ESG & Responsible Investment

Committed to Putting the Future First

In order to capture all the ESG risks and opportunities that our company might face, we have essentially developed a number of key performance indicators across our four pillars of the environment, governance, human capital management, and products and services.

At Partfield, we consider environmental, social, and governance information to be fundamental information when considering a stock. As a result, the conventional analysts and ESG analysts work together in a very integrated fashion to develop. Research on any given name.

service page thumb

What this has evolved to is about 30 sector and sub-sector-specific templates for ESG information that all include between 60 to 80 key performance indicators that were developed jointly between ESG analysts and conventional analysts.

When we look at a company’s operate governance what we are doing is taking a deep dive into the expertise on the board of directors, how independent the board may be, we are looking at the executive management team how qualified they might be, how they get compensated. And we are also looking to see how transparent and accountable the company is to its shareholders.

Powering a New Era of ESG

At Partfield, we aim to accelerate the evolution of ESG on behalf of clients, investors, communities, and all the stakeholders to make a positive impact on people and the planet. With our size, scale, and significance at the heart of the financial system, we touch many points along the financial value chain-giving us an unparalleled view of the continuous shifts in ESG. We're uniquely positioned to collaborate with clients to drive transparency, insight, and impact.

Some ESG factors that we
believe are most relevant to
our investments

ESG factors can materialize in different ways, but the
major distinction is between sudden shocks and gradual
trends. In either case, they can be highly disruptive to a
company's operations.

Cross-ESG factor concerns
• Supply chain oversight and management
• Technological innovation and disruption
• Cybersecurity and privacy • Population demographic shifts
• Resiliency of infrastructure
• Significant ESG-related controversies
• Quality of ESG disclosure and transparency

Environmental

• Climate change
• Pollution
• Natural resource
utilization
• Biodiversity
• Water scarcity
• Waste management
• Other environmental issues

service page thumb

Social

• Health and safety
• Labor relations
• Diversity
• Human rights
• Respect for the
community
• Other stakeholder
expectations

service page thumb

Governance

• Board composition
and oversight
• Executive compensation:
structure, performance
metrics, and oversight
• Minority shareholder rights
protection
• Capital management,
dividend payouts, and dilution
• Corporate actions
(e.g., MM) and corporate
strategy

service page thumb

Companies need an ESG strategy and high-quality managemet to execute it

Company's ESG strategy

ESG shocks

• Labor stoppages
• Product recalls
• Supply chain
disruption

• Pollution incidents
• Accounting fraud
• Executive corruption

service page thumb

ESG trends

• Climate change
• Water scarcity
• Tech disruption

• Healthier
lifestyle/longevity
• Labor scarcity
• Diversity

Company impacts

• Cost/liabilities
• Operational stoppages

• Litigation
• Regular intervention

• Executive rotation
• Reputational loss

• R&D, compliance costs
• Gain/loss access to markets

ESG analysis in our
invesrment process

service page thumb service page thumb service page thumb

We take a multifaceted approach to conflicts management
Multiple policies, processes, and review bodies help us identify and mitigate conflicts of interest

Governance

Boards and
oversight committees

service page thumb

Policies
and procedures

service page thumb

Conflicts
Advisory council

service page thumb

Oversight
mechanisms

Global eyhics
Global trade oversight
Operations
Proxy voting

Conflicts of
interest policies
tailored to specific
market challenges

Identification
and mitigation
of business-level
conflicts

service page thumb

Our Holistic ESG Framework

ESG CLIENTS SOLUTIONS

What We Do

By embedding ESG principles across the investment value chain, we empower clients with multifaceted solutions in three areas to support ESG integration:

RESPONSIBLE INVESTMENT

Partfield offers a range of responsible investment options and advice for professional and personal investors to help them achieve their investment goals.

DATA AND ANALYTICS

Our breakthrough tools and analytics capabilities power investment processes and portfolio reviews for asset owners and asset managers with compliance monitoring capabilities and an app that provides a clear path to responsible investing.

FINANCING AND PAYMENTS

We offer an end-to-end suite of ESG financing and payments solutions through our global market infrastructure, issuer and treasury services.

ENTERPRISE ESG

Who We Are

Enterprise ESG drives the culture at Partfield, informs our responsible business practices, and inspires our global citizenship. We contribute to sustainable economic growth that helps protect healthy markets, enhances our own business resiliency and longevity, and aims to deliver a positive impact for key stakeholders.

CULTURE AND PURPOSE

Together, our purpose and values drive our culture, which is built on our commitment to diversity and inclusion, leadership and development, employee engagement and wellbeing, and community partnership.

RESPONSIBLE BUSINESS

We believe responsible business is simply good business. As a major global financial institution, we have an important role to play in contributing to market integrity.

GLOBAL CITIZENSHIP

We're committed to operating responsibly and sustainably, so we integrate human rights and environmental sustainability across the business.

service page thumb service page thumb
service page thumb

ESG Data Analytics Application

Integrated Information. Individual Preferences.

The ESG Data Analytics application is a cloud-based application that mass-customizes investment portfolios to clients’ individual ESG factor preferences. The application’s rigorous data governance and peer behavior feedback loops guide the user’s selection of ESG factors to construct custom investment portfolios.

Through peer behavior feedback loops, the ESG Data Analytics app helps support the definition of ESG industry standards across investor types. As a part of an open ecosystem of complementary solutions and designed for ESG investment portfolio managers, research analysts, financial advisors, client reporting teams, securities borrowers, and lenders, the application solves three key client needs—customization, standardization, and demonstrability.

Features

ESG Data Analytics enables the incorporation of individual ESG preferences in portfolio and policy design. Gain a better understanding of the relationship between ESG ratings across different commercial vendors by viewing your factor preferences against commonly accepted taxonomies, such as the UN Sustainable Development Goals. With the dynamic mapping of ESG factors against multiple data sources— third-party, in-house, or public—you can structure and review investment portfolios across different measurement regimes.

The lack of widely accepted ESG industry standards intensifies the need for investors to understand peer group behavior. The ESG Data Analytics App's crowdsourcing metrics reveal peer behavior, providing you with a deeper understanding of other investor views of factor relevance, as well as the use of underlying factors as defined by multiple data sources. Moreover, the depth of the Partfield network, coupled with anonymized data usage from institutional asset managers and asset owners, helps begin the establishment of informal standards, while supporting investment policy decisions. This in turn helps improve data quality via a feedback loop to data vendors.

Investors, stakeholders, and regulators expect greater transparency around ESG investing. The ESG Data Analytics App's unique combination of multi-taxonomy mapping, crowdsourced research, and factor analysis enables you—from portfolio design to implementation—to evidence individual client preferences and compare ESG factor implementation across various managers. Upload portfolios and security lists to construct custom investment portfolios, while increasing transparency and demonstrability with better-informed investment processes, such as security selection, portfolio optimization, and proxy voting. In-house or public—you can structure and review investment portfolios across different measurement regimes.
service page thumb

Stewardship,
investment,
and ESG
integration

We recognize the critical connection between deciding to
invest and maintaining a strong program of stewardship
to protect each of our investments. The central objective
of our approach is to strengthen the potential risk/reward
profile of our clients' portfolios.

In all asset classes, we're committed to continuing to integrate ESG analysis alongside
our fundamental research process, and we seek to create a positive impact by engaging
with investee companies to mitigate ESG-related challenges and enhance ESG-related
opportunities. We believe that identifying and assessing material sustainability issues
help us protect and enhance the value of the assets we own or operate.

Our approach to ESG integration

We seek to incorporate material ESG considerations throughout the stages of our
investment and lending lifecycles, considering the characteristics of the asset class
and investment process in question, as well as industry and geography, among
other factors. In our capacity as stewards of capital, our investment approaches go
beyond conventional financial statement analysis. Our investment strategies that have
fully integrated ESG analysis monitor a company's strategy, capital structure, and
management of ESG risks and opportunities on an ongoing basis. In our operating
activities, we hold ourselves to a high standard of sustainability. We do this to both
protect and grow the value of the assets as we create long-term value for
our stakeholders.

Environmental, Social, and Governance (ESG) issues are increasingly important to the long-term financial success of a company. As skilled, experienced, and active investment managers we believe it is our duty to our clients to evaluate and integrate material ESG factors into the overall investment process. We believe doing so can contribute to better investment outcomes.

Genuine ESG Integration means our investment teams:

Invest

in extensive in-house ESG resources, training and education

Integrate

ESG across strategies within an overarching research framework

Incorporate

ESG considerations
consistent with each
portfolio's distinct
philosophy

Exercise

active ownership responsibilities

Develop

custom solutions that meet each client's ESG objectives

Strive

to achieve 100% integration

Focus on Financial Materiality

ESG Integration Framework

Our ESG integration process is guided by a three-layer analytical framework that is aligned with our fundamental analysis process and fiduciary duty. The framework is applied to equity and fixed income strategies and seeks to 1) identify macro-level ESG issues impacting market dynamics, 2) determine which of these issues are relevant at the sector level, and 3) evaluate ESG materiality at the issuer level.

ESG Macro Analysis

Identify ESG issues affecting sectors and companies

Sector Analysis

Determine ESG risk exposures at sector level

Issuer Materiality Assessment

Assess ESG materiality at issuer level

Investment Teams:

• Consider relative ESG assessments in context of analysis/fundamental research process.
• Address company management with any ESG issues and controversies deemed material to an issuer's long-term financial condition.

ESG 2.0: Crowdsourcing Standards and Mass Customization

“More transparency, flexibility, and responsiveness to investor needs will yield tremendous gains in advancing ESG standards in a post-pandemic world.”

With net flows into sustainable funds nearly quadrupling in 2019, attracting a record $20.6 billion, last year was widely heralded as a breakthrough year for Environmental, Social, and Governance (ESG) investing. The dramatic growth provided yet more proof of the heightened demand for ESG investment options from institutional and retail investors alike. With the outbreak of the COVID-19 pandemic, ESG focused funds now face their first real test since entering the mainstream.

The initial signs remain encouraging: assets under management continued to grow in Q1 2020 and, relatively speaking, there is some evidence that ESG funds performed better than broader market indices. There are still a number of underlying challenges to be overcome, however, and the fallout from the pandemic could prove to be an inflection point for ESG investing.

One of the key issues with ESG investing is that it is – by definition – a broad range, encompassing a huge number of factors, even within each of the over-arching environmental, social, and governance themes. As such, ESG can often mean different things to different people. In Europe, for example, ESG is typically viewed through more of an environmental lens with climate change and carbon risk the primary focus while in many APAC countries social factors, particularly those related to financial inclusion of under-served communities, tend to take center-stage. In North America, there has traditionally been a greater emphasis on governance issues, particularly around management quality. At an individual level, it becomes even more complex and disparate; one investor may be interested in carbon emissions, while another may be interested in diversity.

A range of ESG issues in our engagements

We often engage with a company on more than one ESG issue in a given engagement interaction. These engagements can be purely to learn about firm management of sustainability risks or to encourage them to address a material issue we've identified that may affect value over the long term.

service page thumb

Top 10 engagement topics*

Board structure and practices

Shareholder rights

Market opportunity: environmental
business/sust finance

Market opportunities

Customer pref and shift

Other governance topics

Other social topics

Climate change vulnerability

Other environment topics

GHGs

E,S,G

G

G

E

G

S

G

S

E

E

E

Number of engagements

248

196

115

92

86

79

62

55

47

41

service page thumb

New Tools of the ESG Trade

In practical terms, achieving a greater alignment between investor objectives and the investment process will require:

  • A deeper understanding of investors’ interests and concerns when it comes to ESG, allowing them to define relevance on their own terms;
  • An ability to “open up the box” to explore and identify the underlying components of ESG, how they’re scored, and how they can inform and support specific investment strategies and objectives;
  • Customized portfolio construction to reflect investor preferences and needs;
  • Demonstrability to ensure preferred ESG factors are represented in the portfolios or fund investments.

Without existing common standards and the disparity across ESG’s data universe, a consensus will likely only form through greater transparency into what investors are doing, which will, in turn, inform best practices.

At Partfield Data and Analytics Solutions, for instance, we are developing an application to leverage the power of the Partfield network to learn how portfolio managers and business users are interacting with and interpreting ESG data. Effectively this will provide crowdsourced guidance around the preferred ESG factors and priorities to determine the materiality of specific data sets and in the process create standards that both guide future ESG investments and continually improve and optimize the effectiveness of ESG metrics to complement traditional fundamental analysis or facilitate non-financial goals.

service page thumb






Investment-Led ESG Platform

We believe it is crucial to maintain the independence of our fundamental analysts and the integrity of the investment process. Our ESG research framework augments the existing fundamental research process and helps portfolio managers make better long-term investment decisions for clients. The ESG views generated by our proprietary scoring system reflect an analysis of financial materiality and its investment implications. We believe integrating ESG provides the opportunity to increase portfolio diversification and improve client outcomes through the incorporation of both ESG- and alpha-related inputs within our fundamental research processes.

service page thumb





To support our investment teams in the achievement of this significant goal, we’ve provided support and resources, available to all teams

ESG education

  • Education and training program for internal and external audiences
  • Specialists host seminars and online training
  • Hosted forum on climate change, September 2019

Public markets ESG team

  • Advance ESG research and thought leadership
  • Develop proprietary views on macro-sustainability trends
  • Act as the primary base of support for investment teams and distribution

ESG info hub

  • ESG milestones
  • Thought leadership
  • Engagement recaps
  • Media and industry events


Client-Driven Platform

There are so many ways to apply ESG Considerations to an investment strategy. Approaches can vary based on assets class, style, time horizon opportunity set nd client objectives


service page thumb


Exclusionary/Negative Screening

service page thumb


ESG Integration

service page thumb



Positive/Best-in-class Esg Tilt

service page thumb



Thematic Investing

service page thumb



Impact Investing

service page thumb



Combined Approaches