Federated Hermes Sustainable Global Equity Fund

Sustainable, Responsible &/or ESG Policy:

The team believes that ESG is a materially important factor, but their approach to ESG integration goes beyond risk mitigation. We take a more forward-looking holistic view by also considering the impact of company’s products or services. This enables us to invest in both today’s sustainability leaders and those of tomorrow.

From a risk perspective, businesses that aren’t managed sustainably are exposed to a variety of risks, including:

• Risk of adverse regulation;
• Reputational risk;
• Shifting consumer preferences.

Whereas for responsible companies, they cannot only mitigate the risks above, but also benefit from:

• Green stimulus & associated investment - “build back better”;
• Attracting and retaining talented people;
• Shifting consumer preferences.

The cumulative effect of the above trends provides a powerful tailwind for leading sustainable businesses. A trend that we see as structural and nascent. Growing environmental and social awareness is already driving disruption across multiple industries and will provide rich opportunities for active investors.

Companies need to consider the broader effects of their actions, of their products and services, and their operations. How they protect their workforce, how they manage their supply chain, and provide the best product or service for their customers. Further questions every management board needs to ask itself include:

• What is their purpose, their central goal, over and above profit maximisation?
• How can they manage their business without depleting scarce resources?
• What can they do to limit their scope 1, 2 & 3 emissions and align their business to a 1.5°C scenario?
• How can they motivate, attract and retain their workforce?
• How can they improve their product and service to create more value for customers?
• Is the governance structure and remuneration policy aligned to all stakeholders?
• How can they grow their business without creating negative externalities?

It is our belief that companies that can best manage these responsibilities will be rewarded.

The team’s sustainability analysis centres on three inter-related aspects; the fundamentals of the business model, their ESG metrics, and product impact. Every company is assessed on each area before consideration for the portfolio.

From an ESG perspective, we consider three criteria when looking at the ESG profile:

• Quantitative metrics: we believe measurable ESG metrics are among the most important data points in trying to identify ESG leaders. Most of the reported data from companies relates to policy (80-90%), which is typically a less valuable input into the team’s process. The team assesses and compares companies with peers on a variety of metrics, considering both the absolute level, as well as the rate of change. The team makes use of proprietary tools such as the Carbon Tool, Portfolio Snapshot and ESG Dashboard score. Any notable metrics from external ESG research providers will be considered at this stage.
• Engagement/corporate openness: EOS engages with many of the world’s largest companies, interacting with companies on behalf of clients with over $1.5trn of assets under advice. Their rich insights help inform our company-specific and sector understanding, particularly on ESG issues. The team believes the approachability and openness of management and board directors can be a telling indicator of the culture within a business. In addition to responsiveness, other key considerations for the team when assessing on this metric include sustainability KPI’s and goals, ongoing monitoring and measurement of those KPI’s, audited sustainability report, and overall ESG disclosure.
• Materiality: the relative importance of different ESG metrics vary enormously depending on the stock, the industry, and the geography. Material ESG topics are those that could have meaningful financial consequences. To assess materiality, the team are principally guided by their understanding of the company, while utilising international frameworks like SASB as a sense check. The team recognises that materiality is a fluid concept, and changes over time depending on trends changes in the competitive landscape, regulation shifts, innovation and other factors.

Product Impact

The team also assesses the effect of the products and services on broader society. The team seeks to identify companies whose products and services are aligned to one of the four sustainable themes, which in turn are mapped to the UN SDGs. In this analysis, the team seeks to understand the net effect on broader stakeholders, considering positive, neutral and negative effects. The team works closely with the Impact Opportunities team to assess impact and alignment with the SDGs. Additionality is an important component in our impact analysis, there is considerable value to products and services that have incremental benefit above what is already available.

Overall sustainability

Each company is analysed and compared on the same criteria. The team recognises that there is some interdependence across the three areas but look for companies that score well across all three.

The analysis required contains a degree of subjectivity. Reflective of the inherent difficulties of applying a common framework to a diverse set of companies, operating in different industries and geographies, with frequent gaps in data availability and accuracy. For this reason the team has eschewed a simplistic scoring mechanism in favour of an open format assessment. Ultimately the value lies in how the team use the sustainability assessment to inform valuation analysis.

The sustainability assessment and rating will continue to evolve, aided by new tools and analysis internally, as well as the improvement in corporate disclosure and the introduction of new common reporting standards.

Exclusions:

In aiming to achieve superior long-term returns, the team will exclude investment in the following companies:

• Companies that generate over 5% of their revenues from the extraction, exploration, distribution or manufacturing/refining of oil and gas or from the use of oil and gas for electricity generation*; 
• Companies that generate over 1% of their revenues from the exploration, mining, extraction, istribution or refining of coal or from the use of coal for electricity generation*; 
• Electricity utility companies with a carbon intensity that are not aligned with a below 2 degree scenario*;
• Companies that generate over 0% of their revenues from the manufacture of Controversial Weapons or by providing either an essential and/or tailor-made product or service to the manufacturers of Controversial Weapons* and companies that generate over 5% of their revenues from production of Conventional Weapons; 
• Companies that generate over 5% of their revenues from nuclear power; 
• Companies that generate over 0% of their revenues from the production of Tobacco products* and companies that receive over 5% of their revenues from tobacco distribution; 
• Companies that generate over 2% of their revenues from gambling products;
• Companies that generate over 2% of their revenues from adult entertainment products;
• Companies that generate over 2% of their revenues from the production of alcohol and companies that receive over 5% of their revenues from alcohol distribution; 
• Companies that generate over 5% of their revenues from GMO crop production; and 
• Companies that are in contravention of the principles of the UN Global Compact*.

*The above exclusions align with the exclusions for Paris-aligned Benchmarks detailed in Article 12(1)(a)–(g) of Commission Delegated Regulation (EU) 2020/1818

Process:

We have provided below the investment process for the Sustainable Global Equity Strategy:

1) Screening

The investment process begins with an initial screen of the investment universe. At the first stage, companies are excluded that don’t meet market cap, liquidity and ESG requirements. The team also applies exclusions to certain sectors within the global equity universe identified as not meeting certain environmental and social thresholds, including those with significant involvement in weapons manufacturing, fossil fuels, nuclear power, alcohol, gambling, tobacco and adult entertainment.

2) Idea generation

Idea generation is the lifeblood of the investment process. The team is focused on identifying new investment opportunities through the cycle. The availability of new ideas varies with the cycle and is, in itself, a useful barometer of where we are in the current cycle that can be used as an aid to portfolio construction. Maintaining a healthy watchlist of new ideas is also central to a strong sell discipline and helps ensure strong oversight of existing holdings.

The team therefore seeks to maintain a watchlist of companies that could be potential candidates for inclusion in the strategy via its five-part idea generation process:

• Thematic Research: The team believes thematic research is a key source of new ideas. Four broad themes are explored: two related to the environment and two to society. Environmental preservation, social inclusion, health & wellbeing, and efficient production and resource usage. Within each, there are a plethora of exciting sub-themes with the strong potential for growth.

• Each of the overarching themes is closely aligned to the UN Sustainable Development Goals and, as such, help to identify companies addressing the greatest challenges that society faces today. All stocks within the strategy are exposed to at least one of the four sustainable themes.
• However, it is insufficient just to be aligned to a sustainable theme, each company requires a robust stand-alone investment thesis. Often there can be an attractive theme but without any compelling stock ideas, typically for valuation reasons. On those occasions the team won’t invest. The bottom-up investment analysis and valuation takes precedence.
• The team believe that by assessing the full value chain within specific sustainable themes, it provides a powerful framework for identifying stock ideas with long-term structural drivers.
• Positive screening: As a complement to the thematic approach, the team also runs screens for positive attributes relating to business model fundamentals and ESG metrics.

The initial screen is followed by a second positive sift to identify companies with some of the following attributes:

• Revenue metrics: organic growth, consistency, rate of change;
• Return metrics: ROCE, gross margin, consistency;
• Balance sheet strength, free cash flow generation;
• ESG momentum/rate of change;
• Investment teams and EOS. The team discusses sustainability ideas and themes on a regular basis with experts from our other equity teams, as well as our fixed income and private-market teams. This is further supplemented by access to a range of external research providers.

EOS directly advises companies on how best to report on their sustainability performance. The team supplements our proprietary data with external research from providers including Trucost, MSCI and Sustainalytics to identify stocks that could potentially have an attractive impact profile. The team looks at revenue thresholds and capital expenditure in sustainable products and services. They also use more traditional ESG screens to make sure companies not only have a potentially attractive exposure to the UN SDGs, but also operate in a sustainable way and reduce negative externalities that may undermine their mission.

• Company meetings. Company meetings are one of the most important sources of ideas. We aim to talk with senior management, but also with operational management and the board of directors, to get a more rounded perspective. The team regularly conducts reverse roadshows to meet companies at their sites, outside of the standard investor roadshow calendar. The team find these conversations are more relaxed and open as a consequence. The team will also meet with other companies in the industry to understand competitors, suppliers, and customers; regular attendance at investment conferences is part of this process. The COVID-19 pandemic has accelerated the introduction of virtual meetings, enabling a greater number of company interactions.
• Industry analysis: Companies do not operate in a vacuum and the exogenous influences of macroeconomic shifts, politics, FX moves, climate change and social upheaval, can significantly influence the relative attractiveness of different areas of the market at both the company and industry level. Industry analysis is closely linked to thematic research, as it seeks to identify the key changes that will influence the longer-term structural opportunities and the potential winners and losers. A central part of industry analysis is in the conversations with other sector experts across the investment floor.
• Fundamental analysis: While thematic analysis is the key driver of idea generation, fundamental bottom-up stock analysis is also central to building a watchlist of stock ideas. The team seeks to understand what drives the core business (how the company makes money), understand the corporate strategy and assess financial stability. An array of information sources facilitates this process, from standard broker notes to blogs, podcasts and expert networks. Central to this analysis is understanding how the company is operating sustainably; for example, have they demonstrated an understanding of their impact on all stakeholders and set a clear path to operating more sustainably in the future? What changes in their operations, or their products and services are required in the future and have they invested sufficiently to innovate and adapt?

3) Sustainability Score

The team’s sustainability analysis centres on three inter-related aspects: the fundamentals of the business model; their ESG metrics; and product impact. Every company is assessed on each area before consideration for the portfolio.

Business model

Step one is a thorough appraisal of the strength and durability of the business model. Each company is assessed four broad parameters:

• Quality of revenue: Among other considerations, the team looks at metrics including the trend and absolute rate of growth, consistency of top-line trends, organic vs M&A, stability, diversification, cyclicality, FX exposure and customer concentration.
• Quality of returns: Among other considerations the team looks at metrics including the trend and absolute level of return on invested capital, gross and operating profit margins, fixed and variable costs and the level of control the company has to manage these in future.
• Financial foundations: Among other considerations, the team looks at the strength and composition of the balance sheet, the company’s liquidity, leverage and cash flow. This is considered in the context of the business and the level of capital required to grow. Historic and anticipated capital allocation is another important factor.
• Competitive environment: Among other considerations, the team looks at the business through Porter’s five forces framework. The team seeks to understand the moat protecting the business, the power of suppliers and customers, the competitive intensity and the key intellectual property and competitive advantage. For example, we ask ourselves what potential for disruption does the business face from new technology, changing consumer preferences and shifts in regulation nationally and locally.

ESG profile

The team also assesses the sustainability of each company from an ESG perspective. This is predominantly focused on the operational metrics within the business. Broadly we assess three criteria when looking at the ESG profile:

• Quantitative metrics: we believe measurable ESG metrics are among the most important data points in trying to identify ESG leaders. The majority of reported data from companies relates to policy, which is typically a less valuable input into the team’s process. The team assess and compare companies with peers on a variety of metrics, considering both the absolute level and the rate of change. The team makes use of proprietary tools such as the Carbon Tool, Portfolio Snapshot and ESG Dashboard. Any notable quantitative metrics from external ESG research providers will be considered at this stage.
• Engagement/corporate openness: EOS engages with many of the world’s largest companies, interacting with companies on behalf of clients with over $1trn of assets under advice. Their rich insights help inform our company-specific and sector understanding, particularly on ESG issues. The team believes the approachability and openness of management and board directors can be a telling indicator of the culture within a business. In addition to responsiveness, other key considerations for the team when assessing on this metric include sustainability KPI’s and goals, ongoing monitoring and measurement of those KPI’s, audited sustainability report, and overall ESG disclosure.
• Materiality: the relative importance of different ESG metrics vary enormously depending on the stock, the industry, and the geography. Material ESG topics are those that could have meaningful financial consequences. To assess materiality, the team are principally guided by their understanding of the company, while utilising international frameworks like SASB as a sense check. The team recognise that materiality is a fluid concept, and changes over time depending on trends changes in the competitive landscape, regulation shifts, innovation and other factors.

Product impact

The third area the team assesses is the effect of the products and services on broader society. The team seeks to identify companies whose products and services are aligned to one of the four sustainable themes, which in turn are mapped to the UN SDG’s. In this analysis, the team seeks to understand the net effect on broader stakeholders, considering positive, neutral and negative effects. The team works closely with the Impact Opportunities team to assess the intentionality, additionality, nature and balance of each company’s products & services. Additionality is a particularly important component in our impact analysis given the considerable value to products and services which have incremental benefit above what is already available.

Overall assessment

Each company is analysed and compared on the same criteria. The team recognises there is some interdependence across the three areas, but look for companies that compare well across all three.

The analysis required contains a degree of subjectivity. Reflective of the inherent difficulties of applying a common framework to a diverse set of companies, operating in different industries and geographies, with frequent gaps in data availability and accuracy. For this reason the team has eschewed a simplistic scoring mechanism in favour of an open format assessment. Ultimately the value lies in how the team use the sustainability assessment to inform valuation analysis.

The sustainability assessment will continue to evolve, aided by new tools and analysis internally, as well as the improvement in corporate disclosure and the introduction of new common reporting standards.

4) Valuation

The financial appraisal of a company is vital to the stock selection process. The non-financial objective of the strategy does not detract from the imperative of identifying mis-priced securities, and the team will only invest if they see upside to fair value.

The team assesses valuation in conjunction with the sustainability assessment. Every company is modelled by the investment team, with explicit future forecasts. The primary valuation methodology is a discounted cash flow (DCF) model. Cash flow metrics are important to the team, given the reduced risk of manipulation. Traditional multiples-based metrics such as P/E, PEG, EV/EBITDA, EV/Sales and Price/Book are also assessed. These are considered from an absolute and relative perspective, and compared to historic metrics and to peers and the market.

Our fair value estimate for each company incorporates our sustainability analysis. This is done in two ways. Often this is modelled implicitly in the financial forecasts (for example, it informs our view that the company may enjoy lower future costs, higher revenues or reduced exceptional items) and thus is embedded into our multiple or DCF analysis. The second approach is to reflect the sustainability analysis explicitly through the valuation multiple or discount rate. Thus, the team may look to reduce the weighted average cost of capital within the DCF model to reflect exceptional sustainability credentials, or to increase the ‘fair’ earnings or cash flow multiple. The team recognises the risk of double counting (boosting both forecasts and valuation multiple) and sets out where and how the sustainability assessment informs valuation analysis.

The team assess fair value in conjunction with a bull and bear scenario, looking for asymmetry between bull, bear and base case forecasts. Moreover, the process of assessing a bear case scenario forces the team to consider what could go wrong (pre-mortem). The simple documenting of the downside risks can help mitigate regret. This is a common behavioural bias for active investors.

The team believes that no valuation metric should be considered in isolation. For example, while discounting future expected cash flows remains the team’s preferred valuation approach, today’s low-rate environment has introduced a lot more sensitivity to the equity risk premium assumption and driven traditional multiples far higher.

The emphasis on each metric will depend on the specific investment and the industry it operates in. The team focuses its efforts on understanding what the investment community (as represented by other investors and research providers) has priced into the company and how this compares to their own forecasts, as well as understanding how these metrics and their individual components are changing over time.

The team also considers the operational leverage of the company and the impact that changes in forecasts will have upon the valuation metrics. For example, they would be more willing to accept a lower current FCF ratio or higher P/E multiple if the company has a high gross margin and they expect sales to surprise positively. Beyond the initial assessment of the investment, the team also monitors these metrics across the portfolio to highlight changes in forecasts or re-ratings.

The team recognises that excess returns are unlikely if market expectations are elevated. As such, they look to understand what the current price is inferring through a reverse DCF. This allows flexing of key assumptions such as the cost of capital, terminal margin and growth rate.

The process ultimately looks to identify mis-priced securities, understanding that medium/long-term prospects are primarily driven by free cash flow and, in the short term, by sentiment and consensus forecasts.

Internal research

Independent research is the cornerstone of the team’s approach, and hence most research analysis is proprietary within the group or instigated by the team. The research platform is designed to be a creative force where individuals maintain an open and flexible mindset.

The team have their own thorough Sustainability assessment. In which they analyse a company from three inter-related aspects; the fundamentals of the business model, their ESG metrics, and product impact. Every company is assessed on each area before consideration for the portfolio.

Step one is a thorough appraisal of the strength and durability of the business model. Each company is assessed on four business model criteria: quality of revenue, quality of returns, financial foundations, and the competitive environment.

Step two is an assessment of the company’s ESG profile. The team considers three criteria when looking at the ESG profile: quantitative metrics (both proprietary and external), engagement/corporate openness, and materiality.

Step three is consideration of the effect that the company’s products and services have on broader society.

Companies which meet the minimum requirement on the above steps are tagged within one of three categories.

1. Impact: companies where the predominant sustainability strength is through the products and services enabling positive environmental or social impact.
2. Leader: companies where the predominant strength lies in their operational E&S metrics alongside strong governance.
3. Improver: Companies which rank well across the three parameters, and where they exhibit the fastest rate of improvement.

 Overall sustainability: each company is ultimately analysed and compared on the same core criteria. The team recognises that there is some interdependence across the three areas but look for companies that compare well across all three.

To assist the team in its sustainability assessment, they can utilise excellent internal ESG research tools developed over the years within the Federated Hermes Limited:

• The ESG Dashboard quantifies a company’s ESG profile across a broad range of metrics, producing an overall ranking: the QESG Score. This score is used to systematically direct the capability towards companies with an attractive ESG profile. Indeed, the QESG Score, and the Dashboard as a whole, was developed to reflect our ESG assessment philosophy. The proprietary score also acts as an early indicator of changing ESG risks, thereby alerting analysts and portfolio managers to potential issues and opportunities. The aim of the Dashboard has been to provide a broad, easy-to-interpret summary of a company’s ESG profile, while clearly highlighting key ESG risks. Synthesising data from a range of carefully evaluated external providers and voting and engagement records from EOS, the Dashboard generates a QESG Score. This is simply a proprietary measure of the current level and trend of ESG risk within a given company.
• The Portfolio Snapshot tool offers a portfolio perspective on ESG exposures. It neatly reports on ESG characteristics of portfolio holdings both in absolute and benchmark-relative terms, while also including voting and engagement data from EOS.
• The Carbon Tool, released in early 2018, allows the team to assess their portfolios’ carbon performance, carbon risk, and corresponding engagements with investee companies in a comprehensive manner. The carbon tool assesses and integrates the following four key elements, making it a cutting-edge approach in evaluating the impact that investment portfolios have on the environment.
  • Measuring the carbon risk of an investment portfolio relative to its benchmark and of listed companies relative to their peers, including Scope 1, Scope 2, and Scope 3 emissions
  • Calculating the profit at risk for an investment portfolio for different carbon pricing and policy scenarios
  • Identifying companies with which carbon-focused engagement should be initiated or intensified
  • Gauging the level of carbon risk being engaged on within portfolios – and the progress achieved

External research providers

The team uses a broad range of research providers, some for their specialism in niche areas and others for their broader, holistic view or thematic approach. The team use broker research for stock and sector analysis but also as a gauge for consensus thinking, or to ascertain some of the counter arguments on specific stocks.

The team also places emphasis on social networking, financial and industry blogs, and expert networks. The team keeps an open mind on all investments and seeks information from a wide variety of sources. Information generated by NGOs, public authorities, development institutions, and civil society provide a more rounded and nuanced view on sustainability themes and how specific companies may be affected.

In addition to internally generated ESG, sustainability and impact insights, the team has access to a wide range of external ESG research reports. These include MSCI ESG, Sustainalytics, Trucost, Bloomberg ESG, BNEF, CDP and many more. These are important sources for ESG analysis, but the team are also very aware of their limitations, and approach accordingly. The team is continuously looking at new data sources, and as disclosure improves and regulation changes, better information will likely become available.

The team is also involved in conversations with an external partner to supplement additional data for impact calculations. The team hopes to have some initial impact metrics for the portfolio (and individual holdings) over the coming 12 months.

Resources, Affiliations & Corporate Strategies:

ESG Resources, EOS, Responsibility Office and ESG Specialists:

In terms of our ESG-dedicated personnel, Federated Hermes Limited has 75 staff members that are directly involved in ESG integration, as at 31 March 2025. We also have dedicated ESG personnel embedded within our investment teams. The teams are outlined below:

• Within the Responsibility Office, our dedicated Responsibility team is tasked with coordinating and supporting the development of our policies and their subsequent integration across our funds and stewardship services. Leon Kamhi, our Head of Responsibility, reports directly to our CEO. Each of our investment teams meet formally with Leon and his team on a quarterly basis to discuss their ESG integration activities.
• Our 37-person stewardship team, EOS, includes industry executives, senior strategists, corporate governance, sustainability consultants, climate change experts, accountants, ex-fund managers, former bankers and lawyers. The depth and breadth of this resource reflects our philosophy that stewardship activities require an integrated and skilled approach. Through EOS we engage with companies on strategic and material ESG concerns to promote investors long-term performance and fiduciary interests - this represents over $2.1 trillion in assets as at 31 March 2025.
• Within our Fixed Income team we have a Sustainable Fixed Income (SFI) team, led by Mitch Reznick, Head of Sustainable Fixed Income (and London managed Fixed Income strategies). The SFI team is responsible for the sustainability integration within our credit portfolios and has a dedicated engagement resource.
• We manage some focused responsible investing equity strategies: a Global Sustainable Equity strategy and an SDG Engagement Equity Engagement strategy.[1] The former is managed by Martin Todd (lead portfolio manager) and Henry Biddle (co-portfolio manager), and the latter is managed by Hamish Galpin. We also have a Head of Engagement - Equities, Will Pomroy, who oversees and leads the engagement programme for our sustainable equity strategies, which includes providing ESG analysis and formulating engagement strategies for the portfolios. Will Pomroy sits with the investment teams in London.
• The Global Equities team also has its own ESG specialist in portfolio manager Louise Dudley, who has been with the company since 2009, initially working in EOS. The team manage various ESG related strategies eg, the ESG Pathway Fund, a Low Carbon and an ESG Screened strategy.  
• The Global Emerging Markets team includes two dedicated Responsible Investing & Sustainability personnel, Olivia Lankester and Hayley McGuiness.  The investment team manage a Global Emerging Markets Equity ESG strategy.  The Asia ex Japan team includes Seyoung Serena Ko who is a dedicated ESG Analyst.

Membership Lists:

Federated Hermes is supportive of the development of codes and standards relating to responsible business conduct and responsible investment to aid transparency and accountability. We adhere to a number of responsible business conduct codes and internationally recognised standards for due diligence and reporting:

• We were founding signatories of the UN Principles of Responsible Investment (UN PRI) in 2006 and committed to embedding the six Principles as a responsible investor and owner. We report annually using the PRI Reporting Framework. We also work with the PRI through a number of its working groups and initiatives.
• We are a signatory of a number of stewardship codes, including the Financial Reporting Council’s UK Stewardship Code since 2010. As part of our signatory status to the UK Stewardship Code we produce an annual Stewardship Report. Our stewardship business unit, EOS is a signatory of the Best Practice Principles for Providers of Shareholder Voting Research & Analysis and reports annually on implementation of these principles.
• Signatories of the UN Global Compact (UNGC) since 2017 and report annually on our implementation of the UNGC Principles across the themes of Environment. Human Rights, Labour Rights and Anti-Corruption. We implement the Principles across our operations, and the themes are reflected in our ESG integration and engagement processes as described in our Sustainability Risks Policy. We engage with the UNGC UK Network to support the continued growth of the network and the impact of its engagement with businesses.
• We joined Climate Action 100+ in 2015 and play an active role in this investor-led initiative with the support of over 360 investors, representing more than $34 trillion of assets under management that aims to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change.
• We were a founder of the 300 Club in 2011 and was the Chair until 2014.
• We have been members of the Net Zero Asset Managers Initiative since 2021 through which we have committed to support the goal of net zero greenhouse gas emissions by 2050, in line with global efforts to limit warming to 1.5°C as stated in the Paris Agreement. We publish an annual climate-related financial disclosures report in line with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD). Furthermore, we are proud to have become an inaugural TNFD Early Adopter, which was announced at the World Economic Forum event at Davos in 2023. We have already begun trialling elements of the TNFD disclosure recommendations in our reporting.
• In 2020 we signed the Finance for Biodiversity Pledge and the Eliminating Commodity Driven Deforestation Commitment, through which we have committed to assess and disclose our exposure to deforestation and to protect and restore biodiversity through our investment and engagement activities.
• We have been a member of the International Integrated Reporting Council (IIRC) since 2011 and the Sustainability Accounting Standards Board (SASB) since 2019.
• In line with international treaties, we are currently excluding companies that are manufacturing and/or are providing either an essential and/or tailor-made product or service to the manufacturers of relevant controversial weapons.
• We ensure our sustainable investments are aligned with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights.
• We comply with all relevant regulatory disclosures, including the requirements of the UK Modern Slavery Act (2015) as set out in our Modern Slavery Statement and the EU Shareholder Rights Directive II.  

We are also members of a wide range of industry initiatives through which we seek to advance industry best practice, collaborate with other investors to achieve shared engagement and advocacy outcomes and ensure we remain at the forefront of best practice. We provide an annual update of our external memberships in our Stewardship Report, available via the link: https://www.hermes-investment.com/uploads/2025/05/a4e349bde8a792ace67777de1b554221/federated-hermes-limited-stewardship-report-2025.pdf

[1] Note: The SDG Engagement Equity Strategy includes the Federated Hermes Global SMID Equity Engagement Fund.

Dialshifter

This fund is helping to ‘shift the dial from brown to green’ by…

The strategy is a natural extension of our longstanding commitment to responsible investing and our leading work in stewardship through EOS. The approach is driven by the recognition that companies who are helping to create a more sustainable environment and society, and who consider all stakeholders will enjoy superior risk-adjusted returns over time. Through careful stock selection, conducted within a framework that encompasses four sustainability themes (environmental preservation, social inclusion, health & wellbeing, and efficient production and resource usage), we can create a portfolio capable of generating attractive long-term financial returns while also contributing positively to broader society.

SDR Labelling:

Not eligible to use label (out of scope)