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Federated Hermes, Inc. (formerly Federated Investors, Inc.)

PRI reporting framework 2020

You are in Strategy and Governance » Investment policy


SG 01. RI policy and coverage


01.1. 責任投資アプローチをカバーする投資ポリシーを策定しているかどうかを明示してください。

01.2. ポリシーの構成要素/種類と対象範囲を示してください。


01.3. 投資ポリシーが以下のどの項目をカバーしているか明示して下さい:

01.4. 組織の投資原則および全体の投資戦略、受託者義務(または同等のもの)の解釈、ならびに、ESGファクターおよび実体経済の影響をどのように考慮に入れているかについて説明してください。

Federated Hermes' mission is to be a responsible steward of the financial assets entrusted to us by our clients. We seek to produce superior, risk adjusted portfolio returns for our clients while guided by the conviction that responsible investing is the best way to create wealth over the long term. 

We employ an intensive, research-driven, bottom-up, fundamental approach to our security selection and portfolio construction process.  We believe deep knowledge of a company requires not only understanding its key financial metrics but also understanding the material ESG risks which can impact its competitive, regulatory or reputational frameworks. Federated investment teams integrate relevant ESG metrics into their research process to provide another lens through which to evaluate a company's business practices, which include managing ESG risks. Financial and ESG information data are integrated with insights gained from stewardship and engagement activities because we believe that the combination of these resources provides investment teams with the tools to illuminate, mitigate or potentially eliminate investment risks posed by corporate ESG behaviours.  We integrate fundamental and ESG due diligence across all asset classes to ensure that all investors benefit from this holistic approach to asset management.



01.5. 責任投資アプローチをカバーする組織の投資ポリシーの重要な構成要素、バリエーション、例外事項を簡潔に説明してください。[任意]

We believe our mission is to deliver outstanding risk-adjusted returns to our clients and their beneficiaries by setting the standard for responsible, active management including rigorous investment analysis, active ownership and consideration of the long-term needs of all stakeholders. Federated has fully embraced its partnership with Hermes Investment Management, reflected not only in the now combined name, but by fully tapping into the expertise and deep knowledge of ESG integration within the investment process that has defined Hermes for over thirty years.  Federated has created a Responsible Investing Office to work closely with investment teams to accelerate our journey from ESG aware to actively incorporating financially material ESG factors into our decision-making process across all asset classes.  We continue to improve upon our processes by setting objectives that reflect our commitment to deepening ESG factors as an integral part of our research, analysis and ownership processes.  Each investment team is charged with developing a framework specific to their strategy for integrating ESG issues into their investment analysis by 1) identifying material ESG risks within their portfolio sectors; 2) accessing all available data and research resources to fully understand each identified risk; 3) incorporate those factors into their existing proprietary credit or stock analysis process and assessment of the security.

Federated is focused on ongoing ESG education for its investment teams and delivering best-in-breed information resources.  An ESG information hub has been established to allow investment teams a central location for accessing critical ESG resources which include external ESG data from multiple vendors; corporate engagement reports from EOS at Federated Hermes ("EOS"); ESG Dashboard for covered companies, which provides a summary of multiple sources of ESG data and a proprietary rating of a covered company's ESG risk profile versus its peers; and portfolio-level tools which provide metrics related to ESG and engagement, carbon exposure and governance.  In addition to these resources, investment teams participate regularly in "deep dive" presentations on relevant industry-related ESG topics from SASB and EOS engagers.  

This commitment to providing investment teams with the needed resources and tools deepen their understanding of and ability to integrate ESG factors into the investment process reflects our investment policy belief that ESG factors are an integral part of our fundamental research and ownership processes and critical to our capacity as stewards of our clients' financial assets.


01.6. 補足情報 [任意]


SG 01 CC. Climate risk

01.6 CC. 投資期間において特定され、組織の投資戦略・商品に組み込まれている気候関連のリスクおよび機会について記述してください。

特定された気候関連の移行リスク・物理的リスクおよび機会、ならびに投資戦略・商品にそれらがどのように組み込まれているかを説明してください。(500 語以内で自由に記載)

Transition to a lower-carbon economy can threaten investee companies by disrupting existing business models and assumptions about the markets in which they compete.  Although transition risk is usually framed as a long-term risk, we are also keenly aware that transitions can happen abruptly in response to unforeseen events. 

Accordingly, we assess climate risks on how they will affect us and our portfolio companies in the short, medium and long-term.  In the near term, regulatory risks and mandatory legislation are the biggest risks, while longer-term the risk of stranded assets increases and the physical impact of climate change are likely to impact many different types of assets.

We have identified the key transition risks and opportunities around these dimensions: technology; policy and legal; reputation; and market expansion or contraction.  Physical risks are evidenced by more immediate or event-driven risks from wildfires and more extreme weather events such as powerful storms, floods and droughts. Longer-term shifts in climate patterns may result in rising sea level or chronic heat waves.  All investment teams are "climate-related risk aware", i.e. they are aware of the risks --  transition and physical -- and that those risks vary by sector, e.g. insurance companies are impacted by climate risk very differently than agricultural companies. 

Each team must assess climate risks differently in relation to its strategy's investment thesis.  Investment teams are working to deepen their understanding of climate-related risks and improve their process for assessing their impact on portfolio holdings through application of the ESG resources available to them.  Investment teams have access to best-in-class proprietary and third- party resources that are key inputs into the fundamental research process.  These include proprietary ESG data, ESG research, and portfolio-level dashboard tools to help identify climate and carbon-related exposures. All teams have access to our proprietary Carbon Footprint Tool which measures scope 1, 2, and 3 emissions to identify climate-related carbon risk in a portfolio by identifying those outlier companies versus industry peers and relevant industry benchmarks.  It also sheds light to what extent our stewardship team is engaging with high-emitting companies to reduce their carbon footprint.  Our stewardship team, EOS at Federated Hermes, regularly engages with companies on climate-related risks to their enterprises and those insights are shared with investment teams.

To accelerate investment teams' capacity to factor climate-related risks into their strategies, the Director of Responsible Investing and the Head of ESG Integration work closely with each investment team to identify the climate issues most relevant to their sector, industry and portfolio companies, and assess how these data are appropriately integrated within the fundamental research process. Investment teams are benefiting from the added lens of ESG research and data for understanding the long-term externalities and risks faced by portfolio companies related to climate change.

01.7 CC. 組織はそれら気候リスクの可能性および影響を評価しましたか?


Although transition risk is usually framed as a long-term risk, the timing of climate-related financial impacts can vary by type of risk, therefore we view them across different timeframes.  

Short-term (0-2 years) - Risks that could cause impacts in 0-2 years from now; legal and regulatory risks:

  • Regulatory changes and mandatory legislation affecting license to operate or management practices in certain sectors or geographies.

Medium term (2-5 years) - Risks that could cause impacts in 2-5 years from now; legal and market transformation risks:

  • Regulatory changes and mandatory legislation affecting license to operate in certain sectors or geographies;
  • Market-led changes, emerging new opportunities, obsolescence of certain products and services affecting certain sectors;
  • Risk of stranded assets.

Long term (5+ years) - Risks that could cause impacts in 5 years and beyond; legal, market transformation risks and extreme weather events:

  • Obsolescence and stranded assets across a range of assets, sectors and geographies due to regulatory changes, market transformation or extreme weather events;
  • Extreme weather events impacting defined geographical locations and whole regions and supply chain disruptions affecting large number of sectors;
  • Impact to infrastructure and real assets, ranging from business discontinuity costs, refurbishments and rebuilding costs, to obsolescence and destruction;
  • Impact to insurance premiums or ability to insure assets in certain locations at risk.

01.8 CC. 組織はTCFDを公式に支持しますか?


While Federated is not listed as an official supporter of the TCFD we strongly support the need for a common framework for identifying and disclosing material financial risks associated with climate change. As an example, Federated participated in a policy development discussion with the GAO regarding a study the agency was conducting related to ESG disclosures by publicly traded companies, the extent to which these companies address ESG matters, the extent to which investors seek greater disclosures, and options for Congress to consider.  When asked which, if any, organizations or companies we would recommend the GAO speak with to better understand investor interest in ESG reporting, Federated expressed its support for the TCFD climate-related risk framework and recommended the GAO engage with TCFD to discuss their framework for disclosures.  



01.9 CC. 重大な気候関連リスクおよび機会を特定・管理する組織全体の戦略がありますか?


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:



1.10 CC. TCFD開示を発表するために組織が使用する文書/通信を示してください。

SG 02. Publicly available RI policy or guidance documents


02.1. 一般に入手できる組織の投資ポリシー文書を記載してください。その文書のURLを記入し、該当文書を添付してください。




02.2. 一般に入手できる組織の投資ポリシー文書を記載してください。その文書のURLを記入し、該当文書を添付してください。


02.3. 補足情報 [任意]

Our approach to ESG integration is guided by three criteria: data, materiality and engagement.  This is the framework used by our Responsible Investing Office for integrating environmental, social and governance criteria into our investment processes across all asset classes. 

  • First, we avail best-of-breed ESG data to our investment teams that include a suite of proprietary company and portfolio-level tools and leading third-party data providers;
  • Second, our research is focused on financially material ESG risks and opportunities in each industry using both proprietary analysis and SASB materiality matrices to guide investment teams in identifying relevant factors; and
  • Third, our investment teams have access to ESG insights about a specific issuer through dedicated engagers within EOS at Federated Hermes (EOS).  Our investment teams have access to issuer engagement information and insights, and related portfolio-engagement tools which help provide them with an in-depth perspective on long-term ESG risks.

This three-pronged approach reflects the beliefs outlined in our public documents  -- that responsible investing is the best way to create wealth over the long term. 

SG 03. Conflicts of interest

03.1. 組織として、投資プロセスにおける潜在的な利益相反を管理するポリシーを策定しているかどうかについて明示して下さい。

03.2. 投資プロセスにおける潜在的な利益相反を管理するポリシーについて説明してください。

Federated Hermes maintains a robust Compliance Program.  Policies such as the Code of Business Conduct and Ethics, Code of Ethics for Access Persons (personal trading), Policy on Trading and Confidentiality (insider trading), Anti-bribery and Corruption Policy, among several others, are designed to govern the general comportment of Federated employees.  Other policies in the Compliance Program are directed at specific investment management and trading practices and address topics including but not limited to: best execution, equity and fixed income allocation, side by side arrangements, derivatives use, counterparty approval, affiliate identification and trading, and use of expert networks.  Such policies are designed to operate in a manner consistent with the responsibility to fulfill duties as a fiduciary, to treat all clients fairly and not systematically disadvantage any client.  The policy documents for each of the Federated Advisory Companies contain robust disclosure of potential conflicts of interest related to the performance of their responsibilities along with the controls in place to mitigate conflicts.  All of the Federated Advisory Companies and other Federated subsidiaries are covered by the Compliance Program.  All policies are subject to at least annual review coordinated by the Federated Compliance Department with senior business unit management.

03.3. 補足情報 [任意]

SG 04. Identifying incidents occurring within portfolios

04.1. 組織では、投資先企業において発生するインシデントの特定と管理を行うプロセスを設定しているかどうか明示して下さい。

04.2. インシデントを管理するプロセスを説明して下さい

As an active manger we continually monitor investee companies for events that can represent material investment risk and, as needed, address the issues directly with a company.  We rely on various sources that include sell-side research, news media, and ESG research providers such as Sustainalytics to help inform investment teams of significant ESG events.  In addition to these sources our monitoring is supplemented by EOS at Federated Hermes (EOS), our engagement and stewardship arm.  EOS engagers build relationships with companies over the course of their engagement program, so that if there is an incident in a company, they are able to effectively engage with the company.  EOS stewardship teams provide insights and alert portfolio managers of sustainability issues affecting companies in their portfolios.