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SDG ENGAGEMENT EQUITY

Aiming to generate strong investment returns while creating positive impacts on society through engagements focused on the United Nations Sustainable Development Goals (SDGs).

We focus on attractive companies with the potential – through engagement aligned with the UN SDGs – to generate outcomes that benefit people, the planet and investors.

Hamish Galpin

Head of SDG Engagement Fund

SDG focused

The SDGs provide an ideal framework for engaging to create more impactful and financially successful companies.

Catalysing impact

Engaging for positive outcomes by aligning corporate outputs with the SDGs, rather than investing in already impactful businesses.

Investment expertise

As experienced stock-pickers, we have a strong 30-year track record in small- and mid-cap equities – an asset class ripe for improvement through engagement.

Engagement strength

Committed to responsible investment since 1983, we have a large team skilled in face-to-face engagement with corporate executives and directors.

Why Hermes SDG Engagement?

The Strategy aims to generate attractive investment returns and positive social and environmental impacts – particularly in emerging markets – through engagements focused on the United Nations Sustainable Development Goals (SDGs). The SDGs are an ambitious, universal set of objectives agreed by UN member states. We believe that there are compelling opportunities to create such change and long-term value among small- and mid-cap businesses, many of which are not typical engagement targets of either shareholders or NGOs, yet whose operations and supply chains provide rich potential for improvement and the direct access required for successful engagement.

 

HERMES SDG ENGAGEMENT EQUITY STRATEGY

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Catalysing impact

The UN SDGs provide an ideal framework for engaging to create more sustainably profitable and impactful companies.

HERMES SDG ENGAGEMENT EQUITY STRATEGY

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Investment expertise

As experienced stock-pickers, we have a strong 30-year record in small-and mid-cap equities – an asset class ripe for improvements through engagement.

HERMES SDG ENGAGEMENT EQUITY STRATEGY

image
Engagement strength

Committed to responsible investment since 1983, we have a large team skilled in face-to-face engagement with corporate executives and directors.

HERMES SDG ENGAGEMENT EQUITY STRATEGY

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Serving investors, serving society

Companies focused on the UN SDGs meet society’s enduring needs – sources of persistent demand that can support long-term business growth.

HERMES SDG ENGAGEMENT EQUITY STRATEGY

What are the SDGs?

The SDGs are a universal set of goals, targets and indicators for global development. They serve as a blueprint for significantly changing the world – by ending global poverty, safeguarding the planet and aiming for prosperity for all – by 2030. Established by the UN in September 2015, the SDGs were adopted by the international community, including 193 governments.

There are 17 SDGs, and within these goals there are 169 targets and 230 indicators, which seek to realise the human rights of all and achieve gender equality, among other issues. They are integrated and indivisible and balance three primary dimensions of sustainable development: the economic, social and environmental. To achieve these goals, it is estimated that it will require investment of between $5-7tn each year until 2030. Approximately $1tn comes from public funds from the UN and member countries annually, while private capital must fund the remaining $6tn annually.1

  1. 1“UN Sustainable Development Goals,” published by UN PRI as at November 2017.

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Techtronic: Drilling deep into the supply chain Company overview Techtronic Industries is one of a number of consumer discretionary or industrial manufacturing companies within our portfolio. We consider these companies to be, from an engagement perspective, ideal investments as each has multiple touch points with different SDGs. Techtronic is a Hong-Kong listed company focused on the US consumer market, with predominantly Chinese manufacturing operations for its power tools and floor-care products, principally sold under its Milwaukee brand. •Market capitalisation: $10bn •Leadership: Joseph Galli Jr, CEO; Horst Julius Pudwill, Chair •Operational scope: Hong Kong-listed with a majority Asia-based workforce, but principally a US sales market. Investment case The attraction of the stock is its exemplary innovation record, which has resulted in it rapidly taking market share in the industry verticals it has chosen to target. This was evident to us in a recent visit to the global R&D centre of Milwaukee – one of the most impressive company visits that Hamish Galpin, Lead Manager of the Fund, has undertaken in his 29 years as a professional stock picker. From a financial perspective, if the company delivers on its aims of releasing innovative products, achieving further increases in market share and expanding into new markets, it should sustain a strong growth profile for a number of years to come. The stock has a similar margin and return profile to its larger and better-known competitor, Stanley Black and Decker, and we believe its slightly higher return on equity and price-to-earnings ratio are justified by the track record and quality of the business.

Sales Contacts

Dan Churchouse,
Director - UK Wholesale
Clive Selman,
Head of UK Wholesale