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Sustainable investment report 2020

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July 8, 2020

Integration, stewardship and future plans – the key pillars of our annual SI report

Our 2020 report includes three core sections reflecting what we believe our clients expect to see us report upon:

  • How sustainable investment is integrated into our philosophy, process and portfolios
  • How we effect stewardship over the investments we make on our clients’ behalf
  • Our future plans in the sustainable investment space

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Integration case study: Frontier market debt

Background

ESG risks can have a greater impact on value within emerging markets and we had been seeking a compelling opportunity within frontier market debt, given the market’s growing size, importance and potential for strong risk-adjusted returns.

Engagement

We saw Africa as a broad and compelling opportunity within frontier markets and subsequently identified a specialist manager that places emphasis on improving governance as a source of increased GDP growth and improving fundamentals within the region, hence it selects sovereign issuers with strong reform agendas. This requires local insight and in-depth analysis, as well as engagement with issuers where possible.

Outcome

Our clients have access to a compelling new area within credit. Investors are able to participate in positive reform stories across Africa and benefit from higher returns as these translate to increased economic growth.

Integration

To fulfil our responsibilities, we think and aim to act like a leading asset owner and a responsible market participant. We leverage the breadth of our specialised investment teams to integrate SI principles into all areas of our decision-making process and client portfolios, with particular focus on:

  • macroeconomic and asset research;
  • manager research; and
  • portfolio construction and management.

We bring all this together in a Total Portfolio Approach which helps to fully integrate sustainability in building the best quality portfolios possible for each client context.

Stewardship

We believe exercising stewardship rights and responsibilities is a powerful way to protect and enhance the value of assets for beneficiaries, the economy and society, and is central to the success of any long-term investment programme. We apply stewardship through a number of mechanisms, including as part of our manager research, selection and ongoing engagement, via a specialist stewardship overlay with EOS at Federated Hermes, and via collaborative initiatives and advocacy.

Future plans

We recognise that the pace of change in SI is both fast and accelerating and effective reporting is central to this evolution, as it connects and engages different stakeholders, and provides insights into investment portfolios and decisions. In the coming year and beyond, some of the major developments we envisage are:

  • improved metrics and targets
  • real-world outcomes and impact
  • standardisation

For the full report, including case studies, please see the below document.

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Sustainable Investment Report 2020 PDF 3.5 MB
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