Schroder International Selection Fund – BRIC (Brazil, Russia, India, China)
Xxxxxxxx International Selection Fund – BRIC (Brazil, Russia, India, China)
Samantekt
Sjóðurinn viðheldur hærri sjálfbærnieinkunn á heildina litið en MSCI BIC (Net TR) 10/40 index, byggt á einkunnakerfi fjárfestingastjórans. Þessi viðmiðun (sem xx xxxxx markaðsvísitala) xxxxx ekki xxxxxx til þeirra umhverfis- og félagslegu eiginleika sem sjóðurinn stuðlar að. Ekkert tilvísunararviðmið hefur verið tilgreint í þeim tilgangi að uppfylla umhverfis- eða félagslega eiginleika sem fjármálavaran stuðlar að. Sjálfbærnistig sjóðsins er mælt með SustainEx™, sértæku tóli Schroders sem gefur mat á hugsanlegum samfélags- eða umhverfisáhrifum sem útgefandi gæti haft í för með sér.
Sjóðnum xx xxxxx með virkum hætti og fjárfestir minnst tvo þriðju xxxxx xxxxx í úrvali af hlutabréfum og hlutabréfatengdum verðbréfum brasilískra, indverskra og kínverskra fyrirtækja.
Sjóðurinn getur einnig beitt ákveðnum undanþágum. Frekari upplýsingar um xxxxx útilokanir sjóðsins er að finna hér að neðan í hlutanum „Vöktun sjálfbærra fjárfestingarmarkmiða“.
Til að meta góða stjórnarhætti notar fjárfestingarstjórinn sérstakt verkfæri Schroders til að hjálpa því að þróa fullkominn skilning á fyrirtæki í gegnum linsu hagsmunaaðila. Þessi fjármálavara stuðlar að umhverfislegum eða félagslegum einkennum en hefur ekki sjálfbæra fjárfestingu að markmiði.
Lágmarkshlutfall eigna sjóðsins sem notað er til að ná umhverfislegum eða félagslegum einkennum er jafnt og 70%. Sjóðurinn mun fjárfesta að minnsta kosti 25% af eignum sínum í sjálfbærar fjárfestingar. Innan þessa er engin skuldbinding um að fjárfesta lágmarkshlutfall eigna sjóðsins í sjálfbærar fjárfestingar með umhverfismarkmið eða í sjálfbærar fjárfestingar með félagslegt markmið. Þetta þýðir að hlutfall sjálfbærra fjárfestinga með umhverfismarkmið og þeirra sem hafa félagsleg markmið xxx xxxx breytilegt með tímanum. Sjóðurinn felur í sér fjárfestingar sem eru meðhöndlaðar sem hlutlausar í sjálfbærnis tilgangi, svo sem reiðufé og peningamarkaðsfjárfestingar og afleiður sem notaðar eru með xxx að markmiði að draga úr áhættu (varnir) xxx xxxxx sjóðnum
skilvirkar. Xxx felur líka í sér fjárfestingar sem ekki eru metnar með sjálfbærniverkfæri Schroders’ og stuðla því
ekki að sjálfbærnismati sjóðsins.
Fjárfestingar- og eignavalsferli sjóðsins hefur verið endurskoðað og samþykkt af vöruþróunarnefnd fjárfestingarstjórans sem samanstendur af fulltrúum frá lögfræði-, regluvörslu-, vöru- og sjálfbærum fjárfestingum. Viðvarandi fylgni við umsamda sjálfbærnieiginleika er fylgst með af teymi um samræmi eignasafnsins. Xxx xx xxxxxx utanaðkomandi eftirlit á þeirri
áreiðanleikakönnun.
Fjárfestingarferli fjárfestingarstjórans er knúið áfram af eigin grunnvali á grunnhlutabréfum neðanfrá og upp. Sérfræðiþekking frá bæði fjárfestingateyminu og sjálfbærniteyminu veitir fjölbreytta hugmyndasköpun xx xxxxx skoðun á hugmyndum í kringum væntanlegan feril langtímavaxtar, ESG og sjálfbærnieiginleika.
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Xxxxxxxx International Selection Fund – BRIC (Brazil, Russia, India, China)
Útilokun tiltekinnar starfsemi, atvinnugreina eða hópa útgefenda eru skráð undir hlutanum „Eftirlit með umhverfislegum eða félagslegum einkennum“, auk fjárfestingartakmarkanna sem xxxxx um sjóðinn, verða mæld innan ramma fjárfestingastjórans um samræmi við eignasafn.
Fjárfestingarstjóri sækir upplýsingar um fyrirtæki sem fjárfest er í frá opinberum fyrirtækjaupplýsingum og fyrirtækjafundum, frá miðlaraskýrslum, iðnaðarstofnunum og rannsóknarstofnunum, hugveitum, löggjafa, ráðgjöfum, frjálsum félagasamtökum og fræðimönnum.
Hægt er að nota rannsóknir þriðju aðila, en innri sérfræðingar okkar mynda sér eigin sýn á hvert þeirra fyrirtækja sem við greinum.
Fjárfestingarstjórinn gerist áskrifandi að utanaðkomandi ESG rannsóknaraðilum þar á meðal; MSCI ESG rannsóknir, Bloomberg, Refinitiv, Sustainalytics og Morningstar, sem er háð reglulegri endurskoðun og breytingum.
Þótt þriðju aðilarnir sem afhenda langflest gagnanna sem notuð eru hafi verið valdir vandlega, geta gagnavillur átt sér stað. Til að bregðast við þessu fylgist sérstakt ESG gagnastjórnunarteymi með virkum hætti með villum og leysir gagnafyrirspurnir. Þetta felur í sér náið samstarf við þriðja aðila gagnaveitendur og stjórnun og eftirlit með gagnaleiðréttingum.
Takmarkanir á aðferðafræði og gögnum fjárfestingarstjórans geta stafað af framboði gagna, og sérstaklega skorti á gögnum sem tilkynnt er um frá fyrirtækinu.
Þar sem gögn eru ekki tiltæk mun Schroders hafa samskipti við fyrirtæki til að hvetja þau til að birta gagnapunkta sem vantar.
Sum af okkar eigin verkfærum leiðir til þess að gildi vantar þar sem við á. Líkönin okkar nota venjulega úrval af aðferðum til að meta gildi sem vantar þar sem við á og eru sæmilega öflug.
Þar sem gögn fyrir mælikvarða eru ekki nægjanlega tiltæk til að hægt sé að draga traustar ályktanir, tökum við xxx mæligildi ekki með í verkfærunum okkar.
Kóðun og eftirlit með takmörkunum á fjárfestingaráhættu fyrir einstaka sjóði og umboð viðskiptavina er á ábyrgð teymis fjárfestingarstjóra eignasafnsfylgni innan sjálfstæðu fjárfestingarinnar
Áhættuaðgerð.
Gögnin í fylgniramma eignasafns mynda grunninn að eftirliti með áhættumörkum og vísbendingum og nýjustu upplýsingar um uppbyggingu eignasafns (svo sem eignaúthlutun, geira og landastöðu) og áhættumælingar eru auðveldlega aðgengilegar fyrir fjárfestingaráhættu okkar, fylgni eignasafns og fjárfestingateymi.
Við teljum virkt eignarhald xxxx xxx áhrif sem við getum beitt stjórnendum til að tryggja sjálfbæra starfshætti í þeim eignum sem við fjárfestum í. Við stefnum að því að knýja fram breytingar sem munu vernda og auka verðmæti fjárfestinga okkar og við erum staðráðin í að nýta vægi fyrirtækis okkar til að breyta því hvernig fyrirtæki starfar til xxxx xxxxx. Við teljum að þetta sé mikilvægur þáttur í hlutverki okkar sem ráðsmenn fjármagns viðskiptavina okkar og hvernig við hjálpum viðskiptavinum að ná langtíma fjárhagslegum markmiðum sínum í samræmi við trúnaðarábyrgð okkar.
Nánari upplýsingar um nálgun okkar við virka eignarhaldsstefnu eru aðgengilegar almenningi: xxxxx://xxxx.xxxxxxxxx.xxx/xx/xxxxxxxxxxxxxxx/xxxxx-xx/xxxxxxxxx-xxxxxxxxxx-xxxxxxxxx-0000-0.xxx.
No sustainable investment objective
This financial product promotes environmental or social characteristics, but does not have as its objective sustainable investment.
Environmental or social characteristics of the financial product
The Fund maintains a higher overall sustainability score than the MSCI BIC (Net TR) 10/40 index, based on the Investment Manager’s rating system. This benchmark (which is a broad market index) does not take into account the environmental and social characteristics promoted by the Fund.
The Fund invests at least 25% of its assets in sustainable investments, which are investments that the Investment Manager expects to contribute towards the advancement of one or more environmental and/or social objective(s).
For more information on how the sustainability score is measured please refer to the "Methodologies for environmental or social characteristics" section.
Investment strategy
The sustainable investment strategy used by the Investment Manager is as follows:
The Fund is actively managed and invests at least two-thirds of its assets in a range of equity and equity related securities of Brazilian, Indian and Chinese companies.
The Fund may invest directly in China B-Shares and China H-Shares and may invest less than 20% of its assets (on a net basis) directly or indirectly (for example via participatory notes) in China A-Shares through Shanghai- Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect and shares listed on the STAR Board and the ChiNext.
The Fund may also invest up to one-third of its asset directly or indirectly in other securities (including other asset classes), countries, regions, industries or currencies, Investment Funds, warrants and Money Market Investments, and hold cash.
The Fund may use derivatives with the aim of achieving investment gains, reducing risk or managing the Fund more efficiently.
The Fund maintains a higher overall sustainability score than the MSCI BRIC (Net TR) 10/40 index, based on the
Investment Manager’s rating criteria.
The Fund may also apply certain other exclusions. Further information on all of the Fund’s exclusions is to be found further below in the “Monitoring of sustainable investment objective” section.
The Investment Manager applies governance and sustainability criteria when selecting investments for the Fund.
In order to assess good governance practices, the Investment Manager utilises a Schroders' proprietary tool to help it develop a complete understanding of a company through a stakeholder lens.
Schroders' proprietary tool is data–driven and provides a systematic framework for analysing a company’s relationship with its stakeholders. It identifies key performance drivers and data points to examine company strengths and weakness across different key stakeholder groups and is a central driver of the assessment of a company’s stakeholder management.
The proprietary tool includes over 250 data points to assess how well companies are governed and how likely they are to adapt to changing social and environmental pressures. It draws on both conventional and unconventional data sources. Examples of unconventional data are employee review reports, consumer product reviews, revenue from green products, community donations and frequency of lawsuits. By drawing on such unconventional sources that do not rely on company reporting, the Investment Manager is able to build a more complete picture of companies’ performance and reduce its reliance on corporate disclosure, which remains incomplete, particularly among smaller companies in emerging regions.
The proprietary tool considers a number of good governance metrics, grouped into the categories of sound management structures, employee relations, remuneration of staff and tax compliance.
The Investment Manager performs due diligence on potential holdings, including meetings with management,
and assesses the company’s governance, environmental and social profile across a range of factors. This
process is supported by quantitative analysis provided by Schroders’ proprietary sustainability tools, which are key inputs to assess how existing and potential investments for the portfolio are meeting the Fund’s sustainability criteria. In some cases, companies which fall below the sustainability criteria may still be eligible for investment if, as a result of proprietary analysis and ongoing engagement with management, the Investment Manager believes the company will meet its sustainability criteria within a realistic time horizon.
For a company to be eligible to be held in the Fund, it is expected to show a commitment to its stakeholders, including customers, employees, suppliers, shareholders and regulators. The Fund selects companies whose businesses demonstrate good governance and aim to treat stakeholders equitably.
The sources of information used to perform the analysis include information provided by the companies, such as company sustainability reports and other relevant company material, as well as Schroders’ proprietary sustainability tools and third-party data and reports.
More details on the Investment Manager’s approach to sustainability and its engagement with companies are
available on the website:
xxx.xxxxxxxxx.xxx/xx/xx/xxxxxxx-xxxxxxxx/xxxxxxxxx-xxxxxxxxxxxx/xxxxxxxxxxxxxx/xxxxxxxxxxx. The Investment Manager ensures that at least:
– 90% of equities issued by large companies domiciled in developed countries; fixed or floating rate securities and money market instruments with an investment grade credit rating; and sovereign debt issued by developed countries; and
– 75% of equities issued by large companies domiciled in emerging countries; equities issued by small and medium companies; fixed or floating rate securities and money market instruments with a high yield credit rating; and sovereign debt issued by emerging countries,
held in the Fund’s portfolio are rated against the sustainability criteria. For the purposes of this test, small
companies are those with market capitalisation below €5 billion, medium companies are those between
€5 billion and €10 billion and large companies are those above €10 billion.
The investment strategy guides investment decisions based on factors such as investment objectives and risk tolerance.
Proportion of investments
The planned composition of the Fund’s investments that are used to meet its environmental or social
characteristics are summarised below.
#1 Aligned with E/S characteristics includes the investments of the financial product used to attain the environmental or social characteristics promoted by the financial product.
#2 Other includes the remaining investments of the financial product which are neither aligned with the environmental or social characteristics, nor are qualified as sustainable investments.
The category #1 Aligned with E/S characteristics covers:
– The sub-category #1A Sustainable covers sustainable investments with environmental or social objectives.
– The sub-category #1B Other E/S characteristics covers investments aligned with the environmental or social characteristics that do not qualify as sustainable investments.
#1 Aligned with E/S characteristics includes the minimum proportion of the Fund’s assets used to attain the environmental or social characteristics, which is equal to 70%. The Fund commits to maintain a higher overall sustainability score than the MSCI BIC (Net TR) 10/40 index, and so the Fund’s investments that are scored by Schroders’ proprietary sustainability tool are included within the minimum proportion stated in #1 on the basis that they will contribute to the Fund’s sustainability score (whether such individual investment has a positive or a negative score). Also included within #1 is the minimum proportion of assets that are invested in sustainable investments, as indicated in #1A. The minimum proportions stated apply in normal market conditions. The actual proportion stated in #1 is expected to be higher.
For more information on how the sustainability score is measured please refer to the "Methodologies for environmental or social characteristics" section.
#2 Other includes investments that are treated as neutral for sustainability purposes, such as cash and Money Market Investments and derivatives used with the aim of reducing risk (hedging) or managing the Fund more efficiently. #2 also includes investments that are not scored by Schroders’ proprietary sustainability tool and so do not contribute towards the Fund’s sustainability score. As #1 states a minimum proportion that is in practice expected to be higher, the proportion stated in #2 is expected to be lower.
Minimum safeguards are applied where relevant to Money Market Investments and derivatives used with the aim of reducing risk (hedging) or other investments by restricting (as appropriate) investments in counterparties where there are ownership links or exposure to higher risk countries (for the purpose of money laundering, terrorist financing, bribery, corruption, tax evasion and sanctions risks). A firm-wide risk assessment considers the risk rating of each jurisdiction; which includes reference to a number of public statements, indices and world governance indicators issued by the UN, the European Union, the UK Government, the Financial Action Task Force and several Non-Government Organisations (NGOs), such as Transparency International and the Basel Committee.
In addition, new counterparties are reviewed by Schroders’ credit risk team and approval of a new counterparty is based on a holistic review of the various sources of information available, including, but not limited to, quality of management, ownership structure, location, regulatory and social environment to which each counterparty is subject, and the degree of development of the local banking system and its regulatory framework. Ongoing monitoring is performed through a Schroders’ proprietary tool, which supports the analysis of a counterparty’s management of environmental, social and governance trends and challenges. Any significant deterioration in the profile of the counterparty in Schroders’ proprietary tool would lead to further analysis and potential exclusion by Schroders’ credit risk team.
Monitoring of environmental or social characteristics
The sustainability score of the Fund is measured by SustainEx™, Schroders’ proprietary tool that provides an
estimate of the societal or environmental impact that an issuer may create.
The exclusion of certain activities, industries or groups of issuers listed below, as well as the investment limits applicable to the Fund, will be measured within the Investment Manager’s portfolio compliance framework. Exclusions and limits are coded into this framework to seek to ensure that pre-trade compliance correctly flags the securities that should not enter the portfolio. Securities excluded based on revenue thresholds are
evaluated quarterly by the Sustainable Investment team using MSCI’s revenue data.
The coding and monitoring of investment risk restrictions for individual fund and client mandates is the
responsibility of the Investment Manager’s Portfolio Compliance team within the independent Investment Risk
function.
The data in the portfolio compliance framework forms the basis for monitoring of risk limits and indicators, and the latest information on portfolio structure (such as asset allocation, sector and country positions) and risk metrics is easily available to our investment risk, portfolio compliance and investment teams.
Excluded Activity | Criteria |
Thermal Coal Mining Maximum Percentage of Revenue | 10% |
Thermal Coal Power Generation Maximum Percentage of Revenue | 30% |
Exclusion Criteria Environmental exclusions
Social exclusions
Excluded Activity | Criteria |
Tobacco Production Maximum Percentage of Revenue | 10% |
Tobacco Value Chain (excluding production) Maximum Percentage of Revenue | 25% |
Bespoke Schroders exclusions
Excluded Activity | Criteria |
Schroders Controversial Weapons Curated List1 | All |
Companies Flagged for Violating the UN's Global Compact Principles | Fail |
Methodologies for environmental or social characteristics
The Fund promotes the following characteristic: it maintains a higher overall sustainability score than the MSCI BIC (Net TR) 10/40 index, based on the Investment Manager’s rating system. As stated above, the sustainability score is measured by SustainEx™, Schroders’ proprietary tool that provides an estimate of the potential societal or environmental impact that an issuer may create. It does this by using certain metrics with respect to that issuer, and quantifying the positive (for example by paying ‘fair wages’) and negative (for example the carbon an issuer emits) impacts of each of those metrics to produce an aggregate measure expressed as a notional percentage of sales of the relevant underlying issuer. The overall sustainability score aggregates the effect of sustainability indicators including but not limited to greenhouse gas emissions, water usage, and salaries compared to the living wage. An issuer may be a company or a sovereign. The Investment Manager monitors compliance with this characteristic by reference to the weighted average sustainability score of the Fund in SustainEx™ over the previous six month period.
As part of the Fund’s investment processes, the SustainEx™ score, and the drivers of that score, are reviewed at the overall fund level. Schroders proprietary tools, including SustainEx™, may not cover all of the Fund’s holdings from time to time, in which case the Investment Manager may use alternative methods to assess
1 Schroders controversial weapons screening covers cluster munitions, anti-personnel mines, and chemical and biological weapons. Full details of the criteria and company names are available via the following link: xxxxx://xxx.xxxxxxxxx.xxx/xx/xxxxxxxxxxxxxx/xxxxxx-xxxxxxxxx/xxxxx-xxxxxxxxxx/
relevant holdings in the Fund. In addition, certain types of assets (such as cash and certain equivalent securities such as gilts) are treated as neutral and are therefore not considered by our proprietary tools.
The Fund also invests at least 25% of its assets in sustainable investments, which are investments that the Investment Manager expects to contribute towards the advancement of one or more environmental and/or social objective(s). The Investment Manager monitors compliance with this characteristic by reference to the sustainability score of each asset in Schroders' proprietary tool. Compliance with this is monitored daily via our automated compliance controls.
As part of its broader assessment, the Investment Manager also considers the following:
CONTEXT
Context is a proprietary ESG research tool which provides a systematic framework for analysing a company’s relationship with its stakeholders and the sustainability of its business model. Comprising over 260 metrics across over 13,000 companies, it is designed to support the Investment Manager’s understanding of the sustainability of companies’ business models and profitability, and provides structured, logical and wide- ranging data.
The tool enables analysts to select the most material ESG factors for each sector, weight their importance and apply relevant metrics. Analysts are then able to compare companies based on the metrics selected, their own company assessment scores or adjusted rankings (size, sector or region), with the flexibility to make company specific adjustments to reflect their detailed knowledge. The tool is fully integrated within Schroders’ global research platform, which is readily accessible across investment desks and geographies.
External Research
The Investment Manager uses information from several external ESG research firms, but only ever as one input into the Investment Manager’s own company assessments to be questioned, examined and built on. External data providers are used to challenge or endorse the proprietary view of the Investment Manager.
The Investment Manager’s Sustainable Investment team has extensive networks within its respective field. Information is drawn from publicly available corporate information and company meetings, from broker reports, industry bodies, and research organisations, think tanks, legislators, consultants, Non-Governmental Organizations and academics; wherever it is felt the information would add value to the Investment Manager’s analysis.
Through this process, the Investment Manager aims to evaluate the relevance and materiality of a range of ESG factors on future earnings growth and as potential risk factors for a company.
Data sources and processing
In order to assess and understand the potential impact of sustainability risks and opportunities, Schroders has developed a range of proprietary tools. These tools rely on data that is available at the level of the underlying investment holdings.
The Investment Manager draws information on investee companies from publicly available corporate information and company meetings, from broker reports, industry bodies, and research organisations, think tanks, legislators, consultants, Non-Governmental Organisations and academics.
Third party research may be used, however our internal analysts form a proprietary view on each of the companies we analyse. Financial analysts may also use third-party research to support their assessment of ESG issues when analysing companies, in addition to consulting with our in-house ESG specialists. Through this process, we aim to evaluate the relevance and materiality of a range of ESG factors on the sustainability of future earnings growth and as potential risk factors for a company.
The Investment Manager subscribes to external ESG research providers including; MSCI ESG research, Bloomberg, Refinitiv, Sustainalytics and Morningstar, which is subject to periodic review and change.
Whilst the third parties that deliver the vast majority of the data used have been chosen carefully, data errors may occur. To address this, a dedicated ESG Data Governance team pro-actively monitors for errors and resolves data queries. This involves close collaboration with the third-party data providers, and managing and tracking data corrections.
Where data is not available, Schroders will engage with companies to encourage them to disclose the missing data points. This additional information will be used alongside data from conventional and unconventional data sources that feed into our proprietary tools.
Some of our proprietary tools infer missing values where applicable. Our models typically employ a range of techniques to estimate missing values where appropriate and reasonably robust. For example, in one tool, where reported values are missing for companies, we fill using metric-specific rules such as filling with the industry peer group 60th percentile where higher values are considered negative and the peer group
40th percentile where higher values are considered beneficial (which is a conservative approach).
Where data for a metric is not sufficiently available to form robust conclusions, we do not include that metric in our tools.
Limitations to methodologies and data
The characteristic promoted by the Fund is to maintain a higher overall sustainability score than the
benchmark, based on the Investment Manager’s rating system.
Limitations to the Investment Manager’s methodology and data may arise from data availability, and
specifically the lack of company reported data.
The section “Data sources and processing” outlines the approach in ensuring the above mentioned limitations
do not affect how the environmental or social characteristics promoted by the financial product are met.
The Fund also commits to invest at least 25% of its assets in sustainable investments, based on the Investment
Manager’s rating system.
Due diligence
The Fund’s investment and asset selection process has been reviewed and approved by the Investment Manager’s Product Development Committee that includes representatives from the Legal, Compliance, Product and Sustainable Investment functions. Ongoing compliance with the agreed sustainability characteristics is monitored by the Portfolio Compliance Team. There are no external controls on that due diligence.
Engagement policies
We consider active ownership to be the influence we can apply to management teams to ensure sustainable practices in the assets in which we invest. We aim to drive change that will protect and enhance the value of our investments and we are committed to leveraging the weight of our firm to change how a company is
operating for the better. We believe this is an important aspect of our role as stewards of our clients’ capital
and how we help clients meet their long-term financial goals in line with our fiduciary responsibilities.
Our active ownership priorities reflect the combined perspectives of our fund managers, investment analysts and sustainability specialists across the firm, supported centrally by the Sustainable Investment team. As a result, we are able to take a common approach across investment desks.
We focus on sustainability issues which we determine to be material to the long-term value of our investee holdings. When material and relevant, we believe that companies that address these factors, where lacking, will drive improved financial performance for our clients. These issues reflect expectations and trends across a range of stakeholders including employees, customers, and communities, to the environment, suppliers and regulators. By strengthening relationships with that range of stakeholders, business models become more sustainable. The governance structure and management quality that oversee these stakeholder relationships are also a focus for our engagement discussions. In addition, we seek to reflect the priorities of our clients.
Based on this process, we identify six broad themes for our engagement: climate, natural capital & biodiversity, human rights, human capital management, diversity & inclusion and governance.
Our themes are underpinned by additional cross-cutting thematic priorities. We also increasingly recognise the interconnectedness of ESG themes, such as the “just transition”, which recognises the social dimension of the transition to a resilient and low-carbon economy. We seek to reflect this interconnectedness in our engagements with companies.
How we engage
We identify three key methods for practicing active ownership:
1. Dialogue: We speak with companies to understand if and how they are preparing for the long-term sustainability challenges they face
2. Engagement: We work with companies to help them to recognise the potential impact of these challenges and to help them take action in the areas where change may be required
3. Voting (where applicable): We use our voice and rights as shareholders to make sure these changes are effected.
These forms of active ownership can take place directly with companies, led by our fund managers, investment analysts and Sustainable Investment team; they can also take place in collaboration with other groups.
Engagement is therefore a component of the portfolio’s investment strategy, both from an environmental and
social perspectives.
We recognise that effective engagement requires continuous monitoring and ongoing dialogue. Where we have engaged repeatedly and seen no meaningful progress, we will escalate our concerns. Decisions on whether and how to escalate are based on the materiality of each issue, its urgency, the extent of our concern and whether the company has demonstrated progress through previous engagements. We identify a number of methods to escalate our engagements, such as meeting or otherwise communicating with non-executive directors or the chair of the Board, publicly stating our concerns, withholding support or voting against management and directors (where applicable) up to divesting partially or fully.
Our approach to active ownership focusses on achieving real-world outcomes and achieving change. When determining when to engage and setting an objective for the engagement, we consider:
1. Materiality: We seek to focus our engagement on the most material sustainability threats and opportunities to the company.
2. Regional context: The materiality of issues and the expectations we have of companies vary by country and region; for example, differing socio-cultural factors, regulatory maturity and resource constraints. Where possible we reference country or regional initiatives, regulations and leading practice from peers in our dialogue with companies.
3. Realistic outcomes: We consider both leading practice and what could realistically be achieved by the company in the next few years, including considering the size of the company.
4. Ability to monitor progress: We use objective, measurable metrics or indicators that can be used to assess company performance on an issue.
5. Length of engagement: We aim to set short- to mid-term objectives – that can often be achieved over a 12- to 24-month period depending on the intensity of the engagement - but with a longer-term vision in mind.
We aim to set pre-defined SMART (specific, measurable, achievable, realistic and time-bound) engagement objectives. We regularly monitor progress against the engagement objectives, at least annually, and at a frequency that is appropriate for the priority of the engagement and materiality of the issue or holding. That said, we recognise that the length of time to achieve an objective will vary depending upon its nature, and that key strategic changes will take time to implement into a company’s business processes. A measurable outcome from our engagement upon completion of an objective could take a range of forms, including additional disclosure by a company, influencing the company strategy on a particular issue, or a change to the governance of an issue.
Further details on our approach to active ownership policy is publicly available: xxxxx://xxxx.xxxxxxxxx.xxx/xx/xxxxxxxxxxxxxxx/xxxxx-xx/xxxxxxxxx-xxxxxxxxxx-xxxxxxxxx-0000-0.xxx.
Designated reference benchmark
No reference benchmark has been designated for the purpose of meeting the environmental or social characteristics promoted by the financial product.