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Global Evolution

PRI reporting framework 2020

You are in Strategy and Governance » Investment policy

Investment policy

SG 01. RI policy and coverage

New selection options have been added to this indicator. Please review your prefilled responses carefully.

01.1. Indicate if you have an investment policy that covers your responsible investment approach.

01.2. Indicate the components/types and coverage of your policy.

Select all that apply

Policy components/types

Coverage by AUM

          Valuation integration by artificial intelligence
        

01.3. Indicate if the investment policy covers any of the following

Other description (1) Valuation integration by artificial intelligence to enhance precision of investment scales

01.4. Describe your organisation’s investment principles and overall investment strategy, interpretation of fiduciary (or equivalent) duties,and how they consider ESG factors and real economy impact.

Impact Investing through sovereign debt

Global Evolution, in partnership with our investors, is committed to leaving a legacy of impact investing, which assists in the process of lifting nations out of poverty.

Financing the debt that provides macroeconomic sustainability and goes into promoting productivity, and raising infrastructure, such as electricity production, health, water, security, transport, and school systems, has a significant impact on reducing poverty levels.

At Global Evolution, we have conducted extensive research into the relationship between sovereign debt investing and Environmental, Social, and Governance (ESG) indicators. There is a clear correlation between the sovereign funding costs and ESG dynamics, with governance, unsurprisingly, the most prevalent. By not integrating ESG dynamics into investment decisions, investors sacrifice essential information.

Furthermore, through country visits, we conduct, among other things, extensive on-the-ground dialogue with policy makers discussing strategies to optimize their funding strategies to promote the swiftest and most sustainable economic development.

01.5. Provide a brief description of the key elements, any variations or exceptions to your investment policy that covers your responsible investment approach. [Optional]

The importance of ESG considerations

At Global Evolution we recognize the importance of Environmental, Social and Governance (ESG) considerations for investors and advisors globally and continue to help our investors achieve their individual ESG goals.

A strong, integrated, and active ESG approach has become a prerequisite for investment managers to operate in today’s market, but certainly also an important selection criteria for many institutional investors.

Through our significant quantitative research effort, we have found that there is a strong business case for considering ESG dynamics as part of the investment process. ESG dynamics are highly correlated with returns – consequently bridging ESG with returns!

Global Evolution is an active signatory of UN Principles for Responsible Investment and UN Global Compact and continuously publishes research on the relevant subjects of ESG dynamics and investment process integration.

Global Evolution is also on the board of directors of the UNPRI Advisory Committee on Credit Ratings (ACCR) which actively takes ESG factors into account.

 

Global Evolution ESG Integration

Global Evolution has a strategic commitment to impact investment and ESG sustainability as an integrated part of our approach to investment. In terms of our ESG integration approach, we have incorporated ESG dynamics across our investment process through various proprietary quantitative econometric models.

For the full universe of emerging and frontier market countries, we construct proprietary ESG ratings, ESG-adjusted credit ratings, as well as statistical valuation signals for sovereign credit spreads and currencies based on ESG dynamics.

In all modesty, we consider ourselves as being at the forefront of ESG sovereign research and ESG sovereign investment integration. We continue to play an active role in the public domain through our ESG research agenda and our close collaboration with the World Bank, the UN, and other relevant stakeholders.

ESG Ratings

Global Evolution maintains proprietary ESG ratings for all emerging and frontier market countries across a set of more than 100 E, S and G indicators. Our ESG ratings are calculated in our ESG-simulator which is integrated into our proprietary IT systems and contributes valuable information to the investment process.

The ESG Ratings are optimized through simulations of the several variables and weightings and only includes indicators with substantial influence on the sustainable economic and socio-economic development of countries. In that context, the ESG dynamics are linked to long-term sovereign investments through sustainable development.

The ESG Ratings serve to inform our investment process and as ongoing input to our quantitative valuation and rating models.

Negative Screening Model

As part of the sovereign monitoring we operate with a negative screening model that provides a negative watch list for countries due to reasons pertaining to unsustainable levels of governance developments.

Key indicators are used as benchmarks, such as: political rights, civil liberties, democracy, corruption, failed state indicators, and whether the international financial institutions are willing to engage with a government. Deteriorations in such indicators may lead to exclusion from the investable universe of countries.

We prefer to use the carrot rather than the stick approach to encourage a government to act in a manner which we believe will be beneficial for the majority of its population. However, in the most extreme circumstances of government malfunction, we would not favor a strategy of positive engagement.

Valuation and Rating Model

Valuation Model:
By integrating fundamental macroeconomic, financial and ESG factors into our valuation models, Global Evolution estimates signals for valuations of sovereign credit spreads and currencies. The models are based on panel regression econometrics across the relevant emerging and frontier markets universe and then compares the fundamental fair value of the sovereign credit spreads and currencies with actual market levels. The models simulates over/under/fair valuation signals as well as their statistical significance to inform the investment process as leading indicators for credit spread and currency change.

Rating Model:
The Rating Model estimates high-frequency credit ratings, and takes advantage of the dynamics of the fundamentals estimated in the Valuation Model, including macroeconomic, financial and ESG factors. Such high-frequency dynamics in fundamentals are applied to adjust the official and low-frequency credit ratings provided by e.g. S&P and Moody’s, and estimate ratings for non-rated countries. Such a proprietary methodology provides a monthly leading indicator for fundamentally deserved credit rating upgrades/downgrades that are not captured in the official credit ratings, and consequently provides the investment process with timely information on sovereign debt valuations.

 

01.6. Additional information [Optional].

          
        

SG 01 CC. Climate risk

01.6 CC. Indicate whether your organisation has identified transition and physical climate-related risks and opportunities and factored this into the investment strategies and products, within the organisation’s investment time horizon.

Describe the identified transition and physical climate-related risks and opportunities and how they have been factored into the investment strategies/products.

Climate risk such as co2 emission, droughts, natural disasters, etc. are identified through data monitoring and analysis, and through such data directly integrated into valuation model approaches as part of positive screening. That informs directly our investment strategies and process

01.7 CC. Indicate whether the organisation has assessed the likelihood and impact of these climate risks?

Describe the associated timescales linked to these risks and opportunities.

The tinescales vary across type of indicator for climetae risk; some take place gradually and slow (like co2 emission) while others take place quickly and almost witough warning (like natural disasters). Through our quantitative valuation approach the implicitly estimates the coefficients and likelihoods of evens appearing.

01.8 CC. Indicate whether the organisation publicly supports the TCFD?

01.9 CC. Indicate whether there is an organisation-wide strategy in place to identify and manage material climate-related risks and opportunities.

Describe

Our dual objectives of sustainability improvements and return generation for our clients are integrated under the umbrella of the following nine pillars:

Philosophy         Our philosophy and corporate values as a company rely on supporting progress towards sustainable growth and development in the countries in which we invest. In practice, this is accomplished by directly integrating sustainability into our investment decisions.

Vision                  Our vision is a world free of poverty driven by institutions, countries and companies.

Mission               Our mission is to promote sustainable development in emerging market countries and companies around the world through our investments

Approach           Our approach is to integrate sustainability indicators directly into our valuation assessments that directly and systematically inform investment decision-making

Framework        Our proprietary approach leans on a unified framework articulated by the United Nation with the formulation of the Sustainable Development Goals.

Engagement      Our engagement with governments and companies is conducted directly and indirectly and is an important avenue to influence decision-making at the issuer level to promote sustainable development. 

Support              Our support goes to a variety of initiatives and principles to promote such as the UN Principles of Responsible Investment, the UN Global Compact and similar initiatives with the purpose of standing by the thought-leadership that such initiatives represent.

Process               Our Sustainability Process lays out the technical details of this Sustainability Policy[1] by describing in detail the definitions and indicators among other relevant process-oriented items.

Pledge                 Our pledge to our clients, colleagues, community, society, and the world is to diligently and analytically and with passion to direct our assets under management in a direction that supports and promotes sustainable development to the best of our ability.

These nine pillars are the cornerstones of our Sustainability Policy for our company.

 

[Our Sustainability Process is available as a separate and supporting document to this Sustainability Policy]

1.10 CC. Indicate the documents and/or communications the organisation uses to publish TCFD disclosures.


SG 02. Publicly available RI policy or guidance documents

 

02.1. Indicate which of your investment policy documents (if any) are publicly available. Provide a URL and an attachment of the document.

URL/Attachment

URL/Attachment

URL/Attachment

URL/Attachment

URL/Attachment

URL/Attachment

Other, specify (1) description

          Valuation integration by artificial intelligence
        

URL/Attachment

02.2. Indicate if any of your investment policy components are publicly available. Provide URL and an attachment of the document.

URL/Attachment

URL/Attachment

URL/Attachment

URL/Attachment

Other description (1) Valuation integration by artificial intelligence to enhance precision of investment scales

URL/Attachment

File Attachment

02.3. Additional information [Optional].


SG 03. Conflicts of interest

03.1. Indicate if your organisation has a policy on managing potential conflicts of interest in the investment process.

03.2. Describe your policy on managing potential conflicts of interest in the investment process.

The policy is that various conflicts of interest are openly discussed and the CIO (and primary owner of the company) is the final decision maker resposible also to the Board.

03.3. Additional information. [Optional]


SG 04. Identifying incidents occurring within portfolios

04.1. Indicate if your organisation has a process for identifying and managing incidents that occur within investee entities.

04.2. Describe your process on managing incidents

this process is part of our ongoing investment management processes to monitor on a daily basis the developments in the countries in which we invest


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