Federated Hermes has in place executive level committees to identify and manage material climate-related risks and opportunities. The Investment Risk committee meets quarterly to identify and discuss firm-wide portfolio investment risk, which includes ESG risks. The committee includes representatives from investment management, CEO of the advisory companies and the firm's chief enterprise risk officer. The Enterprise Risk committee meets monthly and is tasked with identifying and managing material business risks to the firm, of which ESG investment risks are included. At the board level, Federated benefits greatly from having Saker Nusseibeh, CEO of Hermes Fund Managers, LTD as a board member and CEO of International at Federated. A leading advocate for climate change and the risks it presents, Saker discusses at the highest levels of the firm the need to address and manage climate-related issues within our investment portfolios.
The Responsible Investing Office (RIO) at Federated provides an infrastructure to help identify and manage climate-related risks. As a focal point for communicating about and disseminating information regarding ESG issues within the firm, RIO is a primary conduit for assisting investment teams in gathering and applying climate-related risk information to their investment processes. Federated investment teams have access to portfolio-level Carbon Footprint and ESG and engagement measurement tools that allow portfolio managers to see the exposure their holdings have to climate-related risks by sector and by individual holdings. EOS at Federated Hermes (EOS) engagement reports provide investment teams with insights into companies' identified objectives related to climate-related risks and progress towards those goals.
We are working together with our colleagues at Federated Hermes International to further enhance our approach to managing climate-related risk and opportunities in public equities and credit. The approach has four elements:
Awareness - Portfolio managers are aware of the climate-related risks in their portfolios, which investments are the largest contributors, and what are the associated risks and mitigation strategies.
Integration - Portfolio managers integrate climate-related risk considerations alongside other value and risk considerations, and idenitfy where climate-related risk, alongside other factors, impacts value.
Engagement - We act as engaged stewards of the investments we manage. Where we hold assets with significant climate-related risk exposure, we will engage with public companies to mitigate climate-related risk.
Advocacy - We engage with public policymakers to encourage relevant policies and best practices.
RIO works closely with the Proxy Voting Committee to help in its analysis of climate-related issues, primarily relating to shareholder proposals. Two members of the RIO team are also permanent members of the Proxy Voting committee. This ensures that shareholder proposal issues benefit from the corporate body of knowledge regarding climate change and that it is integrated into relevant proxy discussions.
Across public markets, EOS' engagement program has identified climate as a specific focus and is informed by the outcomes of the Carbon Tool. EOS has taken an active role on the Climate 100+ initiative. More information is available at: https://www.hermes-investment.com/ukw/eos-insight/environment/taking-action-on-climate-change/