Responsible investing policy
Context and commitment
As a long-term investor, Barclays Asset Management Limited (BAML) seeks to invest to generate superior returns for our investors as well as the creation of long term value for all stakeholders. We believe this requires BAML to look deep into our investment process and investments to recognise our responsibility to society and all key stakeholders. We believe in the integration of environmental, social and corporate governance (ESG) considerations into our investment management processes and ownership practices, as these factors can have an impact on financial performance. We believe that as ESG considerations play out over a long horizon, and as they increasingly become a priority for company managers, they may help alleviate the pressure for short-termism and encourage a focus on long-term value creation – to the mutual benefit of firms, investors and the world at large.
These beliefs align with our Purpose of “Helping people to achieve their ambitions – in the right way” and Values of Respect, Integrity, Service, Excellence, and Stewardship.
To recognise many of our existing investment practices, and to further reinforce and strengthen them, BAML has become a signatory of, and is committed to implementing, the six principles of the United Nations supported Principles for Responsible (PRI) in our investment management activities.
Overall approach to responsible investment
We're committed to seeking to deliver the best possible risk-adjusted returns for our clients and we believe responsible investment supports this aim.
We view responsible investing as one approach within the wider discipline of impact investing, which recognises that all investments have an impact that should be considered as part of the investment decision-making. Responsible, distinct from Sustainable or Catalytic approaches, focuses primarily on the risks and opportunities highlighted by ESG factors. As well, we see this approach as distinct from ethical investing, which applies pre-determined criteria, based on religious beliefs, broadly-accepted global norms, or even an individual investor’s personal values, to decide whether an investment is appropriate to hold.
We believe ESG considerations capture non-financial information that could affect financial performance. Considering these ESG factors, and consequently a broader set of data, we believe enables investors to make a better judgement about the financial performance and longer term viability of an investment. Therefore, as part of our investment process, we seek to incorporate any foreseeable risks and opportunities that arise from material ESG factors be included.
A majority of the assets we manage on behalf are our clients are invested indirectly, through third party fund managers. Nonetheless, our approach to undertake responsible investment is relevant across all the asset classes, sectors and markets in which we invest.
Guidelines and approach
At present, our approach to responsible investing can be further detailed against the following components:
Our ambition is for ESG integration to be at the core, rather than an additional element, of the investment process. The key parts of our investment process are Asset Allocation (Strategic and Tactical) and Manager and Fund Selection – primarily of third party managers – supported by Portfolio Construction. Within Manager and Fund Selection we select and invest in the managers based on our confidence in their ability to deliver their investment objectives, along with their associated strategies and practices to responsible investment. We inform our external managers of our focus on and commitment to the PRI principles.
As part of our due diligence and ongoing monitoring, we will review their integration of the principles and practices of responsible investing. This includes review of the ESG policies and governance of potential managers, identifying how effectively they integrate ESG factors into their investment decisions, and how the fund communicates ESG information to its investors.
Throughout the life of an investment, we monitor identified ESG risks and work with managers to ensure effective oversight.
We encourage managers to engage in an open a dialogue with us about their own approach to responsible investment and how ESG factors impact its investment analysis and decision-making processes.
To support our ESG integration, we use external research sources to provide ESG data and insight and will use external data provider(s) to supplement our internal analysis by our investment teams. This includes company and industry reports and thematic research on specific ESG issues, as well as data and screens for our teams. We believe these insights, and in particular quantitative data, should be used alongside, rather than a replacement for, the analysis of our investment professionals.
Currently, across our investment management activity, we generally don't exercise voting rights actively against particular views or positions. At the same time, where capital is co-mingled, nor do we restrict investment managers from voting.
However, as and when we exercise our discretion to vote for or against a particular proposal it will be in a manner consistent with its customers’ best interests.
This approach to proxy voting will be subject to a forthcoming review to determine an approach to act on behalf of its investment clients without generating conflicts with clients in other parts of the organisation.
Screening and exclusions policy
Overall, our approach to responsible investment involves ESG integration, rather than screening. Where we provide mandates to external managers, who undertake screening as part of their investment process, we will acknowledge their practices. We do not extend restrictions to investment managers of co-mingled funds where we're not the sole client.
One exception to this approach is the case of cluster munitions, in which we will decline holdings in companies known to manufacture cluster munitions in violation of the international convention on cluster munitions.
Additionally, we do provide clients, within segregated mandates, the option to exclude sectors or companies based on ethical or personal preferences, which are incorporated into investment guidelines. The screening rules we are currently able to apply include – abortion, alcohol, animal testing, armaments (including anti-personnel landmines and cluster munitions), environmental impact, fossil fuels, gambling, human rights, pork, pornography, and tobacco.
Furthermore, our Charities Fund and portfolios aim not to have any direct exposure to companies that generate more than a small minority of their turnover from tobacco, pornography, gambling or the manufacture or sale of arms.
We use an external research provider to provide screens which undertakes comprehensive research on each theme and identifies the companies to be excluded. These screens are incorporated into our portfolio management system, which allows us to manage the investment process as well as monitor and ensure that we do not invest in the companies that come under any rules.
We join initiatives that align with – and help to guide – our approach to responsible investment. We actively work with and share experience and knowledge with peers to better understand important responsible investment issues and their implications for our investment processes.
BAML is a signatory to the United Nations Principles for Responsible Investment (UNPRI), a voluntary framework for incorporating ESG issues into investment decision-making and ownership practices. Additionally, we are members of and/or involved in the following organisations and initiatives: the Investment Association (IA), UK Sustainable Investment and Finance Association (UKSIF), Global Impact Investing Network (GIIN), Carbon Disclosure Project (CPD), Taskforce on Climate-Related Financial Disclosures (TCFD), UK Government’s Green Finance Taskforce, Green Finance Initiative (GFI), Banking Environment Initiative (BEI), Green Bond Principles, and United Nations Environment Programme Finance Initiative (UNEP FI).
In addition, we're proactive in strengthening its links within the investment industry, with governments, regulators and exchanges to encourage sustainable capital markets and reduce systemic risks; uphold values or ethical standards as well as to promote compliance with international law, codes or guidelines; and/or to promote change in public policy and wider adoption of responsible investment thinking and practices.
Governance, management, resources, reporting
In order to oversee, manage, and continually improve our Responsible Investment activities, We have established a Responsible Investment Forum (RI Forum) to provide oversight and guidance to the RI effort.
This Forum, comprising key stakeholders from across the investment organisation and chaired by the Head of Impact Investing, reports into the Investment Committee, which has accountability for the investment process and is chaired by the Chief Investment Officer.
The RI Forum will meet, at minimum, quarterly to provide oversight, review, and guidance (where necessary) on the integration of the PRI Principles within the investment teams and across the wider organisation. Responsibility for implementation of relevant RI integration and activity has been delegated to and resides within each team and with the Responsible Investment Champion (RI Champion) for that team. (From 2018 onwards, RI Champions will have an annual performance objective included in their personal performance review.)
For the RI Forum, objectives are set on an annual basis and will be reviewed quarterly for progress and amendment. As well, this RI Forum undertakes the annual review of this RI Policy to propose any changes, which are subsequently approved by the Investment Committee and BAML Board.
As part of being a signatory to the UNPRI, we submit an annual assessment report in accordance with their guidelines. Barclays first submission will be in 2018 after which our Transparency report will be published, alongside this policy.
Conflicts of interest
We believe identifying and managing Conflicts of Interest is fundamental to the conduct of our business, our relationships with customers, and the markets in which we operate.
As part of our Enterprise Risk Management Framework, Barclays has established policy, standards and guidelines which are designed to manage Conflicts of Interest that may emerge for existing or new activities. Areas of Conflict, or even the appearance of a Conflict, are identified on a Conflicts of Interest Register and reviewed on an annual basis across the various relationships between Barclays, its customers, and employees.
This approach is taken within the investment processes across all teams, so that appropriate steps are taken to identify, assess and take appropriate action to address Conflicts of Interest on an on-going basis. Furthermore, we evaluate and evidence the extent to which relevant internal Controls (associated with the Conflict of Interest Standard) are designed and are operating effectively; risk is being effectively managed; and compliance is being maintained with laws and regulations.
Additionally, Barclays also has a code of conduct by which all employees are required to abide, and mandates that employees must identify and address real or perceived conflicts of interest.