Fund Name | SRI Style | Product | Region | Asset Type | Launch Date | |
---|---|---|---|---|---|---|
Zurich Aegon Ethical Equity Pn | Ethical | Pension | UK | Equity | 31/07/2006 | |
As at: 29/02/24 Contact: mark.ferguson@aegonam.com |
||||||
OverviewThis Pension product is linked to the "Aegon Ethical Equity" fund. The following information refers to the primary (OIEC) fund.
The fund offers a portfolio of UK stocks that implements strict ethical exclusionary criteria to avoid companies engaged in unethical activities. It also integrates ESG analysis into fundamental stock picking. Through these elements, it delivers strong ESG-outcomes for clients, as measured by metrics such as carbon statistics and SDG alignment. We have been a recognized leader in responsible investing for over 30 years having launched this fund in 1989. Commitment - We manage £107 billion in dedicated responsible investment strategies (as at 31 December 2022). ESG integration – We believe in the alpha potential of ESG factors and we identify and understand the key ESG risk and opportunities in stocks. Active ownership – We have a robust active ownership programme that includes exercising shareholder voting rights and company engagement. Independent endorsement – Numerous organisations provide independent assessments of our activities, including an A+ rating from UNPRI and UK Stewardship Code Signatory. |
||||||
FiltersFund informationSustainabilityLimits exposure to carbon intensive industries Favours cleaner, greener companies Sustainability focus Encourage more sustainable practices through stewardship Nature & BiodiversityUnsustainable / illegal deforestation exclusion policy Avoids genetically modified seeds/crop production Genetic engineering exclusion Climate Change & EnergyNuclear exclusion policy Coal, oil & / or gas majors excluded Invests in clean energy / renewables Fracking and tar sands excluded Arctic drilling exclusion Fossil fuel reserves exclusion Fossil fuel exploration exclusion - direct involvement Targeted Positive InvestmentsInvests >25% of fund in environmental/social solutions companies Human RightsChild labour exclusion Oppressive regimes (not free or democratic) exclusion policy Modern slavery exclusion policy Ethical Values Led ExclusionsEthical policies Animal welfare policy Animal testing exclusion policy Tobacco and related product manufacturers excluded Armaments manufacturers avoided Alcohol production excluded Gambling avoidance policy Pornography avoidance policy Gilts / government bonds - exclude some Civilian firearms production exclusion Banking & FinancialsPredatory lending exclusion Exclude banks with significant fossil fuel investments Governance & ManagementGovernance policy Avoids companies with poor governance Encourage board diversity e.g. gender Encourage higher ESG standards through stewardship activity Fund GovernanceESG integration strategy Asset Size & MetricsOver 50% small / mid cap companies Invests in small, mid and large cap companies How The Fund WorksStrictly screened ethical fund Positive selection bias Negative selection bias Focus on ESG risk mitigation SRI / ESG / Ethical policies explained on website Assets mapped to SDGs Impact MethodologiesInvests in environmental solutions companies Invests in social solutions companies Invests in sustainability / ESG disruptors Labels & AccreditationsRSMR rated (OEIC funds only) Intended Clients & Product OptionsFaith friendly Intended for investors interested in sustainability Intended for vegetarians and / or vegans Available via an ISA (OEIC only) Intended for clients who want to have a positive impact Fund management company informationAbout The BusinessESG / SRI engagement (AFM company wide) Responsible ownership / stewardship policy or strategy (AFM company wide) Responsible ownership policy for non SRI funds (AFM company wide) Responsible ownership / ESG a key differentiator (AFM company wide) In-house diversity improvement programme (AFM company wide) Senior management KPIs include environmental goals (AFM company wide) Invests in newly listed companies (AFM company wide) Invests in new sustainability linked bond issuances (AFM company wide) ResourcesIn-house responsible ownership / voting expertise Employ specialist ESG / SRI / sustainability researchers Use specialist ESG / SRI / sustainability research companies ESG specialists on all investment desks (AFM company wide) Collaborations & AffiliationsPRI signatory UKSIF member Climate Action 100+ or IIGCC member Fund EcoMarket partner Investment Association (IA) member AccreditationsUK Stewardship Code signatory (AFM company wide) Engagement ApproachRegularly lead collaborative ESG initiatives (AFM company wide) Engaging on climate change issues Engaging with fossil fuel companies on climate change Engaging to reduce plastics pollution / waste Engaging to encourage responsible mining practices Engaging on biodiversity / nature issues Engaging to encourage a Just Transition Engaging on human rights issues Engaging on labour / employment issues Engaging on diversity, equality and / or inclusion issues Engaging on governance issues Engaging on responsible supply chain issues Climate & Net Zero TransitionEncourage carbon / greenhouse gas reduction (AFM company wide) Net Zero commitment (AFM company wide) Working towards a ‘Net Zero’ commitment (AFM company wide) Carbon offsetting - offset carbon as part of our net zero plan (AFM company wide) In-house carbon / GHG reduction policy (AFM company wide) Net Zero - have set a Net Zero target date (AFM company wide) TransparencyFull SRI policy information on company website Full SRI policy information available on request |
||||||
PolicyWe apply a range of client-led exclusions at the start of our investment process which exclude companies undertaking certain unethical activities from the fund’s investment universe. The exclusions are informed by our conversations with clients to understand their concerns and by 30+ years of experience managing ethical funds. We aim for transparency in our screening process and publish the exclusion criteria we use. This means it is easy for clients to understand the types of companies we can and cannot invest in. Our underlying philosophy is to avoid companies that cause significant negative effects in society or the environment. We seek client feedback on the suitability of the criteria every 2 years to ensure they remain relevant to our clients and will adjust if necessary.
We use both external screening databases and in-house research to ensure the companies in our ethical universe are suitable for investment and comply with the fund’s screening criteria. Importantly, this is not a static concept, we constantly review the fund’s holdings to ensure we are aware of any new developments in their business or new information that might change their eligibility. To demonstrate the robustness, a number of holdings have been sold from the portfolio over the past year after new information came to light, resulting in them no longer passing the screens. In each case, the RI team engaged with the company to ensure their understanding of the new information was accurate and, following careful consideration of the information, the portfolio manager was informed that the stock no longer passed the screen and had to be sold as soon as reasonably practicable. The specific exclusions applied by the fund are: Animal welfare
Military
Nuclear power
Environment
Political donations
Genetic engineering
Gambling
Alcohol
Tobacco
Pornography
Banks
Oppressive regimes
Ethical Screening Process Our ethical screening analysis has three stages:
|
||||||
ProcessOur investment process provides an effective and disciplined approach to idea generation, analysis, decision making, portfolio construction and review. The process focuses on identifying profitable investment ideas and provides a forum for constructive engagement across the team.
Our standard investible universe is the FTSE All-Share Index which we monitor through quantitative screening. We may invest out-with this universe to include stocks in several small cap and AIM-listed names. Our monthly global strategy investment policy meeting, and UK strategy meetings provide a forum for idea generation from a top-down perspective in the UK equities market, presenting different considerations such as the economic backdrop, sector and style themes. Company meetings are also a fundamental part of our process to build a deep understanding of businesses. We regularly engage directly with the companies we consider for investment. The information stream generated from these internal and external sources is shared dynamically within the team on a timely basis. A key trigger to investment ideas is change -- change in the economic environment, a leadership shuffle or a reorganization or business model adjustment. We believe change can have a strong influence on stock prices and correctly evaluating its impact gives the investor a strong advantage.
We use a common language and framework to analyse the most promising companies, Aegon AM’s Fundamentals, Valuations and Technicals (FVT). To uncover the hidden value in equity markets we focus our research effort on less researched businesses. The key element we look for across the FVT process is indications of underestimated change or persistency. FVT encompasses the three aspects of our detailed bottom-up analysis: fundamentals, valuation and technicals. While we dedicate most of our time to fundamental research, the exact proportion of each aspect of the analysis is fluid and varies on a case-by-case basis. We use these three aspects to assess all opportunities. This framework ensures research is carried out and documented consistently.
Considering ESG from an equity perspective is both about generating alpha and managing risk. All relevant factors, ESG or otherwise, that affect the sustainability of business models are considered in our investment process. The way our ESG process is represented in our portfolios is often by those companies we do not own - that do not pass our rigorous stock selection process - as well as those that do. Environmental, social and governance issues are all explicitly considered in our fundamental research as we know that they each have the potential to materially impact both the financial performance and the valuation of our investee companies. As fundamental investors, assessment of ESG issues has always been integral to our investment approach. When researching the investment case for a company it is the responsibility of our equity portfolio manager/analysts to form a judgement of ESG issues and leverage the RI team for its expertise. We assess ‘E’, ‘S’ and ‘G’ factors both from a risk and opportunity perspective and tailor this to the specific circumstances of a company rather than taking a blanket approach. Company engagement is regularly shared with the RI team, and key ESG issues and questions are agreed and discussed on a per sector basis to reflect a more considered approach and nuances between companies. To bring this together, we use a common three-stage ESG framework across the equity team to determine the materiality of the identified ESG factors from a risk and return perspective.
Engagement with companies is a central part of our research in ESG, as it is in other areas. The RI team's engagement is well-suited to advancing broad themes such as diversity and inclusion which, in aggregate, are key to the functioning of the financial system. The fundamental equity analysts' focus is more specifically upon the strategy of the company to deliver sustainable long-term returns to shareholders. Our analysts will directly engage with management to better understand the risks, opportunities, and materiality of ESG factors, and how companies are adapting their strategies to manage those issues.
Before a stock is purchased, the analysis is rigorously challenged and debated by all members of the team. All aspects of the investment thesis are considered, testing assumptions, and potentially bringing overlooked aspects to light. Key to reaching a conclusion on each stock is a judgement of the relative importance of each factor in the FVT framework and where we are in the economic cycle. Quick decision-making capability in our stock selection process is facilitated by a daily team meeting, a standard stock discussion template and short lines of communication between team members and the dealing desk. The stock selection process generates high conviction stock candidates for inclusion in portfolios. While a team-based approach is integral to our process to reach research conclusions, the individual portfolio managers are ultimately responsible and accountable for the decisions taken in relation to their strategies.
Portfolio managers are directly responsible for the strategies they manage. The portfolio construction process focuses on the performance target of a portfolio, while keeping it within its risk tolerance level. If our analysis demonstrates the opportunity for a superior return from a stock idea, it becomes a conviction recommendation and is considered by the team for inclusion in the portfolio. The portfolio managers consider a range of factors, including the level of conviction they have in an idea which considers the perceived risks and business risk. Our risk system allows portfolio managers to test the risk impact of an idea before placing an order in the market, providing an in-depth view of the investment decision before fully committing. They are also supported by our portfolio risk management team which provides them with information and advice on risk analytics, portfolio construction, and stock and factor screens.
While our own research drives our investment process, we draw upon external research to help form our views. All portfolio managers have access to our primary information systems, Bloomberg, Reuters and FactSet, which provide us with real-time information on stocks, markets, indices, news, derivatives, economics, bonds, and currencies. We also have extensive access to the research departments of numerous major investment banks, stockbrokers, and independent sell-side houses. We will not take an investment decision or purchase a stock without completing our own investment and sustainability research. |
||||||
Resources, Affiliations & Corporate StrategiesOur dedicated responsible investment team serves as a company-wide, global resource for responsible investment practices. Team members lend their expertise to ESG integration initiatives, contribute to responsible investment product development and lead active ownership and sustainability research activities to promote understanding of ESG issues. Furthermore, the responsible investment specialists serve a central resource for responsible investment education and best practices. As of December 31, 2022, the responsible investment (RI) team consists of 19 professionals (1)
Primary duties of the responsible investment team RI solutions and ESG integration
Engagement and voting
Advisory and reporting
(1) Personnel may be employed by any of the Aegon AM affiliates.
One or more Aegon Asset Management affiliates endorse the most common international guidelines and business principles and actively subscribes to them when possible. Examples include:
Next to incorporating international guidelines and business principles into our investment processes in alignment with clients’ expectations, Aegon Asset Management interacts with various collaborative investor initiatives. A full overview can be found in the Aegon AM Responsible Investment Report. |
||||||
LiteratureDisclaimer For Professional Clients only and not to be distributed to or relied upon by retail clients. Past performance does not predict future returns. Outcomes, including the payment of income, are not guaranteed. Opinions expressed represent our understanding of the current and historical positions of the market and are not a recommendation or advice. This document is accurate at the time of writing and is subject to change without notification. Aegon Asset Management UK plc is authorised and regulated by the Financial Conduct Authority. Aegon Asset Management UK plc is the ACD of Aegon Asset Management UK ICVC, Aegon Asset Management UK Investment Portfolios ICVC and the AFM of Aegon Asset Management UK Unit Trust. UK Funds are registered for distribution in the UK only.
Last amended: 05/03/24 10:33 |
This report is for information purposes only and is intended to complement existing services used by UK based financial advisers only. sriServices is not authorised to give investment advice. The information on this site does not in any way constitute advice, recommendation or endorsement of any product or service. Investment decisions should not be based on this information alone. sriServices cannot be held in any way responsible for decisions made or advice offered as a result of using this site.
Whilst we take care to ensure information is as accurate as possible at time of publication we recommend you/financial advisers confirm specific fund details with fund providers. Please see www.sriServices.co.uk for additional information and for our contact details.
© Copyright sriServices 2024
05/04/2024