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Glenmede

PRI reporting framework 2020

You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities

ESG incorporation in actively managed listed equities

Implementation processes

LEI 01. Percentage of each incorporation strategy

01.1. Indicate which ESG incorporation strategy and/or combination of strategies you apply to your actively managed listed equities; and the breakdown of your actively managed listed equities by strategy or combination of strategies.

ESG incorporation strategy (select all that apply)

Percentage of active listed equity to which the strategy is applied — you may estimate +/- 5%
60 %
Percentage of active listed equity to which the strategy is applied — you may estimate +/- 5%
40 %
Total actively managed listed equities 100%

01.2. Describe your organisation’s approach to ESG incorporation and the reasons for choosing the particular strategy/strategies.

GIM has been managing customized variations of ESG portfolios using a quantitatively-based discipline for more than 15 years based on multifactor stock selection models, leading industry group indicators, positive/downside screens and restriction lists.


Since 2001, we have utilized ESG ratings in portfolio construction from several ESG providers (Innovest, KLD and MSCI) as well as integrating socially responsible restriction lists for portfolio mandates of individuals, institutions, endowments/foundations and religious organizations. On a monthly basis, the portfolio managers receive current ESG analysis and updated ESG ratings from MSCI. The Quantitative Team has performed extensive historical analysis on ESG factors and their effects on portfolio performance, including risk-adjusted returns. In more recent years, the Team has expanded its impact strategies to include Carbon-Free portfolios, a Responsible ESG U.S. Equity Portfolio and a Women in Leadership U.S. Equity Portfolio. 


Currently, we manage client portfolios with the following socially responsible areas of focus:

  • Catholic Values
  • Carbon Free
  • Alcohol, Tobacco and Gaming - Free
  • Christian Science Equity
  • Direct Impact Investing
  • Environmental, Social and Governance
  • Defense-Free
  • Security Specific Restrictions


A few of our ESG-oriented strategies are highlighted below:

  • Our Quantitative U.S. Large Cap Environmental and Carbon-Free strategies are based on negative screens based on externally-provided environmental rankings (MSCI).
  • The Responsible ESG U.S. strategy is based on a combination of positive and negative screenings using MSCI rankings. Stocks with poor ESG rankings are sold from the portfolio and excluded from buy lists. We adjust our alpha signals to reflect a combined 40% weighting in the absolute level and 1-year change in ESG scores.
  • Our Women in Leadership U.S. Equity strategy focuses only invests in companies with significant executive and/or management exposure, including chairwoman, female CEO, >25% of board or at least 25% of women in management.

01.3. If assets are managed using a combination of ESG incorporation strategies, briefly describe how these combinations are used. [Optional]

Responsible ESG U.S. Equity: The strategy utilizes a combination of sector specific multifactor stock ranking models (60% weighting) based on 20 years of historical backtesting analysis and 40% weighting to ESG related measures, including ESG rankings (MSCI) and ESG Momentum (12-month change in MSCI ESG rating weighted on SASB materiality metrics).

Other thematic strategies (e.g. Women in Leadership U.S. and Quantitative U.S. Large Cap Carbon Free) use a combination stock screening process and negative screening. Multifactor stock ranking models, include valuation, fundamental and technical factors.


LEI 02. Type of ESG information used in investment decision (Private)


LEI 03. Information from engagement and/or voting used in investment decision-making (Private)


(A) Implementation: Screening

LEI 04. Types of screening applied

04.1. Indicate and describe the type of screening you apply to your internally managed active listed equities.

Type of screening

Screened by

Description

Negative exclusion for thematic products including product, activity sector and/or MSCI ESG IVA ratings below 3.5

Screened by

Description

Favorable or improving ESG rankings

04.2. Describe how you notify clients and/or beneficiaries when changes are made to your screening criteria.

For GIM ESG-mandated strategies, if changes in screening criteria require updates to fund prospectuses, then the updated prospectuses are provided to fund shareholders.  Otherwise, material changes to screening criteria typically would be communicated to GTC portfolio managers and external financial intermediaries (who then would decide whether to communicate the changes to their clients invested in the funds).


LEI 05. Processes to ensure screening is based on robust analysis

05.1. Indicate which processes your organisation uses to ensure ESG screening is based on robust analysis.

          We take commercially reasonable steps to validate such research topics, including ESG, before incorporating it into the portfolio.
        

05.3. Indicate how frequently third party ESG ratings are updated for screening purposes.

05.4. Indicate how frequently you review internal research that builds your ESG screens.

05.5. Additional information. [Optional]

On a monthly basis, the portfolio managers receive current ESG analysis and updated ESG ratings from MSCI. The Glenmede Quantitative Team has done extensive historical analysis on ESG factors and their effects on portfolio performance, including risk-adjusted returns. 


LEI 06. Processes to ensure fund criteria are not breached (Private)


(B) Implementation: Thematic

LEI 07. Types of sustainability thematic funds/mandates

07.1. Indicate the type of sustainability thematic funds or mandates your organisation manages.

07.2. Describe your organisation’s processes relating to sustainability themed funds. [Optional]

GIM's Responsible ESG U.S. Equity strategy invests in large cap companies with an attractive combination of valuation, fundamental, earnings, and technical characteristics as well as integrating positive and negative screening techniques based on ESG rankings from MSCI ESG. Generally speaking, the strategy is based on proprietary, multi-factor models which rank stocks within each sector. The stock rankings models use a 40% weighting to ESG-based factors, including 1-year changes and absolute ESG rankings. In addition, downside screens are utilized to avoid stocks with greater risk of underperformance. The portfolio is optimized on a monthly basis to provide broad diversification across sectors, industries and individual companies, while controlling turnover. Candidates are domestic stocks in the Russell 1000, S&P 500, or over $3 billion in market capitalization.


GIM's Women in Leadership U.S. Equity strategy invests in large cap companies with significant female representation in leadership, a company is required to have at least one of the following: Chairwoman, a female CEO, or women comprising at least 25% of the Board or 25% of senior management, respectively. The portfolio process is based on proprietary, multi-factor models to rank stocks within each sector, reflecting attractive combinations of valuation, fundamental, earnings and technical characteristics. In addition, downside screens are utilized to avoid stocks with greater risk of underperformance. The portfolio is optimized on a monthly basis to provide broad diversification across sectors, industries and individual companies, while controlling turnover. Candidates are domestic stocks in the Russell 1000, S&P 500, or over $3 billion in market capitalization.


GIM's Quantitative U.S. Large Cap Environmental Equity strategy invests in large cap companies with an attractive combination of valuation, fundamental, earnings and technical characteristics. The portfolio is based on proprietary, multi-factor models to rank stocks within each sector. In addition, downside screens are utilized to avoid stocks with greater risk of underperformance. The portfolio is optimized on a monthly basis to provide broad diversification across sectors, industries and individual companies, while controlling turnover. Candidates are domestic stocks in the Russell 1000, S&P 500, or over $3 billion in market capitalization. This environmentally sensitive strategy is managed to exclude companies with poor industry adjusted environmental ratings (source: MSCI ESG).


(C) Implementation: Integration of ESG factors

LEI 08. Review ESG issues while researching companies/sectors

08.1. Indicate the proportion of actively managed listed equity portfolios where E, S and G factors are systematically researched as part of your investment analysis.

ESG issues

Proportion impacted by analysis
Environmental

Environmental

Social

Social

Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]

GlM implements ESG momentum (the 12-month change in the MSCI ESG scores weighted using the Sustainability Accounting Standards Board Materiality Map) in all quantitatively-based equity strategies. These equity strategies account for over 60% of GIM's total equity products.


LEI 09. Processes to ensure integration is based on robust analysis

09.1. Indicate which processes your organisation uses to ensure ESG integration is based on robust analysis.

09.3. Indicate how frequently third party ESG ratings that inform your ESG integration strategy are updated.

09.4. Indicate how frequently you review internal research that builds your ESG integration strategy.

09.5. Describe how ESG information is held and used by your portfolio managers.

09.6. Additional information. [Optional]


LEI 10. Aspects of analysis ESG information is integrated into (Private)


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