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Sustainable Europe 
ex-UK Equity

Targeting companies undergoing transformative change

Reasons to invest

Connect performance with positive outcomes for people, the planet and investors

Focus on companies leading the global sustainability transition

Target profitable businesses capitalising on underappreciated long-term change

Access skilled stock-picking, thematic investing and world-leading engagement teams

Benefit from innovative, proprietary ESG analysis that delves deeper than mainstream ratings

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Our high-conviction stock selection exploits the power of change over the long term.

James Rutherford - Head of European Equities and Lead Manager

Why Sustainable Europe ex-UK?

Businesses driving the sustainable transition operate on the right side of social and environmental change. We seek those that are built on strong foundations: purposeful, resilient, innovative companies in control of their own destinies – consistently generating cash flow and profits through products, services and activities that help create a better world.

Sustainable investing seeks long-term financial outperformance and social and environment change benefiting current and future generations. By focusing on companies whose activities are aligned with clear environmental and social themes, the team is able to build a portfolio of compelling long-term investments that benefit people and the planet.

Markets can be relatively efficient over the short term, but they struggle to discount positive change over the medium and long term. This means quality businesses helping to improve society and the environment often have better long-term performance prospects than those that fail to adapt to the challenges we face today.

How we invest

We take a bottom-up approach, with stock selection the key driver of returns and the dominant source of relative portfolio risk. We aim to identify companies undergoing longer term structural change. However, even when an investment decision has a strong thematic element, the fundamental qualities of the company take precedence, and stocks only enter the portfolio on their own merit.

Approximately four-to-eight investment ideas will enter the portfolio per year. We only invest in companies where we have identified factors generating long-term positive change that have been underestimated by the market. We also look for companies that can deliver enduring, compounding growth to their shareholders.

The strategy’s approach to sustainability is comprised of three elements:

  • Exclusions: Our initial screen of the universe applies our exclusions, which rule out companies generating revenues from certain sectors, including fossil fuels, tobacco and weapons.
  • Sustainability assessment: A company must then pass the team’s sustainability assessment in order to be put forward for investment analysis.
  • Engagement: We draw on engagement insights during the investment process, using the resources of EOS, Federated Hermes’s leading stewardship team. Once in the portfolio, the team continues to engage with all portfolio companies, attempting to encourage positive change and progress towards greater sustainability.

Investment philosophy

We believe that fundamental investing through a sustainability lens creates a long-term, concentrated portfolio of quality investments.

Investment process

Following the initial screen where we apply our exclusions, we coordinate inputs from several sources. We draw together our thematic research, inputs from company meetings, sustainability assessment and appraisal of positive change at the company. The focus is on identifying companies that are either pivoting their businesses or already helping address the challenges faced by society, thereby driving long-term structural change.

We undertake fundamental analysis and investigate the sources of enduring change. We meet company management to further understand the fundamental, sustainability and ESG factors. The team uses a variety of valuation techniques that vary by industry and time, including a proprietary cash flow model. The team ultimately seeks companies that are significantly mis-priced by the market.

The portfolio consists of 30-50 stocks, position sizes reflecting liquidity and our conviction, usually between 1% and 5% weights. All holdings are held at positive weights compared to the index.


James Rutherford

Head of European Equities

Chi Chan

Co-Portfolio Manager

Our Purpose

To deliver Sustainable Wealth Creation

Like all our investment capabilities, Federated Hermes Sustainable Europe ex-UK aims to deliver Sustainable Wealth Creation: the generation of wealth through investments that enrich investors, society and the environment over the long term.

Our business provides three equally powerful pathways to achieving this aim. Federated Hermes Sustainable Europe ex-UK Equity Fund features in the Sustainable route.