The investment portfolios we select for our clients are critically important to us; we want to make sure they are as sustainable and responsible as possible. In this article we share how we’ve made responsible portfolios the default and look at how fund manager engagement can make real-world change.
In our 2022 Impact Report, we shared our intention to increase the proportion of clients choosing our Responsible (PNr) and Impact (PNi) portfolios and include more responsible and impact funds. We’re pleased to report some significant progress in this area, with our responsible portfolios now the default for new clients and 40% of assets under management (AUM) in PNr or PNi.
This is a big leap since the portfolios were launched and represents a 12% increase since our last report. We are continually making enhancements to our investment offering and now provide a managed portfolio service. This provides the portfolios with greater risk oversight and allows clients to immediately access the latest thinking if changes are required.
“Throughout 2023, we’ve significantly increased the proportion of our default PNr portfolio that’s subject to environmental, social and governance screening.” Farida Hassanali, Client Manager, and Vice-Chair of our Investment Committee
Seeking real world change
There are two ways to approach responsible investing. One is divesting – avoiding investments in companies that controversially add to humanity’s challenges. Many people are reassured to know they’re not investing in these companies. While this is the right choice for some, and divesting may send a signal, it’s debatable whether this leads to significant real-world changes; these companies can still access capital from other investors. Engagement means fund managers proactively seeking to influence companies to improve their environmental, social and governance (ESG) performance, potentially resulting in positive changes in the real world. For example, a company may agree to start reducing carbon emissions towards a net-zero target, or improve labour standards in their supply chain, and shareholders can hold them accountable to these plans or use their voting powers to challenge company decisions.
“We believe the best chance of positive change is working with fund managers whose shareholder engagement meets the highest standards.” Steve Watters, Head of Impact
We want to encourage change and accountability for fund managers. To facilitate this, we’ve developed a comprehensive engagement questionnaire, which asks fund managers about their ESG methodology, personnel, accountability, net-zero commitments, voting, transparency, reporting and engagement programmes. We’ll continue to sharpen this and use the insights we gather to better define best practice. For us, this also means helping to educate clients and other advisers so that, together, we can advocate for higher standards of engagement by fund managers.
Our next steps
We are working with ESG experts to make sure our approach is aligned with upcoming disclosure laws, which aim to prevent greenwashing. As was already planned, we will review our PNi portfolio in 2024 and will ensure that we communicate clearly what this portfolio seeks to achieve.
Additionally, we continue to work to achieve our non-financial aims. For example, our partners play an active role in influential groups, such as the Dimensional EMEA Sustainability Council and VirtuVest.
Our B Corp score increased by 8.8% in the clients and investment category. To find out more, download our Impact Report 2023 – A big step forward. Find out more about our work to create client reports on the carbon intensity of our portfolios.
The value of an investment and the income from it could go down as well as up. The return at the end of the investment is not guaranteed and you may get back less than you originally invested.
Past performance is not indicative of future results and no representation is made that the stated results will be replicated.
Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.