The following describe several distinctive features of our firm and their alignment with our ESG integration approach:
- Fiduciary mindset: We believe ESG integration is about analysis and action that help maximize the long-term value of our clients’ portfolios.
- Long-term perspective of a partnership structure: Our ownership structure allows us to have longer investment horizons that consider longer term ESG risks.
- Active management: We have a long history of conducting fundamental research and engaging directly with companies on material business issues.
- Our size and access: Our size and access to company management teams give us a voice to influence outcomes on ESG issues where we think it can benefit our clients.
In addition, innovation, new ideas, and client solutions continue to be a cornerstone of our culture and a key area of partnership with our clients. In particular, we are focused on partnering with our clients to develop solutions related to sustainable investing that address their unique goals. For example, at the suggestion of a client, we have implemented a low carbon equity strategy managed by our Quantitative Investment Group which aims to address the transition risks of climate change. Climate Strategy, Global Impact, and Global Impact Bond are three broadly available strategies we currently offer that we believe have a low carbon footprint as a result of the respective investment team's philosophy and focus on ESG.
Our approach to impact investing is also innovative. In 2015, we launched Global Impact, a global equity portfolio that invests in stocks that have at least 50% of their revenue to solving a measurable social and environmental impact (this is determined by Wellington's proprietary bottom-up global fundamental research). From this threshold of currently roughly 500 stocks, we build a portfolio with a total return objective of 200-300 bps over a global equity index.
In 2017, we developed and launched a fixed income version of Global Impact. In this approach, we seek to apply the same impact philosophy and standards to a broader opportunity set across the public debt markets - including mortgages, governments, agencies, municipals, and corporate bond issuers.
In 2018, we developed a global equity portfolio focused on stewardship, selecting companies that integrate leading ESG practices into their corporate strategies. This approach has a truly long-term investment horizon and holding period and is low-turnover and concentrated in the managers’ best ideas. Its sell discipline emphasizes patience and engagement over divestment unless the managers lose trust in the company’s stewardship.
In late 2018, Wellington Management and Woods Hole Research Center (WHRC), the world’s leading independent climate research institute, announced a collaborative initiative to integrate climate science and asset management. This alliance focuses on creating quantitative models to help analyze and better understand how and where climate change may impact global capital markets. Wellington and WHRC collaborate on a broad range of projects, including developing investor tools and innovative analytical methods seeking to improve climate risk assessment and investment outcomes. WHRC publishes academic papers that draw from the climate modeling involved in the project.
Wellington also recently won the 2020 Investment Innovation of the Year award from Insurance Asset Risk. Climate risk is a key topic for global insurance companies, and this award highlights our commitment to climate science and our research partnership with WHRC.
Wellington is working with a RI-focused distributor to launch a climate adaptation sleeve within a multi asset portfolio. The sleeve invests in the liquid equities of companies whose core products or services will help various parts of society to adapt to physical climate change.