Global Equity ESG

Reasons to invest

Strong foundation

Launched in May 2014, the Strategy builds upon the core investment process of the Global Equity Strategy, which has invested in the global developed markets since its inception in December 2007.

Disciplined approach, fundamental oversight

Portfolio stocks are analysed using fundamental factors in a systematic process.

ESG is about more than doing good

We believe that companies that fail to adequately manage their ESG risks tend to underperform the market. ESG investing can be positive for society, but also for the performance of the holdings.

Identifying positive change

Companies with a good or improving ESG track record are favoured. Our leading stewardship team, EOS, provides best-of-breed ESG intelligence.

Risk management

Proprietary risk management tools enable the team to monitor and neutralise macroeconomic exposures before they impact returns.

Quick links

A disciplined investment process with environmental, social and governance factors at its core does not just provide a ‘feel-good factor’: it can improve returns.

Geir Lode

- Head of Global Equities

Why Global Equity ESG?

Consistent

ESG pioneers

Tailored solutions

The Strategy seeks to achieve long-term capital appreciation by investing in worldwide equity securities with favourable ESG characteristics. The team seeks to achieve consistency by investing in a diverse range of companies with strong, long-term fundamentals. This helps defend against swings in style and means clients are not required to time their entry point to benefit from a particular style tailwind.

The team joined Federated Hermes in 2007 with the specific aim of conducting ESG research and integration. The result of these efforts was pioneering research that linked ESG to investment performance and led to the creation of leading-edge proprietary tools, such as the QESG Score and ESG Dashboard. It also underscores our belief that companies less exposed to ESG risks will outperform over the long term, while those that are improving their ESG profile can unlock significant shareholder value. To learn more about our approach to ESG integration, click here.

The team is also highly experienced in delivering bespoke solutions for institutional clients, such as our Low Carbon and Screened ESG strategies. These solutions incorporate sustainability, ESG and clients’ own ethical beliefs, enabling clients to achieve their investment goals without compromising their beliefs.

How we invest

Pragmatism over perfection

We like stocks with robust financial statements, competitive strength, and a proven ability to consistently beat revenue and earnings expectations. Ideally, these companies should also be guided by impressive management teams, mitigate ESG risks and, of course, appear cheap relative to peers. But very few – if any – stocks embody such an ideal investment, so we identify those with the most attractive combinations of these characteristics in every market environment.

Systematic analysis

Each day, our proprietary systematic model (the Alpha Model) assesses the attractiveness of every stock in the investment universe. The metrics used to select stocks are justified by both economic reasoning and statistical effectiveness, and have a long-term focus that leads to low portfolio turnover. They are grouped by valuation, sentiment, growth, profitability, corporate behaviour and capital structure. This model creates an optimised portfolio that aims to maximise risk-adjusted returns.

Risk management

There are a number of components to our risk management process:

We use our proprietary risk-management system, MultiFRAME to manage and diversify macro and factor risks, ensuring that stock selection is the dominant source of relative risk and returns.
We then perform a bottom-up ‘sense check’ to ensure the model has assessed the nuances of each potential investment.
The ESG Dashboard, another proprietary tool, alerts us to stock-specific environmental, social and governance risks.
We also collaborate with EOS, our leading stewardship team, and undertake a regular review of ESG issues and risk within portfolio holdings. EOS provides ESG expertise and company specific insights gained from engagements that we factor into our investment decision making process.

Investment philosophy

We believe companies less exposed to ESG risks will outperform over the long term and that companies improving their ESG profiles can unlock significant shareholder value.

Our investment philosophy can be encapsulated in four words: pragmatism, sustainability, responsibility and longevity.

The team takes a pragmatic view of the investment universe to identify stocks with the most attractive combinations of fundamental characteristics. We look for companies with sustainable business models and competitive advantages. In addition, it is important that companies behave responsibly, which leads us to companies that are well governed and treat their responsibilities to society and the environment seriously – such companies are more likely to avoid negative surprises. Choosing companies that demonstrate a combination of these characteristics allows the team to hold stocks over the long-term: it is only in the long term that a company can fulfil its potential.

Investment process

Idea generation & portfolio construction

Risk analysis & idea verification

We use a systematic approach, our Alpha Model, which seeks to identify companies with an attractive combination of fundamental and ESG characteristics. This is combined with a disciplined subjective analysis that interrogates the model’s efficacy and assesses the ESG characteristics of a company to identify potential weaknesses not captured by the model. The Axioma Optimiser combines stocks in an optimal portfolio to favour stock-specific risks and diversify top-down exposures.

We assess macro risks and stress-test the portfolio. We perform a subjective ‘sense check’ to validate the data, assess unquantifiable factors and interrogate ESG before constructing the final portfolio.

Team

6094, 6196, 6204

Product information

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Insights

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Investments

Our capabilities provide the key.

Solutions across the spectrum

EOS Stewardship

Fusing fundamental analysis with systematic rigour