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M&G Global High Yield ESG Bond Fund (SICAV/Offshore*)

Logo for M&G Global High Yield ESG Bond Fund
SRI Style: ESG Plus
Fund Type: SICAV/Offshore*
Region: Global
Asset Type: Fixed Interest
Launch Date: 05/10/2017

SRI / Ethical Overview

The investment process of the fund is based on the bottom-up analysis of individual bond issues whilst remaining aware of the macroeconomic environment.

 

Environmental, social and governance (ESG) considerations are fully integrated in the investment process via the use of third party ESG information and analysis and proprietary assessment of ESG characteristics.

 

Companies that are assessed to be in breach of the United Nations Global Compact principles on human rights, labour, environment and anti-corruption are excluded from the investment universe.

 

In addition, a screen is applied which seeks to filter out companies that derive revenue of more than 5% for producers, and 10% for distributors, from the following sectors or sub-sectors: tobacco, alcohol, adult entertainment, gambling or thermal coal. In addition, and on a best-effort basis, subject to source information, companies that derive any revenue from defence and weapons are excluded.

 

Finally, the fund excludes holdings which have below average ESG industry-adjusted ratings based on third party ESG ratings, although to a limited extent, the Fund may invest in securities that have not yet been ESG rated.

 

SRI / themed / ethical assets under management – overview

  • Fund Size (GBP):   £11.7 million
  • Total value of assets covered by responsible ownership policy:   £281.5 billion – As environmental, social and governance factors are incorporated into our investment processes, everyone at M&G who is involved in investing shares in this responsibility. M&G’s Responsible Investment Policy (attached) relates to all strategies that we run. We have therefore provided our total assets under management.
  • Total assets under management:    £281.5 billion

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.
  • Social policy Find fund options that consider social issues (e.g. human rights, labour standards, equal opportunities, child labour and adherence to internationally recognised codes such as the UN Global Compact). This will include funds in most of the different SRI Styles as this is considered a core issue. See fund information for detail.
  • Governance policy Find fund options that have policies that relate to corporate governance issues such as board structure, executive remuneration, bribery and/or corporate corruption. These funds will typically avoid companies with poor practices.
  • Tobacco production avoided Find fund options that exclude manufacturers of tobacco (or related) products. This typically relates to ethical funds however funds from other SRI Styles commonly avoid this area also. Strategies vary and funds may invest in retailers of such products (e.g. supermarkets or hotels.) See fund information for further information.
  • Armaments manufacturers avoided Find ethical fund (and other SRI) options that avoid avoids companies that manufacture products intended specifically for military use. Fund strategies vary - particularly with regard to non strategic military products. Read fund literature for specific details.
  • Alcohol production excluded This filter helps you to find ethical funds - and other options - that avoid investment in alcohol production. See fund literature for further information.
  • Gambling avoidance policy Find ethical fund options (and other options) that avoid companies with significant involvement in the gambling industry. See fund policy for details.
  • Pornography avoidance policy Find ethical fund option - and in some cases other options - that avoid companies that derive significant income from pornography. See fund details for further information.
  • Human rights Find funds that consider human rights practices when approving companies for investment. Such funds will require decent standards of human rights to be demonstrated - which typically means adherence to international norms as a minimum standard.

SRI Features

  • 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.
  • Negative selection bias Find funds where their main 'ethical approach' is to avoid companies by using negative screening criteria. Read fund literature for further information.
  • 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.
  • Limited/few ethical exclusions* Funds with this label tend to avoid fewer companies than other ethical funds or other options with avoidance criteria. Strategies vary. The fund may only avoid companies in one or two areas (eg only exclude tobacco or armaments companies) or they may exclude only the very worst companies when measured against internationally accepted standards (across potentially a range of areas). Read fund literature for further information.
  • Available via an ISA Find funds that are available via a tax efficient ISA product wrapper

Corporate Activity

  • 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.
  • PRI signatory Find fund management companies that have signed up to the UN backed 'Principles of Responsible Investment' initiative.

SRI / Ethical Policy

M&G has a significant volume and breadth of fixed income investments – lending to companies, governments, infrastructure projects, housing associations and other borrowers.

 

We believe we will do our best for our clients if we consider every factor that can have a meaningful impact on the long-term performance of the investments we make on their behalf. This includes the full range of environmental, social and governance (ESG) issues.

 

We embed responsible investing into our fixed income investment processes, so that all of our investment professionals have a duty to assess and evaluate the role of ESG issues and risks in a given investment. Such assessments are factored into credit analysis and investment decision making, and are a contributing component of valuations.

 

Analysis and investment

We have a large analytical platform, covering public and private debt, and our investments span a diverse range of fixed income asset classes. Across this breadth of interests our investment processes share many commonalities, including meticulous analysis of each borrower.

 

These assessments focus on all issues that could impair the future creditworthiness of a borrower and interrupt expected future investment returns – ESG risks are assessed in conjunction with all other risks.

 

Our fund managers factor such analysis into their investment decision making, determining whether an investment offers good value to our clients in the light of present and future risks – cognisant of the fact that ESG issues often develop over the longer term.

 

Engagement

The scale of M&G’s resources and participation in debt markets means we are well placed to represent our clients’ interests on ESG initiatives. This can range from responding to public consultations to acting as a sounding board for, and consulting with, government departments and regulatory bodies. M&G also engages directly with borrowers on ESG issues to enhance the value of our clients’ investments. We are very aware of the responsibility that comes with our market position and always seek to represent the best interests of our clients.

 

Sustainability

M&G’s commitment to making investments that support socially responsible and sustainable economic growth can be seen in many sectors. For example, M&G is a significant lender to UK social housing borrowers, where we have continued to provide much-needed long-term financing, at a time when banks have withdrawn their support. We have also provided financing for a range of socially or environmentally beneficial investments in areas including affordable housing, education, healthcare, green property developments, low carbon transport and renewable energy. All investments in these areas must meet our usual, stringent requirements for providing appropriate returns for our clients relative to the risks taken.

 

The fund utilises the following ESG screens.

  • Norms-based screen (Stage 1): Companies that are assessed to be in breach of UN Global Compact principles on human rights, labour rights, bribery & corruption and the environment are excluded from the funds’ investment universes.

 

  • Sector screening (Stage 2): companies that derive more than 5% of their revenues for producers, or 10% of their revenues for distributors, from the following sources: tobacco, alcohol, adult entertainment, gambling or thermal coal. In addition, and on a best-efforts basis subject to source/s and MSCI data, we seek to exclude companies that derive any of their revenue from defence and weapons. 

 

  • The third stage is called ESG integration and filters companies according to their ESG credentials based on ratings provided by MSCI. Companies are assessed on an industry-adjusted basis, taking into account the key issues which are relevant for that sector and with comparison to the standards and performance of its industry peers. The fund focuses on both the industry leaders (ESG score 7.2-10) and companies with an average rating for their industry (ESG score 3.0-7.0), but excludes formally the industry laggards (ESG score below 3.0). In addition the investment team will work with companies to encourage improved ESG outcomes. 

Resources, Affiliations & Corporate Strategies

As environmental, social and governance factors are incorporated into our investment processes, everyone at M&G who is involved in investing shares in this responsibility. We also have individuals with specific responsibility for coordinating activity within each asset class. M&G's Corporate Finance & Stewardship Team supports the Equities business in all matters related to ESG and stewardship of our clients' assets.

 

Finally, M&G's Responsible Investment Advisory Forum oversees the governance and management of responsible investment activities across the group. The committee’s members include representatives from each business unit involved in investment management as well as from the distribution teams.

 

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