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The Circular Q2 2019: keeping you in the sustainability loop

The Circular dives once more into our recent sustainable-investing commentary and analysis to bring our latest insights on environmental, social and governance (ESG) and impact investing to the surface. Get ready to take the plunge.

On target: the Hermes Global Equity ESG Strategy celebrates its sixth birthday

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In May 2013, Hermes swam against the tide when it launched this strategy. Today, sustainable-investment allocations flow throughout the investment industry.

What’s it all about?

The team behind the Hermes Global Equity ESG Strategy show how forward-looking ESG analysis can support solid, long-term returns as well as deliver a social dividend.

What’s new?

Listen as portfolio managers Lewis Grant and Louise Dudley discuss the evolution of the Global Equity ESG Strategy, and the industry at large: what’s changed over the last six years, and where are we going next?

What’s the impact on investors?

ESG has proved it can be a performance-enhancing factor in global-equity investing. But investors should seek managers who know how to navigate the sustainable waters.

True north: how stewardship keeps investors on course

Specialist asset stewards can help investment companies steer safely into the future

What’s it all about?

With a dedicated stewardship team on board, we have the depth of knowledge needed to navigate a journey that is filled with both monetary and non-financial challenges.

What’s new?

In this episode on our podcast channel, Amplified, Hermes Chief Executive Saker Nusseibeh, Head of Investment Eoin Murray, and Head of Hermes EOS Hans-Christoph Hirt reveal why fiduciary duty and stewardship are deeply intertwined.

What’s the impact on investors?

Stewardship can alert investors to both hidden dangers and new opportunities that others, who have not considered how a company's strategy or ESG performance can be improved, may have missed. It is a particularly hands-on task that grapples with real business issues.

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Close engagement: walking the talk

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Good ESG managers don’t cut losses and run – they engage for change.

What’s it all about?

Sometimes it isn’t helpful for investors to throw everything overboard in the pursuit of ESG purity. Speaking again on Amplified, Saker Nusseibeh says long-term investors have a core duty to engage with stakeholders on sustainability issues.

What’s new?

In this wide-ranging conversation, Ingrid Holmes, Hermes head of policy and advocacy, and Bruce Duguid, Hermes EOS head of stewardship, detail why investor engagement must venture beyond the boardroom and into policymaking.

What’s the impact on investors?

Investor engagement can encourage stakeholders to make high-level commitments to ESG goals. This was seen at the recent Vatican Dialogues summit, which was attended by Saker Nusseibeh, as well as in technology company FoxConn’s progression from controversial to best-practice employer, as explained by Hans-Christoph Hirt. The world clearly needs comprehensive, coordinated action to achieve sustainable goals and maintain long-term investment returns.

Impact flows: more than a drop in the ocean

From plastic bags to government bonds, sustainable investment is making waves.

What’s it all about?

Hermes’ ESG philosophy is deeply embedded across the business, creating a material impact that surfaces in surprising places.

What’s new?

The world has woken up to the nightmare of plastic-filled oceans, which, as our latest Quarterly impact report reveals, has seen investors redouble engagement efforts and turn to collective action. The Hermes sustainability message is actioned across areas as diverse as small-to-mid cap equity investing and ESG risk in sovereign debt.

What’s the impact on investors?

By integrating ESG into its investment decisions, Hermes can demonstrate real-world improvements – such as commitments from one of our portfolio holdings, marine-equipment manufacturer Brunswick, to develop sustainable solutions – and deliver better overall long-term investment performance.

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Flashing signals: risk merges with opportunity

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Some ESG indicators alert us to danger on the horizon; others suggest a bright future: investors need to act on both signals now.

What’s it all about?

While it’s not yet time to man the lifeboats, Saker Nusseibeh says that businesses and investors must ditch scepticism about climate change and act now. Ingrid Holmes, Head of Policy and advocacy, also notes the sense of urgency in this in-depth discussion with Bruce Duguid. There’s still time for investors to help mitigate or at best prevent further temperature-driven disasters.

What’s new?

In fact, the winds of disruption sweeping the world also carry the energy of “positive change” that quick-thinking investors can tap into, according to Tim Crockford, Lead Manager of the Hermes Impact Opportunities Equity Strategy. He lays this out in a new video that looks at how early adopters can benefit from emerging themes such as future mobility, health and wellbeing, as well as the circular economy.

What’s the impact for investors?

ESG principles can help investors chart the way to sustainability and investment success. As Saker Nusseibeh says in this Amplified podcast, the origin – and indeed the future – of free markets is the premise of rewarding those who risk capital while growing an economic system that benefits everyone.

Sustainability Viewpoints

FULL CIRCLE

That’s a wrap for the second issue of The Circular. We’ve narrated the mainstreaming of ESG analysis, explained how stewardship contributes to long-term sustainability and investment success, and stressed the need for urgency – and depth of opportunity – in challenging climate change.

More Insights

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Join Andrew Jackson, Head of Fixed Income, and Fraser Lundie, Head of Hermes Credit, for the second 360° webinar.
Macro Watch
Your guide to this week's big economic events.
Weekly Credit Insight
The composition of the high-yield world is likely to be volatile going forward: more issuers could default, while others may be downgraded from investment grade.
Harnessing the illiquidity premium: managing liquidity risk in multi-asset credit portfolios
In order to harness the illiquidity premium while remaining mindful of the inherent risks, investors need to challenge assumptions about current liquidity conditions and maintain flexibility and an open mind.
A meeting of minds: fusing fundamental and systematic analyses
We explain why we adopt an integrated investment approach and how it shapes our research agenda.
Upside funk: navigating negative convexity
Strong performance in credit markets since the start of this year means that many high-yield bonds now trade to call.