Investment team's approach to Responsible Investment
Given the varying nature of the asset classes we manage, the geographies in which they operate and the size of our holdings, each of our investment teams’ responsible investment approaches are tailored to individual investments and the specific issues in question. In all cases there is a focus on material ESG issues that could impact on investment value over all periods, but particularly over the long term.
Each listed equity team has a process for identifying and assessing the relevance and materiality of ESG issues for their respective asset classes. For all active equity teams, company engagement is a key source of insights on such risks and opportunities. These insights, coupled with the best available third party ESG research, are assessed by the relevant company analyst and incorporated into stock notes or reviews and influence company valuations. Some teams assign specific ESG scores, while others incorporate the assessment into broader views of company management and business quality. All active equity teams hold regular team meetings to discuss company assessments, including ESG factors. Proxy voting rights are an important asset for listed equity investors and exercising these rights is a core part of our stewardship responsibilities.
For more information how our listed equity teams integrate ESG into their investment strategies, see each team’s page below.
Our Fixed Income teams believe that ESG issues have a direct impact upon an issuer’s risk and therefore its probability of default. As risks turn into liabilities, they can impact cash flow and, therefore, on debt costs and credit ratings. ESG issues can also impact on a sovereign’s ability to generate sustainable revenues or potentially increase its future costs, affecting its ability to repay bond holders.
The teams have an assessment process for ESG issues which flows into their view of a particular security, whether through a proprietary six-factor model used for emerging markets debt or the ESG score and internal credit rating used for other securities.
Our fixed income teams engage with counterparties, corporates, governments and supranational issuers to raise ESG concerns.
For more information how our fixed income teams integrate ESG into their investment strategies, see each team’s page below.
Our Multi-Asset team works with clients to integrate ESG considerations into their portfolios as required to meet their investment objectives. In addition to our standard exclusion of munitions and armaments companies, they can exclude specific ‘red flag’ companies or industries, such as those involved in tobacco, gambling and alcohol.
For more information how our multi-asset teams integrate ESG into their investment strategies, see each team’s page below.
For our Unlisted Infrastructure team, the ownership interest we currently hold in our portfolio companies ranges from ~15% to 100%. Our investment professionals are therefore a key part of the corporate governance structure by sitting on Boards of Directors or Shareholder Representative Groups. Consequently a more bespoke approach to ESG integration is desirable and necessary. The team has developed separate and detailed RI policies and assessment frameworks, while still adhering to the organisation-wide approach.
For more information how our unlisted infrastructure team integrates ESG into their investment strategies, see the team’s page below.