Reasons to invest
1 ESG Investing: How Covid-19 accelerated the social awakening, by Federated Hermes, published November 2018
We have been working closely with clients since 2012 to understand their needs and provide solutions that meet their investment objectives without compromising their beliefs.
Why Global Equity Screened ESG?
The Strategy is aimed to generate consistent returns and to outperform its benchmark in any market environment. Consistency is achieved by investing in a diverse range of companies with strong, long-term fundamentals and ESG characteristics. This helps defend against swings in style and means clients are not required to time their entry point to benefit from a particular factor tailwind.
Assessment of a company’s ESG characteristics is a vital part of our investment approach. We use ESG research in proprietary models and in discussion with our voting and engagement experts, EOS at Federated Hermes. We believe companies less exposed to ESG risks will outperform over the long term. Learn more about our approach to ESG Integration.
Our investment approach enables us to create bespoke solutions based on a range of different factors, including regional biases, risk and return objectives, sustainability, ESG and clients’ own ethical beliefs. We work closely with clients to help them create specific parameters and understand the associated risk implications.
How we invest
Our investment philosophy can be encapsulated in four words: pragmatism, sustainability, responsibility and longevity.
We take a pragmatic view of the investment universe to identify stocks with the most attractive combinations of fundamental characteristics. We look for companies with sustainable business models and competitive advantages. In addition, it is important that companies behave responsibly, which leads us to companies that are well governed and treat their responsibilities to society and the environment seriously – such companies are more likely to avoid negative surprises. Choosing companies that demonstrate a combination of these characteristics allows us to hold stocks over the long term: it is only in the long term that a company can fulfil its potential.
We incorporate exclusions based on clients’ specific requirements, and we exclude companies:
- Identified by EOS as being involved in the manufacture and distribution of controversial weapons and cluster munitions.
- On EOS’s Controversial Companies Report with a High Severity rating for environmental and social risks and where engagement is deemed unfeasible
- Generating >10% of revenue from gambling, tobacco, logging, nuclear energy or armaments
- Companies with material high-carbon exposure
We assess macro risks and stress-test the portfolio using MultiFRAME. We also perform a subjective ‘sense check’ at the company level to validate the data, assess unquantifiable factors and interrogate ESG before constructing the final portfolio.
Stewardship is an essential part of our investment approach. In managing the portfolio, we seek constructive and positive dialogues with each company’s board and management team, encouraging them to mitigate any negative impacts and to adopt practices, initiatives and strategies that deliver tangible and positive outcomes.
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