Stewardship and ESG integration
In the Short Term Investments and Global Credit space, the Environmental, Social and Governance (ESG) assessment most often comes through its impact on the internal credit rating (ICR) provided by the Credit Analysts via our Credit Research process.
The portfolio management team then use this to assess relative value when compared to other similarly rated issuers. For example, ESG considerations in the financial industry have led to our internal rating for some issuers being lower than that of the external rating agencies. As a result, the risk-reward assessment has often been decided such that we are underweight that sector in our active global credit portfolios.
The ICR is also used by the credit portfolio managers when making their decision to buy or sell securities and to determine position sizes for the funds that we manage.
We believe that a strong commitment to stewardship is an essential component of a strong approach to responsible investment (RI), and that embedding RI into the core of our investment activities is in the best long-term interests of our clients. For more than a decade we have systematically and progressively improved our practices and processes across our investment capabilities globally.
(Source: First Sentier Investors Responsible Investment & Stewardship Report 2019)