Meeting long term objectives in a sustainable way
The world is changing, and the way we invest must change too. Environmental, Social and Governance (ESG) challenges are amongst the biggest risks the world face. Climate change is a prominent aspect but there are a multitude of issues that present relevant and material risks to investors within each of the three broad categories. Therefore, integrating ESG and active ownership are fundamental components of good investment decision making to generate sustainable long-term returns.
This philosophy is embedded throughout our processes and interactions with our clients, investment managers and how we operate as a business.
This philosophy is embedded throughout our processes and interactions with our clients, investment managers and how we operate as a business – we were delighted to have been confirmed as a signatory of the 2020 UK Stewardship Code, and our submission provides more detail on the ways we look to ensure long term sustainable outcomes for all stakeholders.
We recognise pension schemes are on a journey and we are here to support and lead our clients in incorporating ESG across the spectrum from Responsible, Sustainable through to Impact investing.
We understand that one size does not fit all when it comes to ESG and stewardship and work with our clients to ensure our advice and solutions are tailored to their specific needs alongside providing training and education along the way.
We work with our clients to:
- Understand and formulate bespoke ESG beliefs and policy
- Provide insight into their current portfolio from an ESG integration and carbon footprint perspective
- Develop a tailored approach using our Responsible Investing framework
- Implement the chosen approach with practical and tangible steps
- Hold investment managers accountable by setting high expectations and then monitoring and engaging with managers against these
Our clients also benefit from our proprietary ESG research framework which has been developed using the UN PRI principles as a foundation and aims to assess the genuine commitment and capability of managers to ESG and stewardship activity.
Our evidence-based due diligence approach, culminates in an ESG rating of Green, Amber or Red for every fund that we research. The ESG rating is integral to our overall view of a fund. Further we employ a strict requirement funds must be at least Amber rated on ESG in order to be recommended for clients to invest. If a fund is Red rated on ESG i.e. does not incorporate ESG to our minimum threshold, we will not recommend that fund to a client irrespective of how good it is in any other respect.
There is currently no universal definition of what sustainable investment means and how it differs to traditional investing. In response XPS has established our own Sustainable designation for funds that meet specific requirements in relation to sustainability. This gives our clients the assurance they need that funds are doing what they claim to be doing.
Commitment as a firm
ESG permeates through our business culture and values and we have a Sustainability Committee who supports the XPS Board with driving ESG initiatives that have a material impact on business strategy, business performance and the long-term sustainability of the Company. Further details can be found here.
We also demonstrate our commitment through participation in various industry initiatives as below: