Fund Size: £1943.20m

Total screened & themed / SRI assets: £312.80

Total Responsible Ownership assets: £36698.50

Total assets under management: £46595.70

As at: 31/03/24

Overview

Filters

Fund information

Policy

The Global Equity ESG strategy seeks best-in-class companies within their specific industry or those that are showing positive ESG momentum, but does not explicitly exclude any companies. Rather than exclude specific sectors or industries, the team avoids certain behaviours. These behaviours include the manufacture of harmful and unsustainable products, e.g. tobacco, and exposure to severe ESG risks that may prompt material fines or regulatory consequences, e.g. companies deemed to be in breach of the UN Global Compact.

Exclusions:

Outside of the firm-wide exclusions list on controversial weapons, the Global Equity ESG strategy does not exclude a predefined list of companies. Instead, the team takes into account negative signals, including certain products or behaviours that are considered unsustainable. This can lead to exclusion of certain business lines and practices including:

• Companies involved in the production and/or manufacture of tobacco products.
• Companies which have been deemed to have breached the UN Global Compact Principles.
• Companies involved in controversial weapons in accordance with the guidelines of the Ottawa Convention on landmines, the Oslo Convention on Cluster Munitions, the Biological Weapons Convention, the Chemical Weapons Convention and involvement in nuclear weapons.
• Companies deriving a material proportion of revenue from coal mining or coal fired electricity production
• Companies deriving a material proportion of revenue from the gambling industry
• Companies deriving a material proportion of revenue from pornography

Consideration is also given to the engagement activity that is carried out by the EOS team around key issues to encourage better management of material environmental, social and governance risks.

Process

Assessment of the ESG characteristics of a company is a vital part of the team’s investment approach and the team uses ESG research in both proprietary models and in discussion with our in-house ESG experts, EOS.

The team has built a bespoke quantitative assessment of the most important ESG issues, the QESG Score, which evaluates a company’s ESG characteristics and identifies positive ESG change. The team believes that companies less exposed to ESG risks than peers will outperform over the long term. Further, it believes that companies that are improving their ESG profile through positive change can unlock significant shareholder value.

The QESG Score is designed to capture a company’s behaviour on various ESG issues, as well as observed change in its ESG behaviour. The score combines data from EOS, Sustainalytics, MSCI, CDP, ISS, Trucost, FactSet and Bloomberg and is weighted 50% governance factors, 25% environmental factors and 25% social factors; the score is shown in the ESG Dashboard. The weightings used are based on the expertise of the EOS team. Following research into the growing impact of ESG factors, the team found a significant correlation between governance and stock performance.

The QESG Score is a valuable component of the ESG Dashboard, which is used in the subjective part of the process, and provides a concise digest of the ever-increasing amount of data on ESG risks. As such, all of the team’s investments are analysed from an ESG perspective.

The expertise of EOS has also helped define the key performance indicators or risk factors on which each company is measured. These are either generic, such as board structure, or sector specific, focusing on the major risks by industry – such as CO2 emissions and fleet consumption for the automobiles industry, paper sourcing for media and energy efficiency for airlines. The team uses it to identify ESG risks within companies and determine the materiality of these risks. Any change in the level of ESG risk and progress on current engagements are key factors that could influence an investment decision.

The ESG Dashboard has helped the team further integrate ESG research into investment decisions and foster dialogue with EOS, with whom the team have formal monthly meetings, as well as numerous ad hoc conversations. The Dashboard is accessible through Bloomberg and, as well as its assessment of a company’s ESG characteristics, is further bolstered by the voting and engagement activities of EOS. This collaboration with our stewardship experts ensures the team remains active owners of the companies held in the portfolio.

The Portfolio Snapshot offers a portfolio perspective on ESG exposures. This tool reports on ESG characteristics of portfolio holdings (both in absolute and benchmark-relative terms) including voting and engagement data from EOS. The Snapshot also highlights companies with potential controversies and ESG concerns. The tool acts to promote discussion on thematic ESG risks, as well as to identify the best and the worst companies according to various ESG metrics.

By thoroughly rating companies on these extra-financial criteria, businesses (and investment managers) can be steered towards greater consideration of the ESG issues. This assessment of ESG factors helps the team reinforce its view of the sustainability of a company and is consistent with their long-term approach and helps ensure that turnover remains low.

The ESG integration approach adopted by the team is complemented by direct dialogue with businesses that is made possible through EOS, which ensures the team remains active owners of the companies held in the portfolio.

The team also has access to a range of proprietary tools, including the Corporate Governance Tool, the Carbon Tool and the Environmental Tool.

In addition, our investment teams make use of data related to ESG analysis from several providers, such as MSCI, Sustainalytics, Bloomberg, CDP, ISS, Trucost and Planetrics.

Resources, Affiliations & Corporate Strategies

ESG Resources, EOS, Responsibility Office and ESG Specialists:

The responsibility for implementing our approach resides with all personnel; however, we have a number of teams in place that ensure that, across the business, we discharge our responsibilities in a consistent and effective manner.

Launched in 2014, our dedicated Responsibility Office coordinates, develops and supports the implementation of our responsible investment and stewardship policies and ensures that responsibility is embedded throughout the business. This extends to our approach to our own governance and practices, as well as the integration of engagement and ESG factors into our investment strategies and processes.

In terms of our ESG-dedicated personnel, Federated Hermes Limited has 85 staff members that are directly involved in ESG integration, as at 31 March 2024. 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 38-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.
• Within our Fixed Income team, we have a Sustainable Fixed Income (SFI) team. The SFI team is responsible for the sustainability integration within our credit portfolios and has a dedicated engagement resource.
• We have two dedicated impact equity investment teams: Impact & Sustainable Investing and SDG Engagement. These are managed by Ingrid Kukuljan and Hamish Galpin, respectively. We have also appointed a Head of Impact Engagement - Equities, Will Pomroy, who oversees and leads the engagement programme for our equity impact strategies, which includes providing ESG analysis and formulating engagement strategies for the portfolios.
• 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 Global Emerging Markets team includes two dedicated Responsible Investing & Sustainability personnel, Olivia Lankester and Hayley McGuiness and 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/2024/05/6f19626d98852698c2f960906dccf312/fhl-corporate-stewardship-report-2024.pdf.

Dialshifter

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

The ESG characteristics of companies are reflected in the team’s proprietary assessment of ESG performance, the QESG Score. These scores reflect the current behaviour of companies and how the former are improving.

Selected stocks are then subjected to a disciplined subjective analysis, which seeks to validate the models results and assess macro and ESG risks.

The result is a portfolio with exposure across the style spectrum that favours best-in-class companies alongside those whose ESG profile is improving.

Our organisation is helping to support the Paris Climate Agreement and the Race to Net Zero by…

We trust companies have set their net-zero pledges in good faith and we look for interim targets and goals to better understand their pathways to net-zero.  We acknowledge the challenge around the alignment of net-zero time-lines for commitments.  To address this challenge, we look for explicit short- and medium-term targets that are sufficiently ambitious so that the company’s decarbonisation profile is aligned with the temperature degree rise goals of the Paris Agreement( ie 1.5 degrees,).

We are signatories to the Net Zero Asset Managers initiative. We have committed to support the goal of net-zero greenhouse gas emissions by 2050.

Literature

• Fund overview & literature (including factsheet)

The value of investments and income from them may go down as well as up, and you may not get back the original amount invested. It should be noted that any investments overseas may be affected by currency exchange rates. The performance of the strategy may have some dependence on the economic environment of emerging markets which may negatively affect the value. The strategy has environmental and/or social characteristics and so may perform differently to other strategies, as its exposures reflect its sustainability criteria. Past performance is not a reliable indicator of future results and targets are not guaranteed.

For professional investors only. This is a marketing communication. This document does not constitute a solicitation or offer to any person to buy or sell any related securities, financial instruments or products; nor does it constitute an offer to purchase securities to any person in the United States or to any US Person as such term is defined under the US Securities Exchange Act of 1933. It pays no regard to an individual’s investment objectives or financial needs of any recipient. No action should be taken or omitted to be taken based on this document. Tax treatment depends on personal circumstances and may change. This document is not advice on legal, taxation or investment matters so investors must rely on their own examination of such matters or seek advice. Before making any investment (new or continuous), please consult a professional and/or investment adviser as to its suitability. All figures, unless otherwise indicated, are sourced from Federated Hermes. Whilst Federated Hermes has attempted to ensure the accuracy of the data it is reporting, it makes no representations or warranties, expressed or implied, as to the accuracy or completeness of the information reported. The data contained in this document is for informational purposes only, and should not be relied upon to make investment decisions. Federated Hermes shall not be liable for any loss or damage resulting from the use of any information contained on these pages. All performance includes reinvestment of dividends and other earnings.

Federated Hermes Investment Funds plc (“FHIF”) is an open-ended investment company with variable capital and with segregated liability between its sub-funds (each, a “Fund”). FHIF is incorporated in Ireland and authorised by the Central Bank of Ireland (“CBI”). FHIF appoints Hermes Fund Managers Ireland Limited (“HFMIL”) as its management company. HFMIL is authorised and regulated by the CBI. Further information on investment products and any associated risks can be found in the prospectus, the fund supplements or the key investor information documents/key information documents, the articles of association as well as the annual and semi-annual reports. In the case of any inconsistency between the descriptions or terms in this document and the prospectus, the prospectus shall prevail. Details of the Manager’s Remuneration Policy and Sustainable Policies are available on the Policies and Disclosures page at https://www.hermes-investment.com/ie/hermes-ireland-policies-and-disclosures/, including: (a) a description of how remuneration and benefits are calculated; and b) Sustainability related policy and disclosures. All offering documents are available free of charge (i) at the office of the Administrator, Northern Trust International Fund Administration Services (Ireland) Limited, Georges Court, 54- 62 Townsend Street, Dublin 2, Ireland. Tel (+ 353) 1 434 5002 / Fax (+ 353) 1 531 8595; (ii) at https://www.hermes-investment.com/ie/; (iii) at the office of its representative in Switzerland (ACOLIN Fund Services AG, Leutschenbachstrasse 50, CH-8050 Zurich www.acolin.com). The paying agent in Switzerland is NPB Neue Privat Bank AG, Limmatquai 1/am Bellevue, P.O. Box, CH-8024 Zurich. The information provided herein does not constitute an offer of the Fund in Switzerland pursuant to the Swiss Financial Services Act ("FinSA") and its implementing ordinance. This is solely an advertisement for the Fund pursuant to FinSA and its implementing ordinance. The costs for hedged share classes will be higher than the costs for non-hedged share classes. Refer to the prospectus or offering documents before making any final investment decisions and consider all fund characteristics and not just ESG characteristics.

Issued and approved by Hermes Fund Managers Ireland Limited (“HFMIL”) which is authorised and regulated by the Central Bank of Ireland. Registered address: 7/8 Upper Mount Street, Dublin 2, Ireland, DO2 FT59. HFMIL appoints Hermes Investment Management Limited (“HIML”) to undertake distribution activities in respect of the Fund in certain jurisdictions. HIML is authorised and regulated by the Financial Conduct Authority. Registered address: Sixth Floor, 150 Cheapside, London EC2V 6ET. Telephone calls may be recorded for training and monitoring purposes. Potential investors in the United Kingdom are advised that compensation may not be available under the United Kingdom Financial Services Compensation Scheme. Eligible European investors are advised that compensation may be available for certain eligible investments under the Ireland Investor Compensation Scheme.

Last amended: 22/01/24 06:24