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Enivronmental, Social and Governance Strategy of the Year

2016
Axa Investment Managers

Since the mid-2000s, when the firm’s board endorsed a responsible investment strategy for its mainstream processes, Axa Investment Managers has used various tools to embed ESG criteria across its range of asset classes and products. One tool, its dynamic Ri Search engine, was launched in 2008, and “enables ESG research to be aggregated and disseminated to all portfolio managers across the firm,” the company’s submission said. By the end of 2015, some 50% of its assets under management were classed as ESG or impact investments – more than a threefold increase on 2014, and amounting to €333 billion.

BMO Global Asset Management

Under its former moniker, F&C Investments, the firm made responsible investment an integral part of its overall philosophy. In 1984, it launched Europe’s first ethical strategy and became a founding signatory of the United Nations Principles of Responsible Investment in 1996. As BMO, this theme has continued with 11 ESG experts overseeing its ethical and sustainability process. Its “in-house quantitative ESG risk tool scores more than global 6,000 companies” while its sustainable investment team works with portfolio managers to ensure that both “stock and sector-level assessment of ESG opportunities and risks are systematically incorporated into analysis across the investment floor,” the company’s submission said. The equities team follows a five step investment process from idea generation to proxy voting and engagement to support long-term performance, reduce risk and “contribute to a promoting a fairer and more sustainable world”.  

First State Investments

In 2013, First State set out a three-year objective to be recognised as a global leader in responsible investment with a strategy built around investment quality, stewardship and engagement. In 2016, it measured its achievements and set out next steps to focus on staff engagement across the whole company. This will include investment teams continuing to integrate ESG factors, but also implementing processes to deal with “specific controversial investment where there may be widely differing views between teams and/or we may have policy gaps”. Each of the company’s investment teams have created climate change-related statements, setting out how they see, monitor and manage the issue. First State wants to give a clearer message of its ESG strategy to clients, and started by working with Australian superannuation funds. First State’s portfolio management teams use an ESG dashboard to highlight companies’ risks, while a newly created forum monitors those exposed to potential controversies and meets “when required” to address issues. More broadly, the company is using its responsible investment lens to focus on staff engagement, beginning with how and who it recruits. Responsible investment has been embedded in its values and performance management frameworks.

Hermes Investment Management

Since the launch of the Hermes Global Equity Core fund in 2007, the entire equities team has considered ESG risk in their strategies. While the manager has a range of dedicated ESG strategies, the equities team has a close relationship with the in-house Equity Ownership Services group with which it has developed several tools for analysing these risks. The output from EOS is fully integrated into the investment process through the firm’s ESG dashboard and additional risk monitor and evaluation tools. This process has been adopted by other investment teams at Hermes, not just the equities investors, which has led to “a much greater discussion on ESG analysis within the business”, the company’s submission said.

Standard Life Investments

Every year, SLI conducts an in depth ethical survey of its clients to ensure its overall ESG approach is in line with their views, without compromising on performance, the company said in its submission. In 2016, SLI “conducted a comprehensive review of our ethical funds’ criteria. This was a major undertaking and represented a sea-change for the funds.” This was marked primarily by moving to a positive, rather than a negative criteria, meaning SLI now invests in companies whose effect is a benefit to the environment and society as a whole. SLI is developing more funds with this approach alongside an impact investing product. The manager has created a tool to measure not just ESG factors of emerging markets, but the political risk, too. SLI identified 17 potential relevant indicators from various public sources to calculate the average across the four pillars. Its emerging market debt team is already using the tool “and it has markedly improved the quality and detail of the team’s research to the benefit of our portfolio,” SLI said.