Sustainable, Responsible &/or ESG Policy:
The fund applies a detailed approach to sustainable analysis, whereby the companies in the funds we select go through a series of sustainability screens that endeavour to restrict exposure to the following: controversial weapons, tobacco production, thermal coal, oil and alcohol production, as defined by Morningstar. As part of this analysis, we categorise the selected funds in one of three ways:
- Responsible - we use negative screening to avoid funds investing in companies with connections to activities or industries deemed controversial or unacceptable.
- Sustainable - we select funds that have environmental, social and governance factors (ESG) as a core element of their investment mandate.
- Impactful - we invest in funds that select companies that are determined to create a positive environmental and social impact.
By following the above approach, we have identified 12 of the UN Sustainable Development Goals (SDGs) that we feel are achievable through public markets. Using these 12 SDGs as a basis for our sustainable investment philosophy, we have created four sustainable investment pillars, that show the thematic exposures available through the fund.
These pillars are –
- Health and societal wellbeing
- Financial inclusion and education
- Circular economy and resources
- Climate and environmental action
Sustainable, Responsible &/or ESG Process:
The Sustainable MPS Committee (fund management team) combines the top-down asset allocation from the Investment Committee with bottom-up fund selection from the Authorised Collectives Committee, producing a selection of well-researched investment ideas and holdings. We then apply sustainable analysis through our sustainable investment tents (below) -
Intentionality: this is assessed through deep-dive analysis of a fund manager's commitment to the sustainable allocation of capital
- Commitment to sustainability by the investment house (e.g. UN PRI signatory status, industry engagement, net-zero ambitions)
- Qualitative assessment of the investment mandate (conducted through face-to-face meetings with the investment team), to ensure the motive behind the fund reflects the mandate
- Quantitative analysis using ESG data is undertaken to ensure the underlying holdings align with the fund's stated mission and philosophy
Integration: this is assessed through understanding the ESG profile of the underlying companies
- We want to understand the ESG practices of underlying businesses
- We want to understand how this ESG information is integrated within the fund's investment process, including at asset allocation level
- We want to ensure that the fund is deliberately allocating capital to businesses that have high levels of operation (or good ESG scores)
Impact: we assess this through the impact data produced by the fund, and through our own impact assessment
- For the funds that measure the impact generated by the strategy, we assess the methodology and calculation of this impact. Metrics include water, energy, renewable energy production and access to healthcare
- For every fund we assess the carbon intensity of the underlying holdings (scope 1 + 2, and score 3), versus the benchmark
Hedge funds cannot be assessed using this framework because of the complicated nature of these strategies. As such, these funds are not assessed using the sustainable investment framework. For this reason, these collective investment vehicles are not utilised in sustainable portfolios.
Resources, Affiliations & Corporate Strategies
We have developed a proprietary tool to assess collective investments against our three sustainable tenets. This framework can be applied to long-only equity and bond funds. Occasionally, there are underlying bonds that cannot be analysed using our quantitative ESG tools and data providers as they are not in the universe. Occasions such as these require additional engagement with the fund manager to understand the sustainability profile of these holdings.
We also use external ESG data providers in order to allow us to make fully informed decisions. These data providers are –
- MSCI ESG
- ISS
- Ethical Screening
- Morningstar ESG Research
- RepRisk
We use a combination of internal and external data sources in order to allow the house to make fully informed decisions and add value to the portfolio construction process.
We research funds based on our house view of where we have strong sentiment and apply a bottom-up process to select the best instruments to satisfy our views -
Internally, LGT WM has a dedicated alternatives analyst, long-only collectives analyst, UK equities analyst, international equities analyst, special situations equities analyst and fixed income analyst. These analysts provide specialist research on their respective sub-asset classes and are voting members of their respective committees which meet on a monthly basis.
In addition to the analysts, there is also a team of 4 multi-asset class portfolio managers (3 London based, 1 Jersey based), who are each voting members of a sub-asset class investment committee along with other experienced Investment Managers on the floor.
This team of nine individuals, who collectively make up the Investment Research Team, are highly qualified and have built in-house screens and models to help identify undervalued stocks and have also developed various tools and processes to identify optimal asset class mixes and fund selection. The Investment Team is headed by our Chief Investment Officer Sanjay Rijhsinghani.
External research is provided by the following:
- Independent research
- Absolute Strategy research
- Capital Economics research
- Gavekal
- Strategas
- Sellside Research
- Post MIFID II it is JPM/Citi and Numis
- ESG Research
- Ethical Screening
- Bloomberg
- MSCI ESG
- ISS
- Databases
- MorningStar
- Fundslibrary
- Financial Express
- Factset Aggregate database
- Analytics
- Bloomberg
- MorningStar
- Factset
- In-house analysis tools
- Market data
- Bloomberg
- Factset
Dialshifter
Literature
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