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

PRI reporting framework 2020

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(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]

Our investments in our Impact Opportunities fund are aligned with nine investible themes that are aligned with the 169 targets underlying the 17 SDGs, from resource efficiency, financial inclusion and education to impact-enabling innovations. Our impact themes are the result of careful, continuous research into the global sustainability challenges we face and the unmet needs these create. We believe that these unmet needs provide tremendous growth opportunities for companies able to provide disruptive solutions through innovative and cost-effective products and services. The themes are regularly discussed within the team, but also take output from EOS, as well as experts on sustainability from our Real Estate, Infrastructure and Private Equity teams. These are supplemented by a wide network of relationships with external organizations focused on impact and research providers. We have therefore developed our own impact themes to address these unmet needs; Water, Food Security, Health & Wellbeing, Education, Financial Inclusion, Future Mobility, Impact Enablers, Energy Transition and Circular Economy. 

The Hermes SDG Engagement Equity Strategy aims to generate attractive investment returns and positive societal and environmental impacts through engagements with companies focused on the United Nations’ Sustainable Development Goals (SDGs). The SDGs are an ambitious, universal set of objectives agreed by UN member states. We believe that there are compelling opportunities to create such change and value among smaller companies whose operations and supply chains provide rich potential for improvement and the direct access to management required for successful engagement. To achieve this, Federated Hermes combines the proven stock-selection and engagement skills within its equity and stewardship teams. The investment opportunity that the strategy addresses is that engagement will enable positive change , and will encourage investee stocks to create more resilient businesses, as well as tackling pressing social or environmental needs. These companies should then begin to increase market share in their industries, improve business ecosystems, and strengthen market practices. This positive change should over the medium to long-term be reflected in the price of each company’s stock and will ultimately improve the net overall contribution of the industry to supporting delivery of the SDGs. In summary, we believe engagement has the potential to unlock value for all stakeholders – investors, companies, employees, local communities and the planet – and therefore help deliver the ambitious SDGs.

The Low Carbon Strategy is a Global Equity Strategy that seeks to outperform the representative benchmark while avoiding companies that have material exposure to fossil-fuels or are highly carbon intensive, as well as companies that are engaged in unethical or unsustainable activities.