Why is your SDG Engagement Global Equity strategy focused on small / mid cap companies?
The strategy is benchmarked against the MSCI ACWI SMID. This forms a broad opportunity set, comprised of ~7,600 diverse companies with whom we can drive meaningful change through our engagement activities. By targeting small and medium-sized companies, we hope to make more of an impact through our dialogue, and we seek to create a triple A engagement (AAA) agenda: one that is ambitious, additional and attributable in nature with each of our investee companies. Finally, in designing this investment strategy, we felt there was an underserved area of the market for ESG investing which was the small-to-mid cap space, with the majority of investment products targeting all cap or large cap companies, our clients have appreciated the diversification this product brings to their portfolios, while satisfying their demand for an impactful ESG mandate.
How do you measure impact?
Measuring impact is a key tenet of impact investing. This investment strategy is all about driving impact through engagement, with the engagement targets directly addressing the SDGs. We have delved into the heart of the SDGs and the underlying 169 targets, and we have established that there are around 80 targets where we can influence business and drive improvement through our work. For each company in the strategy we monitor and measure the impact of our engagement dialogue around these defined SDG targets. We want to see improvement and continually assess the progress each company is making. Our constructive, strategic approach to engagement continues to help us achieve positive outcomes for companies and societies, which we call ‘Milestones’. Milestones recognise and capture positive change occurring at the enterprise level, and relating to ESG issues. We use a three-star rating system, with three stars indicating the most significant impact of the milestone on investor value, and one star reflecting smaller changes that nevertheless will contribute to investor value over the long term. We have got the reporting capabilities and the depth and breadth of reporting to be extremely transparent. We believe that what gets measured gets acted upon, and creates accountability, both for ourselves towards our clients, and for our investee companies towards us. This is essential to driving positive, meaningful outcomes.
What should fund selectors be asking managers like yourself when considering an impact fund strategy?
Some suggestions of questions we think clients should be asking of asset managers are as follows:
- What is your definition of impact? How have you arrived at this definition?
- What are the financial and non-financial objectives of your strategy and why did you choose them?
- How do you measure impact? Can we see examples of your impact reporting?
- What are the resources that feed into your impact strategy? What makes you well-placed to run this strategy?
The Fund Selector Asia Investment Forum Singapore was held on 15 March 2022 and was sponsored by Columbia Threadneedle Investments, Janus Henderson Investors, J O Hambro Capital Management and Jupiter Asset Management.
Find out more about what was discussed and the strategies that were presented here: https://fundselectorasia.com/events/fund-selector-asia-singapore/