Like everything in today’s world, the ESG landscape continues to evolve at an unprecedented pace. The COVID-19 pandemic acted as a further accelerant in this regard, solidifying the focus of investors, regulators and the asset management industry on the need to fully embed Environmental, Social and Governance metrics as key components in the investment processes of all industry participants.
It is widely acknowledged today that products considering such “non-financial” factors are more resilient from a performance and risk perspective. PwC noted in their November 2020 presentation “2022: The growth opportunity of the century” that:
“ESG products become more resilient in performance and will, after full implementation of the Sustainable Finance framework, protect better against downside risk linked to sustainability.”
At Eric Sturdza Investments we are committed to ensuring that we offer our investors access to innovative investment ideas, within a framework that seeks to achieve better environmental, societal and governance outcomes. To this end, and in accordance with the Sustainable Finance Disclosure Regulation (EU) 2019/2088 (‘SFDR’), we are pleased to advise that all sub-funds of E.I. Sturdza Funds plc are now classified as Article 8 funds.
As an active investment manager, commonly investing with a long-term view in a concentrated portfolio of holdings, we are often able to develop relationships with the companies in which we invest, engaging directly with company representatives and developing an in-depth understanding of a company’s strategic ambitions, including their ESG position and aspirations.
Such an understanding allows us to allocate capital to those companies that have strong ESG credentials, or those that are transitioning their business to fully integrate ESG considerations.
We fundamentally believe that the strength of a company’s governance, along with its environmental and social sustainability is central to its ability to deliver long-term growth. Accordingly, such considerations are incorporated within the research process prior to any investment being made. This review helps to identify any ESG risks which may be best addressed through direct engagement with the target company. The engagement with investee companies is undertaken by the Investment Advisers we work with and by utilising research from third party specialist companies.
To ensure the Investment Advisers have access to relevant insights in this regard, we have engaged Sustainalytics, who provide ESG risks analysis and research. Sustainalytics categorises risks across five levels, from negligible to severe, with detailed analysis of each environmental, social and governance risk at a company level. Research obtained via external data providers such as Sustainalytics forms part of the initial and ongoing monitoring of potential and existing portfolio holdings. Responsibility for this sits with the investment advisory teams; however, it is subject to oversight by our ESG committee, which consists of senior representatives from across the business. The research obtained from external data providers, as well as proprietary research undertaken by our investment teams, is fully incorporated as part of the ongoing engagement with investee companies.
In identifying investments that allow the funds to promote ESG characteristics, we have established a two-pillar framework; consisting initially of an exclusion list and secondly ESG integration. Full details regarding Our ESG Approach is available on our website.
We strive to be active owners and recognise the power of proxy voting and our obligation to actively participate and contribute to decision-making processes through voting. We use our voting rights to promote best practices, good corporate governance and socially responsible investing principles. As such we aim to vote on all proxies and have therefore engaged Institutional Shareholder Services Inc (“ISS”), a leading third-party provider, to benefit from their experience, extensive research capabilities and voting administration services. Our Shareholder Engagement Policy sets out how we ensure stewardship and shareholder engagement is central in all we do when acting as Investment Manager to our funds. We fully endorse and support the principles on engagement as set out in the Shareholder Rights Directive II (EU) 2017/828 (“SRDII”).
Information on the investment approach that is being adopted with respect to sustainability and non-financial criteria can be obtained from Annex I of the relevant sub-fund’s supplement or via www.ericsturdza.com.
Further, and to comply with requirements issued by the French authorities (AMF position DOC-2020-03), not only will we ensure that our funds have a higher average ESG risk rating than the average ESG risk rating of their respective universes, we will also ensure that the proportion of the Fund’s portfolio with an ESG rating is higher than:
- 90% for equities issued by large capitalisation companies whose registered office is located in developed countries, debt securities and money market instruments with an investment-grade credit rating, or sovereign debt issued by developed countries;
- 75% for equities issued by large capitalisation companies whose registered office is located in emerging countries, equities issued by small and medium capitalisation companies, debt securities and money market instruments with a high yield credit rating or sovereign debt issued by emerging countries.
We recognise the importance of the ESG initiatives and strive to ensure we meet our obligations, whether these be client, business or moral obligations, today and in the future. We also recognise that we are still in the early stages of this journey and are committed to evolving our business and infrastructure as necessary to deliver on our objective of providing our investors access to innovative investment ideas, within a framework that seeks to achieve better environmental, societal and governance outcomes.
Whilst our recent focus has been on the development of our infrastructure to ensure the Investment Advisers are well-positioned to adhere to SFDR, we are also actively working in the background to enhance the reporting we will provide to our stakeholders regarding ESG factors associated with our funds. Work in this regard continues; however, we welcome any input as to the data that would be of most interest, or use, to you.
Updates have been made to the Prospectus and KIIDs as a result of SFDR and are available to download from our Literature Library.
We remain at your disposal should you require any additional information in this regard.
+44 1481 742380