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Fund Name(s):
  • EQ Positive Impact Portfolios
Fund Name SRI Style Product Region Asset Type Launch Date
EQ Positive Impact Portfolios Sustainability Select DFM/Portfolio Global Mixed Asset 31/08/2012

Fund Size: £710.00m

Total screened & themed / SRI assets: £1800.00

Total Responsible Ownership assets: £1800.00

Total assets under management: £1800.00

As at: 21/07/23

Overview

The EQ Positive Impact Portfolios are a range of active, multi-asset portfolios for retail and institutional investors. They are managed under a dual mandate: maximising risk-adjusted performance and positive impacts on people and planet in tandem. It is core to our philosophy that these objectives are reinforcing, and we believe in the long-term outperformance of companies tackling unmet needs and behaving responsibly with respect to their stakeholders.

 

The UN Sustainable Development Goals (UN SDGs) provide a globally agreed-upon framework for the world's most pressing social and environmental issues that need tackling, and we use this to guide our investment approach. Our impact investment philosophy focuses on selecting companies/organisations, through specialist active fund managers, which provide solutions to these unmet needs through their core business purpose (reflected in their products and services). The strategy therefore naturally avoids exposure to those investments that prevent progress on the UN SDGs, covering all common controversial activities. To understand the holistic impact of companies, ESG information (focusing on operations) is also integrated alongside the assessment of core products and services. To drive maximisation of positive impacts over time, strategic engagement is an important requirement of the funds we select, and EQ adds to this systemic impact through its own engagement activity. We have full look-through to all holdings in the MPS and have dedicated investment staff that conduct analysis on the fund managers policies/processes pre-and post investment. We importantly supplement this analysis with underlying holdings data analysis.

 

Non-financial objectives are measured as follows:

 

  • UN SDG alignment: We align every single underlying holding with a negative, neutral or 1-17 UN SDG mapping. We have developed a proprietary mapping model that cuts across fund managers interpretations of the goals, and allows us to aggregate the mappings to the full portfolio level. Our mapping logic is based on revenue alignment to negative categories, and an index of positive products/services solving the needs in UN SDG targets.

 

  • Impact: We conduct in-depth impact data collection, measurement and reporting on the associated impacts with investments we make in a year. This means we can report on the outcomes of intended impacts demonstrated by our UN SDG mapping.

 

  • ESG: We use external ESG ratings data and bottom-up analysis to test fund managers on the degree of ESG integration. We also use the data to monitor the proportion of portfolios in higher ESG risk, and engage on any weaknesses. Where we have an explicit focus on ESG leaders (EQ Future leaders portfolios) we monitor this to test the funds' stated policies and processes.

 

  • Carbon: We use external carbon and fossil fuel data, and bottom-up analysis to measure, integrate and report on carbon intensity and other relevant climate metrics. The data also feeds into our engagement with fund managers and underlying companies.

 

  • Negative product/activity involvement (negative exclusions): We monitor portfolio exposure to an extensive set of potentially controversial products and activities. This also partly feeds into our negative SDG mapping (see above). We use this to test funds' stated policies and processes on exclusions. We engage on the identification of any new flags that run contrary to MPS objectives and may sell positions if it cannot be resolved.

Filters

Fund information

Sustainability

Environmental policy

Sustainability policy

Limits exposure to carbon intensive industries

Resource efficiency policy or theme

Sustainable transport policy or theme

Sustainability theme or focus

Environmental damage and pollution policy

Favours cleaner, greener companies

Waste management policy or theme

UN Global Compact linked exclusion policy

Sustainability focus

UN Sustainable Development Goals (SDG) focus

Report against sustainability objectives

Encourage more sustainable practices through stewardship

Circular economy theme

Nature & Biodiversity

Deforestation / palm oil policy

Plastics policy / reviewing plastics

Unsustainable / illegal deforestation exclusion policy

Avoids genetically modified seeds/crop production

Biodiversity / nature policy

Nature / biodiversity based solutions theme

Nature / biodiversity focus

Responsible palm oil policy

Sustainable fisheries policy

Nature / biodiversity protection policy

Water stewardship policy

Climate Change & Energy

Coal, oil & / or gas majors excluded

Climate change / greenhouse gas emissions policy

Invests in clean energy / renewables

Fracking and tar sands excluded

Clean / renewable energy theme or focus

Arctic drilling exclusion

Fossil fuel reserves exclusion

Energy efficiency theme

Encourage transition to low carbon through stewardship activity

Green / sustainable property strategy

Fossil fuel exploration exclusion - direct involvement

Fossil fuel exploration exclusion – indirect involvement

Targeted Positive Investments

Invests >25% of fund in environmental/social solutions companies

Invests >50% of fund in environmental/social solutions companies

Invests > 5% in green bonds

Invest > 5% in transition bonds

Invests > 5% in sustainable bonds

Invests > 50% in green bonds

Human Rights

Human rights policy

Child labour exclusion

Responsible supply chain policy or theme

Oppressive regimes (not free or democratic) exclusion policy

Indigenous peoples’ policy

Modern slavery exclusion policy

LGBTQ+ policy

Social / Employment

Social policy

Health & wellbeing policies or theme

Diversity, equality & inclusion Policy (fund level)

Labour standards policy

Fast fashion exclusion

Favours companies with strong social policies

Responsible mining policy

Mining exclusion

Vulnerable / gig workers protection policy

Meeting Peoples' Basic Needs

Water / sanitation policy or theme

Invests in social property (freehold)

Demographic / ageing population theme

Invests > 5% in social bonds

Invests > 5% in social housing

Green infrastructure focus

Plant based / smart food production theme

Responsible food production or agriculture theme

Healthcare / medical theme

Ethical Values Led Exclusions

Animal welfare 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 & Financials

Exclude banks with significant fossil fuel investments

Governance & Management

Governance policy

Anti-bribery and corruption policy

Avoids companies with poor governance

Encourage board diversity e.g. gender

Encourage TCFD alignment for banks & insurance companies

UN sanctions exclusion

Encourage higher ESG standards through stewardship activity

Fund Governance

ESG integration strategy

ESG factors included in Assessment of Value (AoV) report

Employ external (fund) oversight or advisory committee

Asset Size & Metrics

Over 50% large cap companies

Invests in small, mid and large cap companies

Invests mostly in large cap companies

Invest in supranationals

How The Fund Works

Balances company 'pros and cons' / best in sector

Strictly screened ethical fund

Positive selection bias

Negative selection bias

Norms focus

Combines norms based exclusions with other SRI criteria

Combines ESG strategy with other SRI criteria

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

Different risk options of this strategy are available

Participated in sustainability solutions IPOs or new issuances

Impact Methodologies

Aims to generate positive impacts (or 'outcomes')

Measures positive impacts

Positive environmental impact theme

Positive social impact theme

Invests in environmental solutions companies

Invests in social solutions companies

Invests in sustainability / ESG disruptors

Described as an ‘impact investment fund’

Aim to deliver positive impacts through engagement

Over 50% in assets providing environmental or social ‘solutions’

Intended Clients & Product Options

Faith friendly

Intended for investors interested in sustainability

Available via an ISA (OEIC only)

Portfolio SRI / ESG options available (DFMs)

Multiple SRI / ESG portfolio options available (DFMs)

Bespoke SRI / ESG portfolios available (DFMs)

Intended for clients who want to have a positive impact

Fund management company information

About The Business

ESG / 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)

Diversity, equality & inclusion engagement policy (AFM company wide)

Specialist positive impact fund management company

Boutique / specialist fund management company

Integrates ESG factors into all / most fund research

SDG aligned aims / objectives (AFM company wide)

In-house diversity improvement programme (AFM company wide)

Vulnerable client policy on website (AFM company wide)

Offer structured intermediary training on sustainable investment

Offer unstructured intermediary sustainable investment training

Resources

In-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 & Affiliations

PRI signatory

Climate Action 100+ or IIGCC member

Accreditations

B Corp certified (AFM company wide)

Engagement Approach

Regularly lead collaborative ESG initiatives (AFM company wide)

Encourage responsible corporate taxation (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 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

Engaging to encourage a Just Transition

Company Wide Exclusions

Review(ing)carbon / fossil fuel exposure for all funds (AFM company wide)

Coal exclusion policy (group wide coal mining exclusion policy)

Coal divestment policy (AFM company wide)

Controversial weapons avoidance policy (AFM company wide)

Tobacco avoidance policy (AFM company wide)

Climate & Net Zero Transition

Encourage carbon / greenhouse gas reduction (AFM company wide)

Net Zero commitment (AFM company wide)

Working towards a ‘Net Zero’ commitment (AFM company wide)

Carbon transition plan published (AFM company wide)

‘Forward Looking Climate Metrics’ published / ITR (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)

Transparency

Publish full voting record (AFM company wide)

Publish responsible ownership / stewardship report (AFM company wide)

Full SRI policy information available on request

Net Zero transition plan publicly available (AFM company wide)

Policy

Our fund research comprises both due diligence of a funds’ investment process and policies, as well as a detailed review (and ongoing monitoring) of all underlying holdings and reporting. This is necessary to ensure the Positive Impact Portfolios meet their mandate of maximising positive impacts (and avoiding harm as a natural by-product).

 

Positive screen: Solution providers

The process really starts with the search for companies whose products and services will make a material positive impact on solving societal and environmental problems. We are using the UN Sustainable Development Goals (UN SDGs) as a framework to focus on the key issues that need to be tackled. Launched following the 2015 UN Summit in Paris, the 17 Sustainable Development Goals address the issues the UN sees as most challenging to our world between now and 2030.

 

We ensure that the investment process and philosophy of funds reflects a focus on selecting companies with a material and additional positive impact case. Additionally, we have developed our EQ SDG X-ray tool that allows us to analyse every underlying holding in regards to contributing solutions to the UN SDGs.

 

Negative screen:

It is also important to screen out the most controversial sectors such as tobacco, armaments, gambling or pornography. Firstly, we review the screening policies applied by the fund’s investment process. Additionally, at EQ Investors, we have developed a proprietary tool that allows us to map all underlying holdings to negative effect on the UN SDGs. This process includes all traditional ethical controversial products/activity involvements but goes further. For example, it allows us to flag fossil fuel exposure, unhealthy nutrition, air freight or automotive pollution. This allows us to be transparent and avoid exposure to harmful sectors.

 

Balance:

While our focus remains on selecting companies with products and service that show a material and additional positive impact, it is also important to look at the operations of the firms to assure these are also responsibly managed. We assure ESG integration to the fund investment process and have access to ESG data in-house to tests fund managers on their rationales. This will allow us to maximise exposure to net-positive impact companies om balance.

 

Engagement:

As a result of this screening process, some of the Sustainable Development Goals align with significant investment opportunities for the Positive Impact Portfolios such as good health and well-being or affordable and clean energy while others do not represent realistic investment opportunities at all. We will engage with fund managers to also create positive Impacts on those UN SDG that are less readily investable, and better targeted through responsible company operations.

We also engage on an ongoing basis to test fund manager adherence to process, flag any controversies, and push for evolution with best-practice.

 

Impact measurement:

Impact measurement is a key prerequisite to ‘impact investing’ definitions.

To measure the impact achieved by the portfolios, we have produced an impact report that details how the companies we invest in align to the UN Sustainable Development Goals.

For 2 years we have also uniquely measured the impact generated by an investment in the EQ Positive Impact portfolios on number of social and environmental key performance indicators. We provide personalised impact reports via our online ‘impact calculator’.

Green bond exposure is around 5% for a Balanced risk profile, 10% for a more cautious portfolio and under 3% for a more adventurous portfolio.

 

 

Process

Alongside a thorough financial analysis, the due diligence process is complemented with an equally detailed analysis of the ESG integration process, sustainability screens and the application of impact investing best-practices within the underlying funds. This is where we add significant value through our 10 years’ experience in evaluating sustainable investments. Given the quickly growing fund universe, there is increasing vagueness in terminology, and a related increase in “greenwash risk”.

 

Please request full process document for all details.

Resources, Affiliations & Corporate Strategies

EQ Investors and its employees have been involved in impact investing since 2008, and this experience led us to the creation of the Positive Impact Portfolios in 2012, with the objective of making impact investing available to mainstream investors.

 

Since then, EQ Investors has built out its sustainable investing capabilities. We launched the EQ Future Leaders MPS range in early 2020, a passive sustainable proposition. We also offer bespoke sustainable investment services tailored to specific client sustainability and financial objectives.

 

We are a team of 14, comprising:

  • 4 full time investment analysts with different sector coverage
  • 2 full time analyst covering sustainability due diligence, monitoring, engagement, impact measurement
  • 2 portfolio managers, heading impact and macro research too
  • 3 investment managers
  • 1 director involved in strategic investment decisions
  • 2 client support and product specialists
  • Additionally, we are supported by operations and platform administration team (4 people) and an internal IT team (4 people).

 

All the fund and asset allocation research is carried out internally, but we have access to external data providers to provide research data input.

 

Given that EQ is a sustainable investment manager, our sustainable investment approach is fully integrated across our research process to avoid over-reliance on key individuals. Therefore all members carry out relevant aspects of sustainability research, integration or engagement. In addition, all EQ fund analysts need to complete the CFA ESG in 2023 and are actively contributing to the ESG assessment, fund monitoring and implementing the sustainability objectives of our portfolios.

 

A dedicated Board Report is produced that summarises key innovations, proposes changes and keeps the bridge between implementation and oversight. Each other committee (Asset allocation, fund selection, risk) includes the relevant aspects of sustainability objectives into their agenda and responsibilities. E.g. climate integration into asset allocation, monitoring the meeting of minimum sustainability standards in risk.

 

Affiliations:

UN PRI, CA100+, ShareAction, Access to nutrition, World Benchmarking Alliance, TCFD, TNFD

 

Dialshifter

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

The EQ Positive Impact Portfolios have been designed with a view to support companies that are developing innovative solutions to tackle the largest issues the world is facing including climate change. By supporting the issuance of green bonds, financing of low carbon solutions as well as engaging with companies to push them to reduce their carbon emissions, the EQ Positive Impact Portfolios are sharing the ethos of the Dialshifter to make the fight against climate change a high priority for all stakeholders.

 

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

Being a signatory of the B Corp Climate Collective NetZero 2030 initiative, EQ Investors has committed to net zero emissions by 2030. EQ wants to accelerate the reduction of greenhouse gas emissions to reach a 1.5-degree trajectory leading to net zero by the year 2030—20 years ahead of the 2050 targets set in the Paris Agreement.

EQ Investors has also joined the influential Climate Action 100+ group of investors. The initiative is aimed at pushing the world’s largest corporate greenhouse gas emitters to take action on climate change.

Literature

Last amended: 31/01/24 06:59

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05/07/2024