Since our first CEO openly challenged a major UK company to improve its governance, to our current leader Saker Nusseibeh being awarded a CBE for services to responsible business, the international business of Federated Hermes has been at the forefront of responsible investing.
Our story preserves our heritage, proves our purpose and inspires our future. It has always been – and will always be – driven by our way of responsible investing.
We act on evidence that our investment approach supports long-term outperformance and positive change.
A governance premium exists: companies with strong corporate governance typically outperform poorly governed peers by an average of 24bps each month.
The social uprising is gathering force: companies with good or improving social factors outperform by 15bps each month on average1.
We can price ESG risk in debt markets. For corporate and sovereign issuers, there is a correlation between ESG risk and credit spreads: those with the lowest ESG scores tend to have the widest credit spreads, and those with the best scores the tightest spreads2.
Engagement success can drive outperformance. Companies undergoing positive change can generate an additional 7.1% in additional annualised returns3.
We integrate ESG and engagement insights through proprietary research tools:
Our Responsibility Office oversees ESG and engagement integration and holds as much influence as our Investment Office.
We have pioneered stewardship since 1996 and continue to advance best practice:
Our multi-year engagement with Infineon culminated in a 2010 proxy fight with the computer chipmaker – the first such battle at a blue-chip firm in Germany. Following an 88.6% fall in its stock price over 11 years, we led shareholder opposition to the nomination of a long-standing non-executive director as supervisory board chair. This contributed to his exit a year later and the election of a new independent chair.
Following a compliance crisis, we engaged Siemens on strengthening its governance, and raised our concerns about the composition and effectiveness of its supervisory board. We spoke at seven of the company’s AGMs between 2007 and 2018 pressing for board refreshment, and in 2014 for timely succession planning for the chair. Over the period of our engagement the company has improved its corporate governance in many regards, including supervisory board composition by adding diversity and critically, expertise more relevant to the development of the business, such as in engineering, digitisation and software.
Following a series of employee suicides, we engaged with Hon Hai about working conditions, human capital management and its governance. As part of this we visited the company’s facilities multiple times, spoke with employees, and raised concerns directly at the 2014 AGM. At the 2018 AGM we also engaged the Chair/CEO about succession planning, requesting separation of the CEO and Chair roles. He stepped down in 2019 and Hon Hai instituted a committee-style governance structure.
After several years of engaging with Microsoft, mainly on social issues, including co-hosting a meeting in Washington DC with the company on human rights, we switched our attention to governance. We called for Steve Ballmer to be replaced as CEO, as we were concerned about the strategy and culture under the long-serving CEO. We also asked that co-founder Bill Gates stand down as chair, because he was not independent, and was more focused on his foundation. Both of these requests had been met by Q1 2014, helping to pave the way for the company’s renewal under an independent chair and CEO. We also sought refreshment of the board, which the independent chair led skilfully after his appointment, completing our objective in Q3 2015.
We led the working group that developed the Principles for Responsible Investment (PRI). In 2006, when they were launched, we became a founding member
We were a founding signatory of the International Corporate Governance Network, and provided input into the Japanese and Malaysian Stewardship codes
We sit on 39 advisory boards or committees of prominent responsible-investment organisations, including:
An exciting new chapter of our story is developing: the confirmation of our shared purpose with Federated Investors, our majority owner, under one brand. The February 2020 listing of Federated Hermes, Inc. on the New York Stock Exchange advances our mutual commitment to global, active, responsible investing.
As Federated Hermes, we are guided by our conviction that responsible investment is the best way to create long-term wealth. Within the group, all activities previously carried out by Hermes now form the international business of Federated Hermes. Our brand has evolved, but we still provide the same distinct investment and stewardship capabilities for which we are renowned – in addition to important new offerings from the entire group.
Together, we focus our fiduciary mindset, investment acumen and stewardship expertise on generating risk-adjusted outperformance for clients while supporting positive change in the wider world.
