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At AllianceBernstein (AB) we view responsible investing as an active and dynamic pursuit that unites all parts of our firm; from the way we work and operate within our communities, to the manner in which we assess and engage with companies, as well as the investment solutions we provide for our clients.
Our approach to responsible investment comprises three core characteristics:
A commitment to corporate responsibility relates to both to our activities as a firm, and as an investor. We believe that we cannot be credible responsible investors without acting as a trustworthy corporate citizen, so it is important that we demand the same standards of ourselves as those of the companies we buy. This relates not only to environmental stewardship and our efforts to improve efficiency, but also to the inclusive and diverse social culture that we foster, and the fiduciary duty we possess to our clients and the communities in which we operate.
Read more about AB’s pursuit of corporate responsibility in our 2020 Responsible Investing Report:
Rigorous environmental, social, and governance (ESG) integration and a proactive engagement agenda form the foundation of our responsible investment philosophy. It is built on the notion that the way companies respond to material issues can impact their future profitability, and the emphasis placed on ESG considerations can offer a valuable insight into the quality of a business’s management, its culture, and risk profile, ultimately helping to scrutinise it prior to investing. Whether it is hidden risk that is uncovered, or a promising opportunity that is revealed, the analysis of ESG factors in assessing potential returns is an essential means of creating value for clients.
At AB, ESG integration is investor driven. Through an in-depth understanding of the companies and industries they cover, our individual investment teams are best placed to determine which ESG factors are material to performance, as well as to encourage the businesses they own to take them into account. The initial analysis is only part of the process though; our insights must be documented and shared using our proprietary systems so that they can form the basis for collaborative engagement campaigns, across teams and asset classes. By doing so, we demonstrate our willingness to demand that companies improve their practices, thereby driving better outcomes for investors.
The importance of utilising ESG factors in fundamental research applies to any investment strategy, within any asset class. It is simply good investment practice. That is why all of AB’s active strategies incorporate ESG considerations into their decision-making processes and use it to guide ownership efforts that may drive positive change within our portfolios.
Portfolios with Purpose
For clients who want to build upon the principles of integration and engagement to invest with a specific, ESG-related, objective, we have created various Portfolios with Purpose.
An example is our Sustainable Thematic range which aims to deliver superior financial performance by targeting companies that identify environmental and social challenges, and offer sustainable solutions to address them.
Our process, spanning both equity and fixed income assets, combines a bottom-up focus on the ability of companies to ensure the longevity of their business models through the management of ESG issues and traditional financial metrics, with a top-down thematic emphasis that determines the products and services which contribute to achieving the UN Sustainable Development Goals.
Climate change, resource scarcity, public health, and demographic shifts are increasingly influencing the movement of financial markets, so it is important that we anticipate the potential opportunities, and risks, that may arise as a result. Directing capital to businesses providing solutions to these challenges, rather than those which face the risks they pose, can provide investors with exposure to fast-growing industries, that may help to preserve and, ultimately, increase their wealth.
Watch our short video with Dan Roarty, CIO of Sustainable Thematic Equities, to hear more about our Sustainable Thematic investment philosophy:
ESG analysis is not just about identifying and measuring risk, it is also about identifying investment opportunities. We consider ESG factors alongside traditional financial measurements to provide a comprehensive view of an investment and help identify those investments that have the potential to deliver sustainable returns.
Responsible Investing refers to an overarching approach that takes into account important aspects of environmental, social and governance (ESG) issues when investing. At Franklin Templeton, this umbrella term applies to the integration of ESG factors into the investment process across all of our strategies.
We believe the consideration of ESG factors can lead to better outcomes for our clients. When used to complement conventional financial research, ESG analysis can help improve long-term investment performance.
Incorporating material ESG factors into fundamental research provides a comprehensive view of an investment’s value, risk and return potential. That’s why we’re committed to integrating ESG across all asset classes and investment strategies.
We’ve standardised our ESG philosophy across the firm by establishing an ESG Investment Committee, as well as ESG asset class working groups. This approach allows us to harness expertise from across our global network, and helps us work together as a firm-wide team, sharing best practices.
Responsibility: our past, present and future. Our fiduciary heritage and expertise in responsible investment ensure that our clients’ interests come first and that we support positive change in the wider world. We believe that investing responsibly is the best way to sustain long-term outperformance, and that it contributes to beneficial outcomes for investors, companies, society and the environment.
Responsibility works: for investors, for business, for positive change.
As pioneers of ESG integration and stewardship, we have been at the forefront of responsible investing since 1983. We aim to deliver sustainable wealth creation that enriches investors, benefits society and preserves the environment – for current generations and those to come.
The international business of Federated Hermes has long advocated and applied this approach.
Since first engaging for stronger UK corporate governance in 1983, to becoming a founding signatory of the Principles for Responsible Investment in 2006 and spearheading the 2017 global Climate Action 100+ initiative, which involved 370 investors with more than $35tn in assets, we have been at the vanguard of a movement that is now redefining the practice of investing.
Federated Hermes is committed to incorporating ESG considerations as fundamental factors throughout its investment strategies. Through EOS at Federated Hermes (EOS), our specialist stewardship team that has a 15-year track record of effective engagement, we seek to advance best practice active ownership for the benefit of investors, companies and the world at large.
The role of the Responsibility Office
The Responsibility Office acts as the conscience of Federated Hermes and is responsible for ensuring that everyone delivers on our mission of delivering holistic returns. It works with the Investment Office to ensure that our investment and engagement teams integrate stewardship and ESG factors into their activities, develops and leads the implementation of our advocacy positions and holds each department accountable for ensuring that we act as a responsible firm and in the interests of the clients and their beneficiaries.
EOS is a leading stewardship service provider. Our engagement activities enable long-term institutional investors to be more active owners of their assets, through dialogue with companies on environmental, social and governance issues. We believe this is essential to build a global financial system that delivers improved long-term returns for investors, as well as better, more sustainable outcomes for society.
ESG investing is a fundamental commitment at Invesco. We believe that ESG aspects can have an impact on sustainable value creation as well as risk management, and that companies with ESG momentum may present investment opportunities.
Invesco S&P 500 ESG UCITS ETF
For investors seeking an ESG enhancement for their core US equity exposure.
In this video, Chris Mellor, Invesco and Jaspreet Duhra, S&P Dow Jones Indices discuss the key drivers for increasing demand in ESG investing, how the S&P 500 ESG index is constructed, and our Invesco S&P 500 ESG UCITS ETF.
Invesco GBP Corporate Bond ESG UCITS ETF
The Invesco GBP Corporate Bond ESG UCITS ETF is the first Sterling-denominated corporate bond ETF in Europe that incorporates ESG. In this video, Paul Syms and Maria Lombardo discuss Invesco’s approach to ESG, the ESG landscape within fixed income and how the ETF aims to provide close tracking and meaningful ESG tilting for only 0.10% p.a.
The Liontrust Sustainable Investment team have been managing money in this way for nearly 20 years. The 13-strong team’s investment process identifies the key structural growth trends that will shape the sustainable global economy of the future and the well run companies whose products and operations capitalise on these transformative changes.
The Liontrust Sustainable Investment team launched the Sustainable Future (SF) fund range in February 2001 at a time when there were some ethical and the odd environmental fund.
The Liontrust Sustainable Investment team manages 12 funds to meet the different risk profiles, return objectives and geographical preferences of investors. The range comprises:
Four equity funds
Three fixed income funds
Five managed funds with different exposures to equities, bonds and cash that are determined by the level of risk they take as measured by volatility
The team’s distinct investment process combines negative and positive screening and identifying the key structural growth trends that will shape the sustainable global economy of the future. The team looks at the world through the prism of three mega trends – Better resource efficiency (cleaner), Improved health (healthier) and Greater safety and resilience (safer) – and then 20 themes within these.
The team then identifies well run companies whose products and operations capitalise on these transformative changes. Every company that meets the team’s thematic requirements is assessed using its sustainability matrix. This analyses:
Product sustainability (rated from A to E): the extent to which a company’s business helps or harms society and/or the environment.
Management quality (rated from 1 to 5): whether a company has appropriate structures, policies and practices for managing ESG risks and impacts.
Companies must score C3 or higher.
A key differentiator for the team is the fact that all the sustainable elements are integrated within a single team. They do not have separate fund management and ESG divisions. Every team member is responsible for all aspects of financial and ESG relating to an investment decision. Because of this approach, the team engages with companies across a broad range of issues, including screening criteria, sustainable investment themes and company specific ESG issues.
The team ensures there is no greenwashing through:
Transparency: The Liontrust Sustainable Investment team has always been transparent, having a clear investment process and publishing all holdings in its SF funds on a quarterly basis.
Experience and resource: The team has been managing sustainable investment funds since 2001. The investment team is 13-strong, along with a specialist governance and stewardship manager.
Activism: Engagement is an integral part of how the team invests, and challenges and encourages companies to proactively manage the wider aspects of their business. In 2019, the team met with 185 companies face to face and raised 245 key ESG issues.
Evidence: Since 2015, the team have shown how themes and companies are contributing to the UN’s Sustainable Development Goals (SDGs). The team shows the impact of their investments, such as the funds emitting 75% less carbon dioxide than the markets in which they are invested.
The team were founding members of the PRI and have a track record of successful engagement in areas such as climate change, clothing supply chains and tax.
Highlights of recent engagement activity include meaningful progress on board gender diversity. In 2016, the team began withholding support for companies that are not sufficiently gender diverse. Where companies had fewer than 15% women on the board, they voted against the annual report and accounts at the AGM and abstained where this was greater than 15% but less than 30%. In 2019, the team used the same process but focused on the resolution to re-elect the Chair of the Nomination Committee.
Twenty-one companies in the team’s funds have increased the proportion of women on the board to over 30%, such that they no longer need to withhold support. After voting, these companies now have an average of 38% female boards, compared to just 22% before they began voting. A further 15 companies in the funds have increased the number of women on their boards, and we remain positive that continued efforts through voting and engagement should result in further progress.
The team’s latest initiative is the One and a Half Degree Transition Challenge that was launched in early 2020. This is calling for all companies held within the SF funds to explain how they plan to decarbonise their businesses to limit global warming to 1.5 degrees. Over 200 companies held across the funds have until the end of 2020 to provide a plan for how they are going to reach zero carbon emissions and over what time period this will be achieved. The team will use all measures at their disposal, including voting and ultimately divesting over time, to persuade companies to reduce their emissions.
1. SDGs video from our Sustainable landing page:
2. Video from recent Responsible Investor event:
3. Video with one of our Sustainable team, Mike Appleby, filmed for the SimplyBiz virtual events a few weeks back:
Our commitment to responsible investment In our view, responsibility goes hand in hand with a long-term, partnership approach. It means having a sense of responsibility and integrity not only towards the present generation, but also to future generations – and to the real economy and the wider world. This is true sustainable thinking.
Our commitment to responsible investment
In our view, responsibility goes hand in hand with a long-term, partnership approach. It means having a sense of responsibility and integrity not only towards the present generation, but also to future generations – and to the real economy and the wider world. This is true sustainable thinking.
We believe in responsible capitalism and take an enlarged view of the economy and its interactions with civil society and the natural environment. We are convinced that Environmental, Social and Governance (ESG) considerations can help us make better long-term investment decisions for our clients
We are committed to integrating material ESG criteria in our investment processes and ownership practices with a view to enhancing returns and/or mitigating risks over the long term. We embed ESG in our risk management and reporting documents to maintain high standards of transparency and accountability. Today, all our active long-only equity and fixed income investment strategies incorporate ESG considerations.
For investors willing to go further, our sustainable strategies invest in companies based on their social and environmental impact, as well as their financial prospects. We also have a range of thematic strategies that invest in companies helping to solve environmental and social challenges such as water scarcity and climate change.
Performance that doesn’t have to cost the planet: Pictet-Global Environmental Opportunities
Sustainability is a crucial part of the business of Robeco. We were a pioneer of sustainable investing as one of the first asset managers to start taking it seriously in the mid-1990s. ESG factors are now integrated into the investment process for our entire fundamental equities, fixed income, quantitative and bespoke sustainability fund ranges.
We know that sustainability is a long-term force for change and a driver to integrate ESG across our investment solutions, actively engage with companies, and work on real impact.
By diving deeper to understand dynamics and impact, our comprehensive sustainable approach leads to better-informed investment decisions. Creating better returns – and looking after the world we live in.
Our long commitment to sustainability often leads to external recognition: Robeco ranked first place for SI in the renowned ShareAction survey of 75 global asset managers.
Trium Capital is dedicated to achieving the best possible risk-adjusted returns for its investors. We believe that ESG and RI are important tools for alpha generation and that this integral part of the investment process helps achieve good outcomes for our investors, and the planet.
One of Trium’s strategies, Trium ESG Emissions Impact, relies directly on constructive engagement with companies to both further ESG objectives and create alpha. It is the Portfolio Manager’s belief that active engagement drives alpha generation whilst reducing carbon emissions.
The Trium ESG Emissions Impact Fund is an Equity Market Neutral strategy that seeks to deliver alpha driven absolute returns with low correlation to other asset classes and existing ESG products.
The Portfolio Manager invests in companies which have the potential to significantly improve their environmental footprint relative to both their peers and the broader European market through active engagement and support. The Portfolio Manager expects to be carbon neutral to net short carbon on average and may invest in European Emissions credits to help achieve this.
The Portfolio Manager is taking a unique approach to ESG investing. Whereas traditional ESG portfolios rely on negative screens, the Trium ESG Emissions Impact Fund takes the view that:
“If you want to fix a problem, you have to go to where the problem is.” The Fund is very focused on the “E” in ESG, specifically emissions reduction, as the Portfolio Manager sees this as being an area of great importance that has not been the focus of Alternatives managers.
The Fund leverages on the Portfolio Manager’s 20+ years of experience in industries where a large proportion of global emissions originates from. We target the high-emitting sectors: energy, resources, materials, utilities, industrials and transport. This universe is c.30% of the overall European equity market and represents c.90% of emissions. The main focus is currently in Europe, with selected exposure in North America and Australia.
As the Portfolio Manager, says, “Do you want a clean portfolio, or do you want to clean the Planet?”