The green traits of a footballing Red

Which Liverpool midfielder has built a long-term career in top-flight football on the sort of qualities that can also indicate a best-in-class company from a sustainability perspective?

10/06/2022

Tom Biddle

Tom Biddle

Investment Product Analyst

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If businesses were footballers, who would you be buying now? If you are among those still merrily braving the tech-driven historic highs of the US market, perhaps you would be happy shelling out £100m or more for a thrilling attacker – Paris Saint-Germain’s Kylian Mbappé, say – though some of those deals work out better than others. For our part, here on The Value Perspective, we are more interested in Liverpool’s James Milner.

To be honest, it first occurred to us to write this piece back in January when, with Liverpool 1-0 up against Arsenal in the semi-final of the EFL Cup and 15 minutes away from what would prove the first of two Wembley finals in the season just gone, manager Jurgen Klopp looked to his bench for fresh legs to help close the game out – and brought on the 36-year-old Milner.

In most lines of work, of course, 36 is still young but, in footballing terms, it is positively ancient – especially for an outfield player. The substitution acted as a stark reminder that Milner – who made his professional debut on 10 November 2002 (when his fellow midfielder and sub in the Arsenal game Tyler Morton was just 10 days old) – remained as capable as ever of playing at the very top level of English football.

Still, we wondered, how big a part might Milner play in what some felt could be a historic quadruple-winning season for Liverpool? Ultimately racking up 39 league and cup appearances, he scored in both penalty shoot-outs as Liverpool edged Chelsea in the EFL and FA Cup finals and was on the pitch for the final 45 minutes of the Premier League campaign as the club ran Manchester City so close to the title.

Milner did not get to play in Liverpool’s 1-0 loss to Real Madrid in the Champions League final at the end of May but he still managed to round off his season very positively – with a one-year contract extension from his club and an MBE from the Queen, as part of her Jubilee Honours List, for services to charity and, of course, to football.

Best-in-class

Were managers to assess footballers in the same way investors are increasingly weighing up companies – seeking out the best-in-class businesses on environmental, social and governance (ESG) considerations – might they conclude Milner is the most sustainable player ever in English football? Certainly his long-term success, coupled with a supposedly dry personality, encapsulates an important sustainable investing lesson.

The wider market appears to believe that, when it comes to finding sustainable or ESG-friendly companies, they are confined to looking only at relatively new businesses that may have come to market recently with some kind of innovative technology or product. This has led to many such companies trading on pretty expensive valuations.

As value investors, fishing in the cheapest areas of the market, we too can find extraordinary examples of companies innovating in order to operate much more sustainably – yet they tend to trade on much cheaper valuations. This is because, more often than not, they are more mature companies and so seen as ‘boring’ – not unlike Milner – and so the market simply does not get as excited about them as we do.

Think about what qualities exactly have contributed to Milner’s longevity among football’s elite and you will start to find parallels between the principles he has demonstrated throughout his career and a number of the elements we look for, here in Schroders Global Value team, when searching for best-in-class companies from a sustainability point of view. Let’s focus in on three of these:

1. Industry leadership

With his wealth of experience – not just on the pitch, but off it too, in terms of the way he trains, eats and looks after his body – Milner’s peers look up to him. As a result, his behaviour sets an example others around him follow, which in turn raises the standards of those across his industry. Managers crave this kind of leadership-by-example in their squads – which could go a long way to explain that recent contract extension.

This kind of leadership is also front-of-mind when we are assessing candidates for our sustainable funds. We target companies that are leading the way in their respective sectors in ESG terms – and so forcing peers to improve behaviour. Be it the introduction of more environmentally-friendly waste management practices, say, or new technology for electronic vehicles, rival firms often follow  suit.

2. Stakeholder interests

The UK rarely finds itself short of footballer-related scandals and yet, over the last two decades, you would be hard-pushed to find a single one involving Milner. Part of his success stems from a continual focus on doing the right thing both by himself and his football stakeholders – team-mates, managers, fans and so on. Such a mindset has kept him at the top of his game while also helping avoid harmful PR issues through his career.

As investors, we too are always on the look-out for businesses that put the interests of their stakeholders ahead of a ‘profit at any cost’ mindset – whether that be ensuring they pay all their employees fairly, manage their relationships with suppliers appropriately or act with proper consideration towards the surrounding community.

All else being equal, businesses that strive to do right by their stakeholders offer a greater probability of improved shareholder returns over the longer term. Furthermore, from a risk-management perspective, investing in a portfolio of companies that adopt this kind of stakeholder-centric approach should reduce the likelihood of individual company-specific controversies occurring that may affect overall fund performance.

3. Adapting to change

In the near two decades he has been a professional footballer, Milner has played for six different clubs as well as earning more than 60 caps for England. Wherever he has played, he has learned to adapt his own game to the different demands made of him by more than a dozen managers as well as to the evolving challenges of football as a whole. Again, this adaptability has contributed hugely to his elongated success within the sport.

Similarly, we want the companies we invest in to show us they are listening and adapting to the evolving requirements we have as shareholders and, importantly, as agents of our clients. With ‘net zero’ targets, for example, we want to see not only verbal commitments, but practical plans and tangible actions to help them achieve these goals. When it comes to sustainability, company actions really do speak louder than words.

These are just three factors among many that can contribute both towards long-term success as a footballer and being a best-in-class company from a sustainability perspective. Comparable principles can be shared by companies and individuals alike and businesses looking to prosper for the long term could do a lot worse than study the actions of James Milner as he closes in on 20 years in top-flight football this November.

Author

Tom Biddle

Tom Biddle

Investment Product Analyst

I joined Schroders in 2018. I initially worked in institutional sales with global insurance clients and then moved into UK Sales focusing on wealth managers and intermediaries. I joined the Value team in 2022 as an Investment Product Analyst. Prior to joining Schroders I interned at EY within the Corporate Restructuring team. I have passed level 1 and 2 of CFA and am studying towards level 3. I hold a BSc in Economics & Finance from the University of Leeds.

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