Fund Name | SRI Style | Product | Region | Asset Type | Launch Date | |
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Aegon Ethical Cautious Managed Fund |
Ethical | OEIC/Unit Trust | UK | Mixed Asset | 01/03/2007 | |
Fund Size: £267.00m Total screened & themed / SRI assets: £16279.00 Total Responsible Ownership assets: £90450.00 Total assets under management: £258777.00 As at: 31/12/22 Contact: mark.ferguson@aegonam.com |
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OverviewOur responsible investment expertise is evident in the Aegon Ethical Cautious Managed strategy which employs a multi-faceted responsible investment approach with an established ethical screening process evaluating the effects that certain companies’ activities, products, and services can have on the environment and society at large. We exclude companies based on client led exclusion criteria and by combining specialist in-house and third-party screening in a process overseen by our RI team. We believe our integrated ESG approach can unlock alpha potential within our equity investment process and help us to identify opportunities and understand ESG risks. Furthermore, we have a robust active ownership programme that includes exercising shareholder voting rights and company engagement. This considers the best interest of our clients and stakeholders, to enhance outcomes, help mitigate ESG risks and encourage more sustainable practices. |
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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 Energy efficiency theme Fossil fuel exploration exclusion - direct involvement Targeted Positive InvestmentsInvests > 5% in sustainable bonds Human RightsChild labour exclusion Oppressive regimes (not free or democratic) exclusion policy Modern slavery exclusion policy Social / EmploymentHealth & wellbeing policies or theme Mining exclusion 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 TCFD alignment for banks & insurance companies 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 Invest in supranationals How The Fund WorksStrictly screened ethical fund Positive selection bias Negative selection bias Assets mapped to SDGs Impact MethodologiesInvests in environmental solutions companies Invests in social solutions companies Invests in sustainability / ESG disruptors Aim to deliver positive impacts through engagement 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 |
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PolicyThe strategy is different from peers due to our client led ethical screening process which focuses on material ESG issues impacting the environment and society. We also seek to identify positive impact companies and currently invest in areas such as eco solutions and inclusive companies who seek to address inequality and are helping to solve demographic challenges. We apply a range of client-led exclusions at the start of our investment process, which excludes companies which undertake certain unethical activities from the strategy’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. Our experienced RI team is responsible for the ethical screening undertaken for this strategy and regularly reviews the portfolio for compliance with our policy. Please refer to the screening policy on our website for more detail: www.aegonam.com/globalassets/aam/documents/brochures/uk/esg-screening-policy.pdf
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 strategy’s screening criteria. Importantly, this is not a static concept, we constantly review the strategy’s holdings to ensure we are aware of any new developments in their business or new information that might change their eligibility. The specific exclusions applied by the strategy are: Animal welfare:
Military:
Nuclear power:
Environment:
Political donations:
Genetic engineering:
Gambling:
Alcohol:
Tobacco:
Pornography:
Banks:
Oppressive regimes: Operations in countries with poor human rights records, and which have no established management policies on human rights issues.
Ethical Screening Process Our ethical screening analysis has three stages:
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ProcessThe strategy’s co-managers first look at the asset allocation in the strategy between equity, fixed income and cash. They discuss themes and views affecting the strategy’s asset allocation after which they review the portfolio positioning and determine the overall risk profile. Following this the asset class weighting for the strategy are set. Insights are drawn from our global macro team, strategic policy group and our investment policy meetings. We have a strategic framework that supports effective active asset allocation across a range of multi-asset strategies and can provide relevant insights for the asset allocation decisions in the Ethical Cautious Managed strategy.
The formal process takes place monthly to review both our long-term strategic views and to help identify tactical asset allocation opportunities in both equities and fixed income. The starting point is the respective strategy meetings that take place within each of the underlying asset class platforms and provide the initial forum for idea generation from a top-down perspective. In the fixed income meeting, we consider the economic outlook, expectations for inflation and interest rates and the impact on underlying bond markets to help shape our asset allocation thoughts across fixed income markets, our active interest rate/duration positioning and our top-down credit risk positioning. Detailed strategy papers are prepared for each of these meetings, with particular focus on what has changed, what might change going forward and the catalyst for change as well as considering what has been priced into investment markets. In each case, our FVTS (Fundamentals, Valuations, Technicals, Sentiment’ quadrant analysis framework is used to assign ratings and recommendations around those top-down views. One advantage in having a common research framework (‘FVTS’) across asset classes is to have all teams using a common language to frame their views, enable debate and challenge others to allow constructive feedback and potential cross-pollination of ideas where appropriate. This outlines a solid foundation for top-down strategy and risk positioning, identification of risks and an asset allocation framework for the Ethical Cautious Managed portfolio managers to reference when setting the strategy and positioning for the Aegon Ethical Cautious Managed Fund.
Our proprietary research generates most investment ideas, and we are agnostic to where an idea comes from. The portfolio manager will utilise expertise and knowledge from across their respective teams – be that from the equity team, including those members who cover other geographical areas, or from the dedicated global credit research team. We will not take an investment decision or purchase a new holding without completing our own investment research. We attach more importance to our own work and direct access to companies, as this will provide valuable insights to company strategies, outlooks, shortcomings and successes. Company meetings and dialogue are a fundamental part of our process to build a deep understanding of businesses. Therefore, 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, which can include the economic environment, management teams or a business model. Change can have a strong influence on stock prices or sustainability of cash flows 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, Technicals framework. 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. In credit, our credit research team utilise a proprietary analytical framework to evaluate the creditworthiness of issuers and the attractiveness of individual securities. These frameworks can include historical data and project expected financial results of existing and potential purchases. For example, our credit analysts use a proprietary financial analysis framework that focuses on cash flow generation, debt levels, maturity schedules, liquidity, and consideration of future credit profiles. Based on this analysis, research analysts form their own independent view on an issuer’s fundamentals and other factors and periodically monitor the factors that influence these views to determine if revisions are warranted. In addition, a strong relationship exists between our RI team and our portfolio managers, which enables material non-financial information to be incorporated into our investment processes. ESG research reports produced by our RI team sit alongside all the other existing investment research undertaken by our portfolio managers on a given security. The RI team also provide relevant news-flow and commentary on ESG issues to our portfolio managers that they might not receive from other sources.
Our portfolio managers consider ESG research alongside other relevant financial and non-financial factors in the investment decision-making process. The importance that the portfolio manager attaches to ESG issues is in proportion to their ability to influence security prices. Considering ESG factors 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 (or lend to in the case of our credit investments) - that do not pass our rigorous security selection process - as well as those that do. 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 and credit 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 or sector 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. Importantly when evaluating ESG factors in the fundamental analysis process, our portfolio managers/analysts look across the ESG spectrum with support from our RI team to ensure that ESG analysis is comprehensive and robust. Examples of areas we assess include: a company’s range of products and their implications for ESG outcomes, climate change policies and impact, tax transparency, carbon emissions, governance structure, management board structure and compensation, social policies, how a company is positioned for the transition to a greener economy and its resource efficiency.
While our own research drives our investment process, we draw upon external research to help form our views. All investment 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 from investment banks, which provide economic and company information, central banks, government agencies and multi-lateral agencies such as the IMF. We do encourage input from economists and strategists at investment banks. Similarly, we cannot ignore credit rating agencies. We view commentaries provided by the rating agencies not as a source of information per se, rather as a market and probably a consensus view of a company. While the 2008 global financial crisis highlighted the unreliability of ratings, their findings on economies and companies can have a direct impact on market valuations. We have a healthy skepticism of rating agencies’ findings, but we will also be aware of the market impact of ratings changes. To supplement our own research, we also make use of a range of external sources of ESG data, including third-party ESG ratings, company and sector reports and regional reports. Although, as mentioned earlier, these are only used as inputs into the process and our conclusions are always based on detailed internally generated analysis. We will not take an investment decision or purchase a holding without completing our own investment, ESG or sustainability research.
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 security 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 supported by our Portfolio Risk team which provides them with information and advice on risk analytics, portfolio construction, and stock and factor screens. We do not take any active currency exposure. However, we do aim to build a diversified portfolio across the other areas mentioned. At a sector level, given the material impact of our exclusion criteria on the investible universe and portfolio, we carefully consider the industrial sector diversification of the portfolio across equities and corporate bonds relative to the peer group and representative market indices to ensure that we do not have one or two risks dominating the entire portfolio. Our country positioning is largely a resultant of our bottom-up security selection however, again, we consider the overall aggregate exposures to ensure we are not taking on unconscious risks or any factors that may dominate or outweigh our bottom-up security selection. From a market cap perspective, the fund can invest across the full market capitalisation spectrum with respect to equities. However, we believe that our fundamental research can uncover under researched ideas in the small to mid-cap area in particular. Therefore, we would expect to have a conscious relative bias to exposures within those areas, provided this was appropriate at the relevant point in the economic cycle.
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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.
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DialshifterThis fund is helping to ‘shift the dial from brown to green’ by… At Aegon AM, we integrate climate-related factors into our ESG analysis where relevant. Various climate-related considerations are evaluated in the firm’s proprietary ESG integration process as part of the fundamental research framework. Analysts evaluate the impact on fundamentals with an emphasis on the issuers most exposed to climate-related risks. Climate-related factors may include metrics such as carbon emissions as well as a qualitative assessment of climate risks such as stranded assets, regulatory and physical risks. Utilizing their industry, country or asset class expertise, analysts identify the most material and relevant climate related factors and assess the potential effect on fundamentals.
Our organisation is helping to support the Paris Climate Agreement and the Race to Net Zero by… Aegon AM carries out a significant number of individual and collaborative engagements related to climate change to improve outcomes for our clients’ portfolios. As part of our engagement strategy, we challenge portfolio companies to set science-based greenhouse gas (GHG) reduction targets and expect them to work towards those with ambitious decarbonisation plans. We engage with companies on a regular basis, prioritizing top GHG emitters, and discuss progress towards their targets and the realisation of the 2015 Paris Agreement as the key international commitment to the climate transition. |
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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: 02/10/23 03:47 |
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04/29/2024