At Federated Hermes, we focus on Sustainable Wealth Creation. We believe 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 and fully integrated into the investment process.
Our proprietary tools enable best-practice ESG and stewardship integration. We have been developing ESG-analysis tools for a long time, and we continue to innovate. Best practice integration means not only integrating quantitative ESG information from third-party data sources or ratings: Our investment teams also integrate qualitative engagement insights from EOS at Federated Hermes to build a complete picture of a company or an asset.
Our proprietary tools
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- The ESG Dashboard provides ESG metrics at the portfolio and company levels, integrating our ESG research and engagement insights with information from third-party data providers.
- Company-level data are used to show environmental (E), social (S) and governance (G) indicators which are used to form E, S & G scores.
- In turn, these are used to calculate a headline score, our proprietary QESG Score.
- Our QESG score captures a company’s sustainability performance and direction of travel.
- Calculated by combining our ESG research and engagement insights with sustainability data from third parties including Sustainalytics, Trucost and Bloomberg and several other data sources.
- Our engagement database, used predominantly by the stewardship specialists in EOS at Federated Hermes to record their interactions with companies, engagement objectives and the progress made towards achieving them.
- The contents and conclusions drawn from strategic and sustainability dialogues with companies helps inform investment decisions and deliver specific outcomes. Our investment teams have direct access to Emerald and are able to factor in the latest engagement insights into their investment decisions.
- Helps assess the governance quality of investee companies.
- It flags any companies that fall below Federated Hermes’ expectations, as defined by EOS at Federated Hermes in the landmark Responsible Ownership Principles.
- Compares the company to peers in its industry, sector and country of operations to provide a comprehensive overview of how it is governed.
- Depicts the ESG performance and engagement activity of specific holdings and in aggregate across portfolios relative to their respective benchmarks, and relevant engagement intelligence.
- It can be used to evaluate a portfolio’s ESG and engagement performance over time on measures including carbon intensity, voting decisions relative to the benchmark, and engagement themes and progress.
- Enables fund managers and engagers to identify environmental risks in portfolios and individual companies.
- Integrates our stewardship insights on environmental engagements with investees, and corresponding progress.
- Measures a portfolio’s exposure to environmentally sensitive sectors and measures its temperature alignment as well as the environmental costs caused by the investments.
- Enables fund managers and engagers to identify carbon risks in portfolios and individual companies.
- Incorporates our stewardship intelligence and can identify companies that are priorities for engagement on emissions and their progress against objectives.
- Measuring the carbon risk and footprint of an investment fund relative to its benchmark as well as listed companies relative to their peers, including Scope 1, Scope 2, and Scope 3 emissions.1
- Identifying companies with which carbon-focused engagement should be initiated or intensified.
- Gauging the level of carbon risk being engaged on within portfolios – and the progress achieved.
1 Scope 1 emissions: all emissions from activities directly controlled by a company.
Scope 2 emissions: indirect emissions from electricity purchased and used by the organisation.
Scope 3 emissions: all other indirect emissions from activities of the organisation, occurring from sources that they do not own or control.
Sustainability in action
Looking for authenticity in investing sustainably? Examine our evidence.
Seeking clarity on sustainability? We provide definitions that we stand by.