Key elements of responsible investing
How does your manager stack up?
ESG cannot be ‘bolted on’ to an investment process or be the domain of one analyst in a team. It must be an area of expertise for all. Knowing how to gather, analyse and integrate sustainability data as an essential part of research is fundamental in forming a complete view of an asset’s long-term potential.
What defines a leading ESG investor?
Our capabilities
For clients seeking sustainable and impact-oriented solutions, we offer a broad range of capabilities – from active ESG integration, to sustainable, impact and other forms of thematic investing.
Our specialists in these areas of investing are driven by the conviction that one can mitigate ESG and related risks and capture the investment opportunities arising from them to deliver broader outperformance for clients over the long-term.
Our sustainable and impact investment teams seek to deliver on two equally important and self-reinforcing objectives – strong financial performance for investors, coupled with positive long-term societal outcomes.
Our strategies
Responsible investment strategies cover a full range of asset classes – including private markets capabilities – each with their own investment style and stewardship approach.
These products are high active share, integrate ESG and related considerations and engagement insights in investment decision-making and deploy best-practice stewardship.
Tailored, specialist strategies designed to meet specific SRI, ESG and impact-related objectives are also available.
Many of our teams perform their own fundamental ESG research through proprietary tools (such as ESG Dashboard, QESG score, ESG Portfolio Monitor, Corporate Governance Tool and Carbon Tool) and have dedicated resources.
Our engagement
EOS, a leading stewardship service provider, is an important part of Federated Hermes Limited.
Its engagement activities enable long-term institutional investors to be more active owners of their assets, through dialogue with companies on environmental, social and governance issues.
These capabilities are informed by decades of specialist experience, innovation and a drive to lead the evolution of investing through a sustainability lens and stewardship.
True engagement takes time, expertise and dedication. Many asset managers talk a good game on engagement; few do it well.
The key elements of responsible investing
Best-practice ESG and stewardship integration
Uses third-party ratings only in the first stage of research
Proprietary, transparent ESG analysis tools enable asset managers to research and provide toolkits to help fund managers conduct their own fundamental company research
Minimum standards
Outsources research to third-party vendors
Uses mainstream ESG ratings and data, which are often one-dimensional and backward-looking
Best-practice ESG and stewardship integration
Performs in-house research on how the relevance of each sustainability factor influences a company’s performance
Assesses the materiality of each factor in order to focus on what is truly material
Minimum standards
Approaches ESG risks in a generic way
Fails to conduct further research in order to understand the relevance of each factor on an asset’s performance
Best-practice ESG and stewardship integration
Proactively engages with companies in the long-term interests of clients and their beneficiaries
Believes that effective stewardship lies at the heart of any long-term investment programme and integrates the full benefits of active ownership
Implements a comprehensive advocacy programme with legislators, regulators and industry bodies to seek progressive change in the capital markets
Minimum standards
Engages companies reactively in response to sustainability flashpoints or crises
Votes proxies in the wake of a corporate scandal but not to proactively seek positive change
Best-practicee ESG and stewardship integration
Beyond ESG and stewardship integration in investment processes, responsibility is embedded in the company’s philosophy and tone and reinforced by senior management
Significant resources are committed to developing, integrating and advancing expertise in investing sustainably
Minimum standards
Does not have the track record to truly claim a history of best-practice ESG integration
Claims to responsibility in annual reports might not be substantiated by the corporate culture or level of ESG and stewardship integration in investment processes
Best-practice ESG and stewardship integration
Track record of integrating ESG and stewardship ahead of requirements set by regulators
Contributing to trailblazing industry initiatives and policy formation championing sustainability in investment
Minimum standards
Integrates ESG in response to the introduction of regulations and stewardship codes
Best-practice ESG and stewardship integration
Customises ESG and stewardship integration to each investment strategy, resulting in diverse approaches to regions, sectors and portfolio construction
Emphasises stewardship to embed a forward-looking view in ESG analysis
Champions direct collaboration between in-house engagement experts and portfolio managers
Minimum standards
Limits consideration of ESG issues to a one-size-fits-all approach
Our Responsibility Office is tasked with monitoring and overseeing every investment team’s approach to integrating ESG and engagement insights into their investment decisions and the monitoring of investees. This helps to maintain our focus on enduring, responsible wealth creation.
Responsibility in action
Measurements and tools
What analytical tools and insights are needed to be a leading responsible investor?
Want to know more about our focus on enduring, responsible wealth creation?