Pictet Global Environmental Opportunities-I dy GBP (SICAV/Offshore*)
SRI / Ethical Overview
In coherence with the commitment of the Pictet Group to sustainability, Pictet Asset Management began looking at sustainable investment in 1997. We launched our first Sustainable Equities strategy in 1999 and in 2000 we launched our Water fund, which is today the largest in its sector. As at end of 2016, sustainable and thematic environmental strategies represented over USD 10 bn of assets invested across multiple asset classes (equities, fixed income and balanced solutions).
Our approach to Corporate Responsibility is born from our history as a family-owned business which began in 1805 and has grown organically over several generations by developing enduring relationships with our clients and our employees and has always been grounded in the highest standards of business and personal conduct. We cultivate sustainability through multiple scopes
- Our People: We believe the well-being of our staff is critical in promoting a sense of responsibility towards clients, towards each other and towards the wider world in which we work and live. In 2009, we founded Pictet Academy which is dedicated to training and developing the staff and entities of the Group. In 2016, we established a Diversity Board to further promote diversity in our workplace.
- Investments: Responsible investment became part of our product range long before the trend emerged in the industry. Today, Pictet Asset Management is a world leader in thematic environmental strategies. At Group level, we implemented a ban on securities of producers of antipersonnel mines, cluster munitions, biological and chemical weapons in actively-managed funds and discretionary mandates.
- Environmental Stewardship: The Pictet Group is committed to reducing its environmental impacts and managing operations in line with best practice. Pictet’s headquarters are fitted with state-of-theart rooftop solar panels and heat recovery of our IT infrastructure, which enabled us to reduce the gas consumption of our building by 90% since 2007. We have set a target to cut the Group’s CO2 emissions per employee by 40% by 2020. Emissions that we cannot avoid are offset by the financing of clean energy projects in China, Zimbabwe and Thailand.
- Philanthropic Tradition: Over the years, the Pictet Partners have made contributions in the fields of medical research, culture, social and humanitarian causes. In 2009, the Pictet Group Charitable Foundation was established. In 2008, we launched the Prix Pictet, a photography prize aiming to raise public awareness of the need to tackle problems of environmental sustainability.
SRI Policies (Primary strategy in bold)
- Environmental policy Find investment funds with environmental policies - ie that consider issues such as pollution, climate change, resource management, environmental impact. This will include options from all of the different SRI Styles, including funds where their core strategy is to focus on other areas such as ethical funds. See fund information for fund specific policy details.
- Norms focus Find funds that use internationally agreed standards, conventions and 'norms' to help direct where the fund can and cannot invest (e.g. the UN Global Compact, UN Sustainable Development Goals). Read fund literature for further information.
- Positive selection bias Find funds where their main 'ethical approach' is to invest in companies that are considered to be positive/good or useful to people and/or the environment. The fund may also have negative avoidance criteria - see fund details to read more about fund strategies.
- Balances company 'pros and cons'/best in sector Find ethical funds and other options that consider both the 'positive' things companies do and the 'negative' things they do in order to make balanced, often complex decisions about where they might invest. Such funds often invest in the best/most ethical companies across most industries ('best in sector'), rather than excluding entire sectors. The fund manager may combine this with 'responsible engagement' activity to encourage better business practices. See fund literature for specific policy explanations.
- Sustainability themed Find funds where there is a significant emphasis on sustainability issues either as its primary strategy or as a core strategy that compliments other criteria. (This may apply to a number of different SRI Styles). Such funds will consider environmental and social issues when making stock selection decisions. Read fund literature for further information.
- Favours cleaner, greener companies Find funds that aim to nvest in companies with strong environmental policies and practices. This may mean it invests in smaller companies offering market leading environmental services or products and/or larger companies that are working towards the improved management of their negative impacts. Read fund literature for further information.
- Favours companies with strong social policies Find funds that invest in line with positive strategies that relate to 'people' issues - such as having strong human rights, labour standards and equal opportunities practices. Such funds are likely to invest in companies that have market leading standards with regard to employee and supplier practices. Read fund literature for further information.
- Faith friendly Find funds that have attributes that commonly suit the aims of investors of faith - although they may not be specifically marketed as being only for religious investors. Strategies vary (as do investor aims). Read fund literature for further information.
- Strictly screened ethical fund Find funds that have a high level of negative ethical avoidance. These funds are likely to exclude more companies than other ethical (and SRI) fund options. Read fund literature for further information.
- ESG/SRI engagement Find funds and fund management companies that actively encourages higher 'environmental, social and governance' and/or 'sustainable and responsible investment' practices amongst investee companies - when positive change is aligned with the best interest of investors. This may apply to a single fund or a group of funds. Read fund literature for further information.
- Responsible Ownership policy for non SRI funds Find funds run by fund managers that apply Responsible Ownership or 'Stewardship' policies to all or most of their investment assets. This means that active involvement (e.g. voting, dialogue) with the companies they invest in across funds (not normally limited to ethical or SRI options.) Read fund literature for further information.
- Integrates ESG factors into all/most fund research Find fund management companies that research environmental, social and governance (ESG) issues when deciding whether or not to invest in a company. This typically applies to all funds, not only those which are promoted as being 'ethical' or 'SRI themed'. This is increasingly often used as a risk management tool.
- Vote all* shares at AGMs/EGMs This fund manager votes or aims to vote all* the shares they own at Annual General Meetings and Extraordinary General Meetings. A commitment to voting shares is a key indicator of 'responsible share ownership' - where fund managers consider - and express their views on - the key business issues effecting the companies they part own. (*Allowance is made for exceptional situations such as when shares are in the process of being sold.)
- In house responsible ownership/voting expertise Find fund / fund management companies where there is in-house expertise that enables the fund manager to make their own decisions on issues such as shareholder voting, setting of in-house guidelines - for example - particularly with regard to environmental, social and governance (ESG) issues.
- Responsible Ownership/ESG a key differentiator The fund managers have said they consider this area to be a key differentiator for their business
- UK Stewardship Code signatory Find fund managers that are signatories to the FRC UK Stewardship Code, which sets out a framework for constructive investor / investee relations where fund managers are encouraged to behave as responsible 'company owners'.
- Publish Responsible Ownership/Stewardship report Find fund management companies that publish information on their approach to responsible investment ownership - also known as 'Stewardship' - following the introduction of 'the Stewardship Code'. This sets out their approach to voting, dialogue with company management and any related activity. This is publicly available.
- Publish full voting record Find fund management companies that publishes a full record of how they vote at AGMs and EGMs. This information is publicly available.
- Review(ing) carbon/fossil fuel exposure for all funds Find funds / fund managers that are reviewing or have reviewed their exposure to carbon intensive industries including (but not only) mining, oil and gas companies. This work is being carried out in the context of climate change related concerns, and may often reference international agreements.
- Regularly lead collaborative ESG initiatives Find funds managed by fund management companies that regularly initiate or help run industry wide (collaborative) investor projects aimed at raising environmental, social and governance standards amongst investee companies.
- Boutique/specialist fund manager Find options offered by smaller, more specialist fund management companies with a significant (or entire) emphasis on sustainable, responsible, ethical, ESG or responsible ownership related investment strategies. Note - strategies vary significantly. Check fund manager supplied links for further information.
SRI / Ethical Policy
Pictet Asset Management was an early adopter of the Principles for Responsible Investment (UNPRI) in 2007. In 2013, Pictet Asset Management initiated an ESG integration projects aiming to share ESG information with all investment teams and foster active ownership. Key features of this program include:
1. ESG research in the portfolio management system
Pictet Asset Management has implemented a comprehensive program that provides access to ESG scoring of companies directly in our proprietary portfolio management system, PAMFolio. Through this tool, investment managers have a direct and real-time access to ESG research of over 5000 companies from 3 providers: ISS (corporate governance and proxy voting research), CFRA (accounting quality) and Sustainalytics (ESG controversies).
2. ESG in risk management
As part of the Quality Review process led by our Investment Risk & Performance team, the exposure to companies with poor ESG ratings as well as the evolution of the portfolio ESG rating is discussed during the product quality reviews of equity strategies. Quality Reviews are held twice a year with investment managers, the CIO in charge of the asset class and the deputy CEO.
3. Active ownership
Pictet Asset Management systematically exercises voting rights on all actively & passively managed strategies. Voting recommendations are provided by ISS and based on its Sustainability Policy. We reserve the right to override ISS’ recommendations on an ad-hoc basis based on specific circumstances. For segregated accounts, proxy voting may be based on the client’s own voting policy.
In 2015, Pictet Asset Management voted at 3’231 meetings and 37’695 resolutions. We supported 89% of proposed resolutions, and voted “Against” (or “Abstain”) to at least one resolution at 1’503 meetings.
Pictet Asset Management has also implemented an engagement programme in partnership with Hermes on behalf of its environment strategies (Pictet-Global Environmental Opportunities, Pictet-Agriculture, Pictet-Clean Energy, Pictet-Timber and Pictet-Water).
In 2015 Hermes conducted a dialogue with 29 companies held in the strategies mentioned above. 44% of the discussions were on governance issues, 30% on environmental issues, 16% on social issues, and 10% on transversal issues. Out of the 29 companies, 16 were subject to repeated and in-depth contacts and 11 have changed their practices or are committed to doing so in the near future.
4. Industry initiatives
Pictet Asset Management actively participates to several investor initiatives aimed at sharing best practices between asset managers and owners and encouraging corporate disclosure on ESG issues. We are notably involved in the IIGCC (Institutional Investors Group on Climate Change), SSF (Swiss Sustainable Finance) and similar organisation in the UK, Germany and Spain.
Pictet Asset Management is further committed to the fight against climate change and the transition to a low carbon economy. In 2016, we supported the special report on renewable energy of the World Energy Outlook, the flagship publication of the International Energy Agency (IEA), and held a high-level conference in Geneva for some of our major institutional clients on the impacts of the energy transition on long-term investments.
Resources, Affiliations & Corporate Strategies
Research Research is vital in identifying the winners within each theme. The investment managers, who have a strong knowledge of the sector, draw on a range of internal and external research inputs.
Internal: the majority of research for the strategy is undertaken by the key investment managers who have dual role responsibilities. In addition to their investment management duties, they are also respon-sible for analysing stocks in their dedicated areas. Furthermore, the team can count on the support of our Equity Research, Developed and Emerging Markets, Small Cap teams and wider Thematic Equities teams. The output of this approach is a global view of sectors and stocks
External: our external research comes from the following two sources of specialist information:
1. Advisory Board: to identify future megatrends, and hence find the companies with the greatest growth potential, each Pictet Thematic Equities strategy has its own Advisory Board composed of distin-guished professionals who are acknowledged thought leaders in their fields. The Advisory Board con-tributes mainly to the first stage of the investment process – strategic definition of the investment theme.
2. Broker research and external databases: we have established close working relationships with the analysts that we believe are the best in the market covering both macro and specialist areas. Brokers’ research is mainly used for actual financial data rather than for buy and sell recommendations. It can also be a good indicator of trends which will drive liquidity. Industry white papers provide de-tailed information on a product or service that we want to understand better. In order to obtain and screen fundamental company data we use a variety of external databases and data delivery systems such as CSFB HOLT, Starmine or FACTSET, which give us access to profit and loss, balance sheet and cash flow statement data for companies, as well as providing IBES EPS forecasts for each of them.
The key investment managers responsible for the Pictet Global Environmental Opportunities strategy are all part of Pictet Asset Management’s Thematic Equities team. In addition a dedicated external Advisory Board helps the investment managers to track trends impacting the various investment segments of relevance to the environmental industry.