages to their strategy within three to five years.

We use an engagement strategy matrix for each  company, which  includes a specific outcome in a defined timeframe, and we create annual KPIs to evaluate progress towards that goal. Our engagement toolkit is broad and includes investor collaboration, letter-writing, management dialogue, site visits, proxy vote, and other tools. We leverage conversations with management, employees, critics, academic institutions and other stakeholders to help us understand potential dislocations and test our investment thesis.

While no single investor can claim responsibility for a company’s sustainable achievements, we believe we can play a role in the journey of investee companies and improve outcomes for our clients at the same time. 



Of course, our focus is not just on when it is the right time to invest in a company. We also have to pay careful attention and make sensible decisions about when it is time to sell. We generally sell companies for one of four reasons:

1. Violation of either our fundamental or SCFA thesis: A negative event impacting a company’s ability to generate free cash flow, mis-execution or the erosion of company’s Sustainable Cash Flow Advantage.

2. Increased execution risk from capital allocation decisions: Management poorly executing a merger or acquisition or making ill-timed capital markets transactions; also may include significant increases in capital expenditures on a go-forward basis.

3. Excessive valuation: When valuation is excessive relative to the quality of the business, it becomes a headwind to total return.

4. Alternative opportunities: If a company is close to its target price level, whereby the risk/reward ratio becomes comparatively less attractive compared to other attractively valued portfolio holdings or a new opportunity. We seek to create competition for capital and fund new ideas from current holdings. Following a sell decision, our team performs an “After Action Review,” which reviews the investment performance against our initial thesis and aims to capture behavioral and analytical lessons learned. We seek to learn and improve continuously—being able to reflect on our past decisions to help us improve our future decisions is something that can benefit us as professional investors and ultimately our portfolio and our clients.


The intersection of ESG and value investing has become increasingly important. Investors are realizing that using ESG criteria can not only help mitigate risks and enhance returns, but also contribute to the sustainable growth of companies and the broader economy. Companies that adopt good ESG practices tend to attract a loyal customer base, talented employees and are likely to avoid costly legal liabilities—highlighting our 3P philosophy. We believe the investors who successfully incorporate ESG factors into their investment decisions are better positioned to identify companies with strong fundamentals and long-term growth prospects, thus creating a more robust and sustainable portfolio with the potential to deliver attractive long-term returns.

How we are different

About Brown Advisory

Brown Advisory is a leading independent investment firm that offers a wide range of solutions to institutions, corporations, nonprofits, families and individuals. Our mission is to make a material and positive difference in the lives of our clients. We are committed to delivering a combination of first-class performance, customized strategic advice and the highest level of personalized service.

We follow a philosophy that low-turnover, concentrated portfolios derived from sound bottom-up fundamental research provide an opportunity for attractive performance results over time. We have a culture and firm equity ownership structure that help us attract and retain professionals who share those beliefs, and we follow a repeatable investment process that helps us stay true to our philosophy.

Michael Poggi, CFA
Mike is the portfolio manager for the Large-Cap Sustainable Value Strategy. He joined Brown Advisory in 2003 as an equity research analyst and has covered multiple sectors and industries with a primary focus on value companies across the market cap spectrum. For the past 13 years, Mike has also been dedicated to the Small-Cap Fundamental Value strategy as an Associate Portfolio Manager while covering the industrial, material and energy sectors.