Fund Name | SRI Style | Product | Region | Asset Type | Launch Date | |
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Aegon Global Sustainable Equity Fund |
Sustainability Select | SICAV/Offshore* | Global | Equity | 21/04/2016 | |
Fund Size: £292.00m 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 mission is to generate excess returns by investing in sustainable growth companies that have a positive impact. Having sustainability research at the heart of our process helps us identify companies that can establish and maintain competitive advantages through positive impact products and practices. We see multiple sustainability trends that are creating opportunities to capture meaningful economic value. We believe that the companies best placed to capture this economic value are those with the most innovative solutions. Typically, these are newer and smaller businesses rather than the more established incumbents. We believe this fresh mind-set makes these companies the best innovators and the ones most likely to achieve large and lasting growth as a result. We aim to be open minded and will consider larger and more established companies that meet our philosophy. |
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FiltersFund informationSustainabilitySustainability policy Limits exposure to carbon intensive industries Resource efficiency policy or theme Sustainability theme or focus Favours cleaner, greener companies Sustainability focus Report against sustainability objectives Encourage more sustainable practices through stewardship Nature & BiodiversityUnsustainable / illegal deforestation exclusion policy Avoids genetically modified seeds/crop production 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 Require net zero action plan from all/most companies Fossil fuel exploration exclusion – indirect involvement Targeted Positive InvestmentsInvests >25% of fund in environmental/social solutions companies Invests >50% of fund in environmental/social solutions companies Human RightsChild labour exclusion Oppressive regimes (not free or democratic) exclusion policy Modern slavery exclusion policy Social / EmploymentHealth & wellbeing policies or theme Favours companies with strong social policies Meeting Peoples' Basic NeedsHealthcare / medical theme Ethical Values Led ExclusionsAnimal welfare policy Tobacco and related product manufacturers excluded Armaments manufacturers avoided Gambling avoidance policy Pornography avoidance policy Animal testing - excluded except if for medical purposes Civilian firearms production exclusion Banking & FinancialsExclude 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 How The Fund WorksLimited / few ethical exclusions* Positive selection bias Negative selection bias Focus on ESG risk mitigation Significant harm exclusion SRI / ESG / Ethical policies explained on website Assets mapped to SDGs All assets (except cash) meet published sustain'y criteria Participated in sustainability solutions IPOs or new issuances Impact MethodologiesAims to generate positive impacts (or 'outcomes') Invests in environmental solutions companies Invests in social solutions companies Invests in sustainability / ESG disruptors Aim to deliver positive impacts through engagement Over 50% in assets providing environmental or social ‘solutions’ Labels & AccreditationsEurosif Transparency SFDR Article 8 fund / product (EU) Intended Clients & Product OptionsFaith friendly Intended for investors interested in sustainability Intended for clients who want to have a positive impact Available via an ISA (OEIC only) 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 fund’s investment approach seeks to identify the best bottom-up investment ideas available globally while focusing our exposure to companies that have strong sustainability characteristics, as defined by our detailed in-house sustainability analysis. In addition, there are a limited number of product-based exclusions, designed to prevent the fund from investing in companies that we believe have a materially harmful impact on environmental and/or social factors.
The fund applies a limited number of absolute exclusions as follows: Adult entertainment
Animal welfare
Fossil fuels
Gambling
Genetic modification
Human rights
Nuclear power
Tobacco
Weapons
Step 2 – Sustainability analysis The sustainability analysis carried out by the RI team assesses three dimensions:
Our RI team refers to the Sustainable Accounting Standards Board’s (SASB) ‘Materiality Map’ as a starting point. Materiality is central to our process, as we strongly believe that sustainability analysis should be tailored to the specific context of an individual company, rather than using the same criteria for all. We believe the materiality map provides an effective way of highlighting the ESG factors that matter most to a company given the industry and the sector in which it operates, helping to focus our bottom-up sustainability research. Our experience is that this often leads to us focusing on different factors when compared to third-party ESG ratings and reaching contrasting conclusions. The RI team’s sustainability analysis will gather and analyze qualitative and quantitative information on these material factors in the context of the ‘Three Dimensions’ framework discussed above to form a conclusion and a sustainability rating for a company. As a result of this analysis, companies are classified into three categories:
This process is dynamic. It does not stop once we decide to invest in a company. The sustainability analysis for every holding in the portfolio is updated at least annually, or more regularly if events occur that we think could impact the conclusions of the most recent research. During each update, the RI team can change the categorization of a company and should their analysis result in a downgrade to a Laggard, then the stock becomes uninvestible and must be sold from the portfolio as soon as is reasonably practicable. This independent oversight of the portfolio is important for the integrity of the process. It is important to note that after applying the product exclusions and conducting sustainability analysis the resulting investment universe is still very large and provides ample investment opportunities to build a diversified portfolio of 35-45 stocks. We recognize that within sustainability considerations, there are always debates, grey areas and nuances and this is a key reason why we analyze stocks from the bottom up. In addition to the categorization of leader, improver or laggard outlined above, each stock is assigned to one of our seven sustainability pillars based on our view of the main sustainability issue they are trying to address. There is no set range for weightings to specific pillars – it is simply an outcome of bottom-up stock selection.
External ESG Screens - The truth is in the nuance We do not believe in using third-party ESG ratings as a driver of our investment decisions, but rather as a flagging system for potential areas of concern that we must investigate and analyse from the bottom up. We believe that ESG ratings offer value in this context and help us to focus our research on areas where there might be concern. However, we often find that ESG ratings providers deliver conclusions that we fundamentally disagree with. This tends to be due to context and nuance of a particular company, and the generic methodology used. We find that this tension is particularly apparent in small and mid-cap companies and in emerging markets, where companies may have very good products or practices, but are either not covered by the ESG rating agencies or screen poorly because they have not disclosed certain pieces of ESG information. In addition, ESG screens do not typically consider products or rates of improvement as part of their methodologies, which we feel misses much of the sustainability alpha that we are trying to capture. Many large companies have departments dedicated to ensuring that ESG disclosures are made, while smaller companies often suffer by simply not having the resources dedicated to showing how well they do things. |
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ProcessAt a very broad level, our investment process can be thought of as consisting of three key stages: idea generation, bottom-up analysis and portfolio construction. We have a very clear philosophical idea of the types of companies we are looking for which means the size of the universe we are realistically going to find ideas in is manageable.
As detailed in our ESG perspective, above, we apply some broad filters to derive an initial investment universe and then apply our sustainability exclusions. It is from this opportunity set that we search for the best sustainable growth ideas. We are guided by our philosophy in this search and use diverse sources of idea generation to ensure a consistent flow of stocks for consideration by the team.
Bottom-up analysis – Fundamental investment analysis combined with sustainability analysis We emphasize stock selection and idea generation rather than blanket research coverage. We evaluate stocks using both our FVT analysis framework and in-depth sustainability analysis from our specialist RI team to reduce the universe to the specific types of opportunities which meet our investment criteria.
Investment Analysis We use a common language and framework across our Equities team to analyse the most promising companies: Aegon AM’s Fundamentals, Valuations and Technicals (FVT).
Sustainability analysis This two-way interaction between the fund management team and RI team enables us to build a more holistic view of each company and discover attractive long-term growth opportunities by looking through an ESG lens. This is a radically different approach to our competitors. The final decision on a stock’s sustainability category rests solely with the RI team, who have the power to veto any investment idea.
Focus list Ideas that we have carried out research on then comprise our focus list. Some of the stocks on this list will have been fully analyzed, having been through the full FVT and RI analysis process. They may be on the list but not in the portfolio at present because we like the fundamental story but think the valuation is too rich, or because we already have several stocks in a similar industry in the portfolio. In contrast, other stocks on the focus list may have only had high level initial research carried out on them. This may be because we think the company has potential but need to see further proof points of commercial success before we consider the idea fully, for example.
Portfolio construction Our final stage is using the output of this analysis to construct an optimal portfolio of around 40 high-conviction stocks from the focus list. We seek to keep stock-specific risk high, meaning our ability as stock pickers is what drives our portfolio. Final decision-making responsibility for portfolio construction lies with the portfolio managers.
Research and ESG data 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. To supplement our own research, we 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. The information stream generated from these sources is shared across the team on a timely basis. We attach more importance to meeting companies, as this provides valuable insights to company strategy and allows us to identify change factors that will drive the share price.
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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:
Aegon AM also has extensive experience managing client mandates to adhere to specific international standards and policies. Examples of such standards include UN Global Compact principles, UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises. Further, through our active ownership activities, we engage with companies to encourage adoption of relevant standards and guidelines. Finally, we also comply with applicable local sustainable finance regulations such as the Sustainable Finance Disclosure Regulation (SFDR) in the EU. 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. All data is sourced to Aegon Asset Management unless otherwise stated. Data attributed to a third party ("3rd Party Data") is proprietary to that third party and/or other suppliers (the "Data Owner") and is used by Aegon Asset Management under licence. 3rd Party Data: (i) may not be copied or distributed; and (ii) is not warranted to be accurate, complete or timely. None of the Data Owner, Aegon Asset Management or any other person connected to, or from whom Aegon Asset Management sources, 3rd Party Data is liable for any losses or liabilities arising from use of 3rd Party Data. Aegon Asset Management UK plc is authorised and regulated by the Financial Conduct Authority. Aegon Investment Management B.V. is registered with the Netherlands Authority for the Financial Markets as a licensed fund management company. On the basis of its fund management license Aegon Investment Management B.V. is also authorised to provide individual portfolio management and advisory services. Aegon Asset Management Europe ICAV is an umbrella type open-ended investment company with variable capital, registered in the Republic of Ireland (Company No. C153036) at 25-28 North Wall Quay, International Financial Services Centre, Dublin 1. Board of Directors: M. Kirby, S. Donald and B. Wright. Aegon Asset Management Europe ICAV is regulated by the Central Bank of Ireland. Aegon Investment Management B.V. is the investment manager and promoter for Aegon Asset Management Europe ICAV. Aegon Asset Management UK plc is an appointed sub-promoter for Aegon Asset Management Europe ICAV.
Last amended: 25/01/24 10:39 |
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05/04/2024