What makes a fund suitable for
the Active ESG pathway?
Products in this pathway invest in companies that achieve (or have the potential to achieve) a financial performance objective. Underpinning this is a rigorous framework of ESG analysis, engagement and effective stewardship.
Our Active ESG funds have the following in common:
- A financial objective
- Best-practice integration of ESG analysis and engagement insights
- Some capabilities may enforce exclusions that reflect portfolio managers’ investment views
- Delivery of outcomes through effective stewardship
- High active share
What does this mean in practice?
Investors in our Active ESG fund range can expect the following:
Solutions across the investment spectrum underpinned by a focus on investing responsibly
Whether it’s developed or emerging markets, equities, alternatives or fixed income, our range of strategies within the Active ESG pathway offer the routes to market that best serve our clients’ needs.
Along the way, they offer a broad range of differing styles: high conviction, diversified, thematic, contrarian.
What they all have in common – and what sets them apart from other investment approaches – is their best-practice integration of deep-dive ESG analysis. This includes insights from the broad range of engagement activity with policymakers and companies undertaken by EOS at Federated Hermes, our specialist stewardship services team. In this, we see ourselves as partners, working alongside companies to drive positive change.
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Begin at the beginning: Stewardship as our goal
We have an acute sense of obligation to our investors to be responsible stewards of capital. That means that we also exercise the rights given to equity and debt holders in companies to vote on business matters and director elections during annual and extraordinary general meetings.
Our Active ESG funds tend to avoid blanket exclusions but at times the fund manager may enforce exclusions to reflect investment views.
For example, Kunjal Gala, Federated Hermes’ Lead Portfolio Manager for Emerging Markets, has implemented a number of exclusions, including on companies that generate revenue from the production of tobacco, from the Federated Hermes Global Emerging Markets small and medium-sized (SMID) fund for the purposes of risk management.
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Mapping out Active ESG: Key attributes
Funds in our Active ESG pathway will use engagement to drive forward our ESG agenda. We believe achieving change requires partnering with companies over the long-term.
Success, in engagement terms, is dependent upon speaking to the right person, about the right issue, at the right time. Fund engagers work with our diverse and highly experienced stewardship team, EOS at Federated Hermes, to devise and deliver an engagement plan that fits a company’s particular business model and geographic footprint. With £1,179bn in stewardship assets under advice (as of 30 June 2022), EOS has significant influence and expertise.
Source: Federated Hermes, as at end June 2022.
We have been at the forefront of investment and sustainability since 1983, pioneering global stewardship, developing innovative ESG strategies, and advocating for a financial system that works for all.
Our £1,179bn in stewardship assets under advice (as of 30 June 2022), ground-breaking work in ESG integration, and the key role we played in developing the Principles for Responsible Investment (PRI) illustrate both our commitment and influence.
When it comes to investing sustainably, our DNA, our culture and our history enable us to stand out from the crowd. Just as a sustainable approach favours responsible businesses contributing to positive, transformative change, our firmwide objective – to deliver Sustainable Wealth Creation – seeks to enrich investors, society and the environment, both today and for generations to come.
EOS at Federated Hermes – changing companies for good, from within
We believe it is through stewardship that investors can best advocate for a more sustainable world.
Our industry-leading stewardship service provider, EOS at Federated Hermes (EOS), was founded in 2004, on a legacy dating back to 1983. EOS pursues constructive engagements with corporate boards and executives on environmental, social, and governance issues, enabling investors to be more active owners of their equity and fixed income assets. Working with investors to change companies for good, from within, EOS continues to evolve best practice stewardship, supporting stronger financial performance and better outcomes for society.
Find out more about EOS.