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RESPONSIBLE INVESTING

We have been at the vanguard of sustainable investing for more than three decades and integrate ESG and active ownership across all our strategies. Our approach to holistic returns means we are committed to delivering excellent long-term investment performance and stewardship, while improving the lives of many.

Our approach

ESG integration

We believe Environmental, Social, and Governance integration and engagement is relevant across asset classes and for all investment strategies.

Active ownership

We act as a responsible steward of investments through dialogue, using our rights as investors and taking action where necessary. 

Outcomes beyond performance

We are committed to delivering holistic returns – outcomes that consider the impact our decisions have on the wider world.

Over 30 years of investing responsibly have convinced us of the positive, long-term impact on performance driven by integrating ESG factors into investment analysis and portfolio construction.

Our latest study on how ESG factors have impacted shareholder returns.

Delivering holistic returns

By delivering positive social and environmental impact alongside investment returns, responsible investing goes to the heart of investors' needs.

Learn more about our holistic approach in 'The Why Question' by Hermes CEO Saker Nusseibeh.

Responsible investment & ownership

Differences between the various types of ESG approaches can be confusing.

At Hermes, we believe there are two mutually reinforcing strands of responsible investment management: responsible investment and responsible ownership. Together, these aim to generate sustainable wealth creation for the end beneficiary investor encompassing both investment returns and their social and environmental impact. Here we present our ESG lexicon.


  • Negative exclusion
    Definition: Excluding entire sectors, companies or countries from a fund or portfolio based on ESG criteria, moral or ethical views, or religious beliefs.
    Objectives: Align investors’ money with their perception of ESG risk or broader beliefs, and to mitigate ESG risks as investors exit ‘sin’ stocks, such as tobacco or gambling companies.

    Hermes' application: Our proprietary exclusion list – or screen – is updated on a quarterly basis, and incorporates investors’ bespoke ESG preferences. The exclusion list includes companies:

    • Identified by Hermes EOS, our in-house stewardship team, as being involved in providing controversial weapons;
    • With a High Severity rating for environmental and social risks in the Hermes EOS Controversial Companies report;
    • Generating more than 10% of their revenue from the gambling, tobacco, logging, nuclear energy or armaments industries.
    Hermes product: Hermes Global Equity Screened ESG.
  • Positive screening
    Definition: Investing in companies demonstrating positive ESG performance relative to peers.
    Objectives: Achieve superior capital appreciation by mitigating ESG risks and acting on opportunities provided by companies demonstrating good ESG behaviours.

    Hermes' application: We invest in companies with a good or improving ESG track records, robust financial statements, competitive strengths and a proven ability to consistently beat revenue and earnings expectations.

    Our proprietary tool, the ESG Dashboard, alerts us to stock-specific ESG risks not specifically covered in fundamental analyses of companies.

    Hermes product: Hermes Global Equity ESG.
  • ESG integration
    Definition: The inclusion of ESG factors alongside financial analysis of assets by investment managers.
    Objectives: Improve long-term risk-adjusted returns, mitigate ESG risks and identify investment opportunities created or supported by positive ESG change.

    Hermes' application: ESG factors are integrated into the investment analysis performed in all of our strategies across public and private markets.

    We combine company-specific ESG data captured by our proprietary analytical tool, the ESG Dashboard, with qualitative and fundamental assessments of ESG risks and opportunities. These views are considered alongside the research and insights from our engagement by our in-house stewardship team, Hermes EOS and fund managers.

    Hermes product: All Hermes strategies integrate ESG and engagement.
  • Impact investing
    Definition: Investing in companies, organisations and funds which have the commercial purpose of solving social or environmental problems.
    Objectives: Generate strong investment returns by allocating to companies creating tangible benefits for society and the environment that will endure over time.

    Hermes' application: We invest for the long term in companies intending to make a positive and sustainable impact on society, and which are succeeding commercially by doing so.

    Our impact strategies are also linked, explicitly or implicitly, to the specific targets detailed within each of the UN Sustainable Development Goals (SDGs).

    Hermes product: Hermes Impact Opportunities.
  • Company engagement
    Definition: Engaging with companies on business strategy and performance including ESG concerns and using shareholder power to positively influence corporate behaviour.
    Objectives: Promote beneficial change within companies that strengthens their business performance and aligns corporate behaviour with investors’ long-term interests. Provides forward-looking insights on future business and ESG performance than can enhance investment decision-making.

    Hermes' application: On behalf of investors worldwide and for our own portfolios, we engage companies as active stewards of capital in face-to-face dialogues at the executive and board levels, and vote at corporate annual general meetings, collaborating with other shareholders to effect positive change.

    Hermes product: Hermes EOS; integrated in all fund offerings.
  • Advocacy
    Definition: Engaging with public policy makers, regulators, governments and industry bodies on enhancing governance, environmental, social and stewardship standards globally as well as regionally, at a thematic-level (such as climate change or diversity) and by industry sector.
    Objectives: Influence societal, environmental and economic change which is beneficial to investors, by leading and participating in industry discussions and policy fora.

    Hermes' application: Hermes has a broad public policy engagement agenda directed towards promoting responsible investment and ownership practices and more pertinently advocating for a global financial system that operates in the interests of its ultimate beneficiaries.

    Hermes product: Hermes Responsibility Office and Hermes EOS.

Want to learn more? Read our piece 'Bringing clarity to ESG investing'.

Hermes EOS

Our stewardship business, Hermes EOS, is one of the largest stewardship resources globally.

We actively engage with companies to align their behaviours with the long-term interest of clients and their beneficiaries by improving the strategic, financial and ESG performance of companies and assets. 

Sustainability viewpoints

Hermes staff share what sustainability means to them.

 

The Circular

The Circular is the Hermes quarterly sustainability round-up. Get our key insights straight into your inbox.

Outcomes beyond performance

ESG integration, world-class engagement, growing wealth and sustainability help us to achieve outcomes beyond performance across our products. Discover our latest case studies below.

Supporting conversations between a large Asian financial conglomerate and local union meant that we succeeded in our push for better governance and working conditions

A global oil giant is one of the largest greenhouse gas emitters. The use of its products is responsible for substantially more greenhouse gas emissions than its own direct activities, making it a very important actor in the battle against climate change

Our engagement with a US global leader in software, has demonstrated their strong commitment to the right of privacy as well as human rights of those it affects across its value chain