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The international business of Federated Hermes (formerly Hermes Investment Management)

PRI reporting framework 2020

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Promoting responsible investment

SG 09. Collaborative organisations / initiatives

09.1. Select the collaborative organisation and/or initiatives of which your organisation is a member or in which it participated during the reporting year, and the role you played.

Select all that apply

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

As founding signatories to the PRI and chair of the committee which developed and launched the Principles, we have been consistently actively involved in many of the organisation's initiatives and members of various working groups and committees. Currently this includes:

  • Credit Ratings Advisory Committee (co-chair)
  • Labour Standards in Agricultural Supply Chain Advisory Committee
  • Palm Oil Advisory Committee
  • Water Risk in the Agricultural Supply Chain Advisory Committee
  • Plastic Investor Working Group
  • Academic Network Advisory Committee
  • Global Policy Reference Group

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

Federated Hermes has been an active member since 2002 and continues to contribute to policy work and engagement. For example, we recently contributed to an article about corporate governance in light of the Covid-19 outbreak.

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

We have  an active working relationship with ACSI whereby we share engagement information and discuss our respective approaches to engagement to assist our continuous improvement.

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

We regularly participate in CDP events as speakers and also frequently join working groups on specific climate, forestry and water-related topics.

We undertake and log specific engagements with companies on their CDP Climate Change disclosure, and track their progress against objectives relating to CDP Climate Change data.

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

We undertake and log specific engagements with companies on their CDP Forest disclosure, and track their progress against objectives relating to CDP Forest data.

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

We undertake and log specific engagements with companies on their CDP Water disclosure, and track their progress against objectives relating to CDP Water data

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

Our Chief Executive was an inaugural member of the CFA Institute’s Future of Finance Advisory Council from 2013 to 2019.

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

EOS play a very active role in Climate Action 100+ and lead or co-lead on engagement with 27 companies, including BP, Centrica, Rolls Royce and AngloAmerican.

More detail is available in our 2019 TCFD report.

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

We were one of the first non-US investors to join the group. Hans-Christoph Hirt, Head of EOS, is an active member of the CII Corporate Governance Advisory Council, and EOS participates in a number of its members’ activities, in particular collaborative engagement.

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

We have been an active member of Eumedion since 2005 and was its first non-domestic member. We are active participants in its investment committee meetings, providing input into its engagement programme and projects. We are members of the Eumedion Investment Committee.

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

We are not a member, but actively supporting EITI.

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

We are members of and have weekly calls with GIGN.

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

We are members and have attended events and engaged with GIIN.

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

We submit all our eligible directly managed funds to the survey and strongly encourage our JV fund to respond.

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

Federated Hermes joined the IIGCC in 2006 and is an active member of several working groups, including Policy, Property, Sustainable Finance and Paris-Aligned Investment Initiative, Listed Equities and Fixed Income. We have been involved in a range of collaborative engagement and advocacy initiatives through the IIGCC.

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

We have been involved in a number of collaborative advocacy and engagement initiatives through ICCR. We are also involved in the Investor Alliance for Human Rights, an ICCR initiative, and are a project lead in developing an investor toolkit.

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

A member of our Responsibility Office is on the ICGN’s Shareholder Responsibilities committee.

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

Our Chief Executive is on the Council.

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

We are active members of CERES, in particular in Climate Action 100+ corporate engagement.

          UKSIF, Eurosif, FIR, JapanSIF, Dansif
        

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

One of our investment staff is on the Board of UKSIF.

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

Our Chief Executive is a member of the Global Steering Committee (2019-21). We are also actively engaged in a number of UNEP FI initiatives.

Your organisation’s role in the initiative during the reporting period (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

We are at Participant level of the UN Global Compact and have completed an annual Communication on Progress since 2018.

          The 300 Club
        

Your organisation’s role in the initiative during the reporting year (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

Founded and initially chaired by our CEO, the 300 Club is a group of leading investment professionals who have joined together to respond to an urgent need to raise uncomfortable and fundamental questions about the very foundations of the investment industry and investing. The mission of the 300 Club is to raise awareness about the potential impact of current market thinking and behaviours, and to call for immediate action.

          British Property Federation and Better Building Partnership
        

Your organisation’s role in the initiative during the reporting year (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

Chris Taylor, CEO of our Real Estate business was previously President of BPF and sits on the Policy Committee. Our Director of Real Estate Risk & RPM Implementation sits on the BPF sustainability committee and is a member of the BPP Board, of which we were a founding member.

          Sustainability Accounting Standards Board (SASB)
        

Your organisation’s role in the initiative during the reporting year (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

We joined the SASB Alliance in 2019. We are members of the SASB European Working Group.

          Workforce Disclosure Initiative
        

Your organisation’s role in the initiative during the reporting year (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative. [Optional]

We are involved in collaborative engagement and are on the WDI Advisory Group


SG 09.2. Assets managed by PRI signatories (Not Applicable)


SG 10. Promoting RI independently

10.1. Indicate if your organisation promotes responsible investment, independently of collaborative initiatives.

10.2. Indicate the actions your organisation has taken to promote responsible investment independently of collaborative initiatives. Provide a description of your role in contributing to the objectives of the selected action and the typical frequency of your participation/contribution.

Description

          Including but not limited to – 

Contribution to executive education and undergraduate programmes and lectures on responsible investment at the University of Oxford (UK), the University of York (UK), Maastricht University (NL), and the University of Munster (GER).

Internal sector workshops with the investment teams organised by EOS to identify the financially most material ESG issues per sector.

Internal deep dive sessions on climate change sessions for each investment team organised by the Responsibility Office.

Internal sessions for the investment teams organised by the Responsibility Office and EOS on best practice engagement techniques. Our investment teams have access to in-house seminars on ESG risks and opportunities in the context of sectors, themes or country, which take place on a regular basis to provide an educational forum on the key risks or opportunities. Recent seminars included renewable energy trends, effective engagement and physical climate risk.
        

Frequency of contribution

Description

          We provided support for the Future of the Corporation research project, as well as for the Focusing Capital on the Long Term (FCLT Global) initiative and the UNEP FI. We have also provided financial support to Transparency Taskforce and are active members of SASB (in their Investor Advisory Group and the European Working Group) and the Future Fit Initiative. 

We have also cofunded the British Standards Institute programme of work on Sustainable Finance Standardization through developing Publicly Available Standards (PAS).
        

Frequency of contribution

Description

          Our SDG Engagement Fund is collaborating closely with two academics over a period of three years.

The Responsibility Office is also involved in academic research projects (together with the University of Dublin, the University of Goettingen and the University of Maastricht) and co-authoring papers on RI and ESG investing, as well as macro-related sustainability topics.
        

Frequency of contribution

Description

          We did this through our advocacy work, including engagement around EU Sustainable Finance legislation and audit/accounting standards. We chair the Disclosures Working Group of the FCA-PRA Climate Financial Risk Forum which will be publishing guidance for the industry in 2020.

We also did this through the publication of thought pieces and blogs and attendance at industry events
        

Frequency of contribution

Description

          We have spoken extensively at numerous events and conferences worldwide promoting responsible investment and sharing best practice. In 2019 we held an event entitled ‘What more can investors do to tackle climate change’ as part of London Climate Action Week.
        

Frequency of contribution

Description

          Publication of two research pieces examining the relationship between ESG scores and sovereign CDS spreads:

https://www.hermes-investment.com/uki/wp-content/uploads/2019/07/bd03720-credit-research-paper-pricing-esg-in-sovereign-credit-q3-2019.pdf

https://www.hermes-investment.com/ukw/insight/fixed-income/pricing-esg-risk-in-sovereign-credit-an-emerging-divergence/
        

Frequency of contribution

Description

          Through attendance at various events and discussion of the PRI
        

Frequency of contribution

Description

          Response to consultations by organisations including the PRI, Investment Association, GRI, CII and ACCA.
        

Frequency of contribution

Description

          We publish thought pieces on responsible investing on our website and in the media frequently throughout the year
        

Frequency of contribution

Description

          We were a founding signatory in 2006 and currently sit on the following committees:
-	Credit Ratings Advisory Committee (co-chair)
-	Labour Standards in Agricultural Supply Chain Advisory Committee
-	Palm Oil Advisory Committee
-	Water Risk in the Agricultural Supply Chain Advisory Committee 
-	Plastic Investor Working Group
-	Academic Network Advisory Committee
-	Global Policy Reference Group
        

Frequency of contribution

Description

          Please refer to SG 09.1 for examples. We are on the board of or officially advising a wide range of RI organisations.
        

Frequency of contribution

10.3. Describe any additional actions and initiatives that your organisation has taken part in during the reporting year to promote responsible investment [Optional]

We are part of a wide range of organisations and initiatives, through which we engage with others both within and beyond the investment industry to promote responsible investment. We have engaged extensively with policy makers and regulators to intervene to address environmental, social and other market failures that may prevent the financial system operating in the best holistic interests of its ultimate asset owners.

In addition to integrating ESG factors into our investment decisions and our engagement processes we undertake substantive advocacy work and thought leadership.

Thought leadership

We regularly release thought leadership papers on how and why the industry can and should move beyond a BAU approach to ESG integrated investment, sharing data and insights to help build capacity in industry debate. For example, we produced a paper setting out our view on how investment management can become a potent force in building a better world through active stewardship of the businesses it owns in our 2020 vision for Stewardship.

https://www.hermes-investment.com/ukw/insight/stewardship/stewardship-the-2020-vision/

Advocacy

We have an active advocacy programme that draws on expertise from across the firm – and with a full-time head of policy and advocacy leading this work. We aim to respond constructively to but also lead the debate on how the industry must (i) play a more active role in delivering a sustainable economy and (ii) do better by its end investors. We respond to consultations but also engage in activities in which we aim to lead a more progressive debate. Examples are:

  • We co-signed a letter to Prime Minister Teresa May asking for a 2050 net zero carbon target, which the UK has now adopted as a policy, with cross party support
  • In 2018 and 2019, we actively and positively engaged with the Financial Reporting Council, both bilaterally and in public meetings convened by various groups, including the Investment Association, PWC and Future of the Corporation, around the key tests we believe the updated Stewardship Code needed to pass. We were pleased with the ambitious Stewardship Code published by the FRC.
  • Through our membership of the Green Finance Institute, the Institutional Investors Group on Climate, UKSIF and in particular our chairing of the Disclosures Working Group of the PRA-FCA Climate Financial Risk Forum, we have pushed for policy makers to take on a more significant role in promoting sustainable wealth creating and ensuring that the targets and tools investment managers need to fully play their part in delivering the net-zero carbon transition are available.
  • We co-sponsored the development of the British Standards Institute’s Sustainable Finance Standardization Programme. The first set of guidelines - PAS 7340:2020 Framework for embedding the principles of sustainable finance in financial services organizations – was published in January 2020. A further, PAS 7341, Responsible and sustainable investment management – Specification, is nearing finalisation.

SG 11. Dialogue with public policy makers or standard setters

11.1. Indicate if your organisation - individually or in collaboration with others - conducted dialogue with public policy makers or regulators in support of responsible investment in the reporting year.

If yes

11.2. Select the methods you have used.

11.3. Where you have made written submissions (individually or collaboratively) to governments and regulatory authorities, indicate if these are publicly available.

11.4. Provide a brief description of the main topics your organisation has engaged with public policy-makers or regulators on.

We engage with and encourage regulators and policy makers globally to intervene to address environmental, social and other market failures that may prevent the financial system operating in the best holistic interests of its ultimate asset owners. We seek to go beyond minimum standards set by regulation to demonstrate and share best practice. Key topics of focus this year have been:

  • The reform of the UK Stewardship Code. We were pleased to see the ambitious reform of the UK Stewardship Code in line with our views which will create greater accountability of investors to clients and beneficiaries
  • The sustainable finance agenda, particularly in the UK and EU. We engaged with a range of parties including the European Commission and EU member states regarding elements of the EU Sustainable Finance legislation/ The European Commission continues to move forward with its ambitious action plan. We co-signed a letter to Prime Minister Teresa May asking for a 2050 net zero carbon target, which the UK has now adopted as a policy, with cross party support. We have been chairing the Disclosures Working Group of the FCA-PRA Climate Financial Risk Forum, which will publish industry guidance in 2020.
  • Audit and accounting reform. We engaged with extensively on this topic, including with the Competition and Markets Authority (CMA), BEIS and the independent Brydon and Kingman reviews on audit and accounting reform. A range of reforms have been proposed on audit and accounting including the replacement of the Financial Reporting council (FRC) with a new organisation Audit, Reporting & Governance Authority (ARGA), and we will continue to engage on the implementation of such reforms going forward.

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