Standard Life Investments (Corporate Activity)
SRI / Ethical Overview
Our ESG analysis is used across Standard Life Investments, informing a range of activities, including how we construct our investment portfolios. The Responsible Investment and Governance & Stewardship Teams’ research is regularly circulated and available to all investment professionals at Standard Life Investments through our internal platforms, including detailed meeting notes, health warnings and thematic research notes. ESG analysis is further incorporated into investment decisions through ongoing communication with Portfolio Managers, e.g. regular attendance at investment meetings, and targeted conversations with sector analysts before and after company engagements, as well as conducting ESG engagement activities alongside mainstream investment analysts. We also have proprietary, in-house tools for rating countries and companies on ESG factors, which are developed and managed by our investment teams and Responsible Investment Team respectively and are integrated into our internal research systems.
In addition, for real estate investment in particular, we have a dedicated Sustainability Manager within our real estate investment team, as well as a Real Estate Sustainability Focus Group, which includes one of our Responsible Investment Analysts. We produce an annual Sustainable Real Estate Investment Report that discloses the global impact of our real estate investment assets and outlines our policy, goals and progress.
Addressing ESG issues within our investment analysis provides opportunities to both reduce risk and to develop value creation. As of 30 September 2015, Standard Life Investments had £250.6 billion of assets under management. Our approach applies across the firm to varying extents as appropriate, based on the particular asset class. Within equity, fixed income and real estate, we had £141.1 billion assets under management.
Our ESG integration principles are used on equity and fixed interest assets in all geographic regions.
SRI Policies (Primary strategy in bold)
- 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.
- PRI signatory Find fund management companies that have signed up to the UN backed 'Principles of Responsible Investment' initiative.
SRI / Ethical Policy
Taking an integrated approach, our ESG analysis is used across Standard Life Investments, informing a range of activities, including how we construct investment portfolios. The Responsible Investment and Governance & Stewardship Teams’ research is available to all investment professionals at Standard Life Investments through our internal platforms, including companies' ratings, detailed meeting notes, health warnings and thematic research notes. In addition, Responsible Investment and Governance & Stewardship Analysts frequently contribute to internal meetings held by the various investment teams, such as daily team meetings or quarterly sector reviews, to highlight trends and any emerging risks, as well as their company-specific analysis.
While the work of our Responsible Investment Team and Governance & Stewardship Teams is accessible by all of our investment teams, the particular areas of focus and implementation across the asset classes can vary based on potential impact and investment objectives, as described further below. The aim in all cases is a material enhancement across our range of portfolios.
Equity and Credit
Across our equity and credit strategies, our Portfolio Managers aim to understand the drivers of change within individual companies and identify the potential impacts of these changes ahead of the market. Understanding the companies in which we invest therefore is central to our overall investment approach and collaboration is a critical element of the process, amongst and between our investment teams and our ESG-focused teams. Standard Life Investments’ Responsible Investment and Governance & Stewardship Teams are closely aligned with our asset class teams. In addition to the availability and distribution of thematic research, sustainability ratings and meeting notes, our ESG and investment teams come together through:
- Contributing to daily equity and credit team meetings, stock selection meetings and sector reviews to integrate ESG analysis into investment discussions
- Presenting developments in regulation, thematic research and company news on ESG factors at investment meetings
- Communicating key ESG risks and opportunities with the sector analysts before and after engagement
- Regularly attending company meetings with mainstream analysts, as well as conducting engagement activities together
Addressing ESG issues within our investment analysis provides opportunities to both reduce risk and to develop value creation. Our style of active engagement is designed to avoid, as much as possible, surprises that have the potential to change the fundamental standing, strategy or dynamics of the companies in which we invest.
Emerging Markets Debt
Our Emerging Markets Debt Team has developed an Environment, Social, Governance and Politics (ESGP) tool, which ranks a universe of 80 investable emerging countries in four broad regions (Africa, Asia, Eastern Europe and South America) on these four dimensions. 17 relevant indicators from various public sources (World Bank, United Nations, think tanks and NGOs) are used to calculate an average rank across each of the four pillars. For instance, the chosen indicators emphasise the extent of corruption, the strength of the state, respect for obligations and fiscal transparency, which are key for investors in sovereign debt. We also use environmental and social factors, such as measures of inequality, health and education, which signal a country’s ability to achieve sustainable growth over time. Our initial analysis shows a correlation between the ESGP rank and market spread, and we can extract useful signals where market pricing differs from what is implied by the ESGP rank, i.e. where spreads are high despite a good ESGP rank or vice-versa.
Our approach to sustainable real estate investment not only looks for assets that will achieve the financial returns expected by investors, but also incorporates respect for society and the environment so that community and individual rights are protected, environmental impacts are reduced and resources are conserved. To support this approach, we have a dedicated Sustainability Manager within our real estate investment team, as well as a Real Estate Sustainability Focus Group, which includes one of our Responsible Investment Analysts.
Our policy is to encourage best practice standards throughout all aspects of our real estate activities. We are therefore committed to environmental management in all phases of an asset’s cycle – from acquisition through demolition, redevelopment, asset management and disposal, our focus is on energy conservation, mitigating greenhouse gas emissions, maximising waste recycling and water conservation. To achieve these goals we employ best in class consultants and contractors, all of whom have our sustainable real estate investment principles imbedded in their contract conditions and included in their quarterly performance reviews.
At each stage in portfolio construction, the initial sustainability thresholds of the asset are assessed with in-depth due diligence surveys, enabling the physical, legal and financial risks that any particular asset’s sustainability characteristics pose to be fully assessed. Although sustainability risks can be managed or indeed may form part of an asset repositioning strategy (e.g. through redevelopment or refurbishment) we execute stock selection decisions with minimum criteria in mind. For example, from a contamination point of view, we would assess the risk together with external experts to ensure that any new properties acquired will not have a level of environmental risk beyond what would be acceptable to our investors.
Furthermore, we are aware of the legacy that our construction and management decisions leave for the communities in and around our properties. By engaging with communities throughout the life of the investment, we believe that we can strengthen local areas and provide support for those located in or near our properties. For example, we consider the transport infrastructure implications of any development and look closely at the availability of public transport for those working in our buildings, and we systematically manage and control health and safety risks to earn the confidence and trust of tenants, customers, employees, shareholders and society at large.
We can demonstrate measurable improvements in our portfolios as a direct result of implementing our policy, together with a number of environmental awards. Standard Life Investments is a participating member of the Global Real Estate Sustainability Benchmark (GRESB), and our Sustainability Manager actively sits on the benchmark committee. We also produce an annual Sustainable Real Estate Investment Report that discloses the global impact of our real estate investment assets and outlines our policy, goals and progress. This report, which also includes our Sustainable Real Estate Investment Policy and supporting Environmental Management Systems, as well as with further information on our real estate capabilities, is available online at:
Resources, Affiliations & Corporate Strategies
Our dedicated Responsible Investment and Governance & Stewardship Teams are in-house and on-hand to provide advice and expertise should our investment analysts require additional knowledge to facilitate and deepen our understanding of any ESG issues causing concern. We also have proprietary, in-house tools for rating countries and companies on ESG factors, which are developed and managed by our investment teams and Responsible Investment Team respectively and are integrated into our internal research systems.