Capital markets clearly have a key role to play in turning ambition into action on climate change, and we believe that those companies who are ahead of the trend should flourish
Climate change is a universal challenge and is one of the most pertinent areas of ESG risk and opportunity. Our long-running research shows that companies managing their ESG risks well have historically outperformed, and as result we believe that businesses who help drive the low-carbon transition have robust long-term performance prospects.
We therefore seek companies that are working now to anticipate the challenges of tomorrow – such as ensuring environmental sustainability and thriving in a carbon-constrained economy. Launched in 2016, the strategy follows an investment process appended from the team's Global Equity strategy which originated in 2007.
In 2019, there was a profound shift in awareness of – and engagement with – the climate emergency: it was the hottest year on record for the world’s oceans, the second-hottest year for global average temperatures, and wildfires raged in the Amazon, California and Australia.
A strategic focus on mitigating and adapting to climate change, driven by an astute understanding of climate-related financial risk, has become an imperative for forward-thinking investors and businesses. Capital markets have a key role in financing companies that are taking action on climate change, and long-term investors can also play an important part by engaging with companies to encourage and enable the transition to a low-carbon economy.
As a global leader in active, responsible investing, we believe that all long-term investors have an interest in the sustainable growth of companies – something that requires strong corporate governance and leadership, and a positive and enduring influence on society and the environment.
At the international business of Federated Hermes, climate change continues to be core to our integration of ESG factors into investment decisions. Our Global Equity Low Carbon capability is evidence of this, and it is defined by the following characteristics.
Disciplined, systematic stock-picking focused on time-tested fundamentals – including ESG considerations – supported by subjective analysis.
Companies managing their ESG risk have historically outperformed, while those that are improving can generate greater shareholder value in the future.
We have been committed to responsible investment since 1983. In EOS, we have a large team skilled in face-to-face engagement with the corporate executives and directors of companies that we invest in.
We focus on companies with a competitive advantage and sustainable business models, which are more likely to offer earnings growth.
Our proprietary risk-management tools enable us to monitor and neutralise macroeconomic risks before they impact returns. Stress tests provide forward-looking views of the impacts of these risks.
Analysing companies from a broad range of perspectives helps us to generate positive returns in various market environments and defend against large swings in style.
The portfolio does not have any one single investment style. Instead, we select companies that have the best combination of fundamental attributes and ESG behaviours. We avoid companies that have material exposure to fossil fuels and a high carbon intensity, and favour firms with attractive financial characteristics and which support the transition to a low-carbon economy and focus on minimising further climate change.
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 resulting from existing activities and to adopt practices, initiatives and strategies that deliver tangible and positive outcomes. We believe this should benefit society and the planet, the companies themselves, their employees and the local communities in which they operate, and investors.
Louise Dudley
CFA, Portfolio Manager, Global Equities, Federated Hermes Limited
Louise Dudley
CFA, Portfolio Manager, Global Equities, Federated Hermes Limited
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Louise joined in March 2009 and leads the ESG and responsible investment research strategy within the Global Equities team. Building on her experience developing factor testing platforms and enhancing the factor modelling capabilities of the team’s systems, Louise has applied this comprehensive analysis to ESG applications. Having delivered research supporting the returns from ESG integration, this has led to the creation of innovative customised product solutions and tools fulfilling client needs. Louise originally joined the company as a member of the stewardship advisory business, EOS. Prior to this, she worked for Coca Cola in a financial accounting role having graduated with a Master’s degree in Engineering from the University of Durham. Louise holds the IMC and is a CFA charterholder. She is a board member of the UK Sustainable Investment & Finance Association and in 2017 was named one of Financial News' Rising Stars of Asset Management.
Lewis Grant
Senior Portfolio Manager, Global Equities, Federated Hermes Limited
Lewis Grant
Senior Portfolio Manager, Global Equities, Federated Hermes Limited
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Lewis joined in February 2008 as a portfolio manager on the Global Equities team. In addition to his role as portfolio manager, Lewis is responsible for designing and implementing many of the team's systems. In particular, he created our proprietary risk-modelling system, MultiFRAME, which is used across all investment teams based in London. He joined from Aon Consulting, where he worked as an actuarial consultant specialising in providing valuations and asset-liability modelling to a range of corporate and institutional clients. Lewis graduated from the University of Warwick in 2003 with a Master's degree in Mathematics, Operational Research, Statistics and Economics and subsequently qualified as a Fellow of the Institute of Actuaries.
Geir Lode
Head of Global Equities, Federated Hermes Limited
Geir Lode
Head of Global Equities, Federated Hermes Limited
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Geir joined in May 2007 to establish the Global Equities strategy. Prior to this, he was Chairman of Bergen Yards in Bergen, Norway, where he was responsible for restructuring and focusing a holding company. Bergen Yards changed name to Bergen Group and was listed on the Oslo stock exchange in June 2007. Geir started his career in 1991 at Frank Russell, moving to Chancellor LGT and then Putnam Investments, where he was a senior vice president before returning to Norway in 2003. Geir studied Mechanical Engineering at the Norwegian Institute of Technology and earned an MBA at the Pacific Lutheran University, Washington. Geir has been on the board of 17 companies in four different countries.
