We do not adopt a one-size-fits-all approach to how ESG information is integrated into portfolio construction. Each investment team undertakes their own fundamental analysis and, where practical and material, uses the available ESG data in considering forecasts and valuations.
Our Global Emerging Markets team, to determine whether to invest in a certain stock and to assess any impact on discount rates, consider, elements such as shareholder structure, risk of abuse of minorities' rights, sustainability of the business model, carbon emissions, and exposure to workers' strikes and community protests. Information obtained from engagements with companies also contribute to the adjustments.
For our Global Equities team, our proprietary QESG scores are integral to their investment process. A range of investment factors, from traditional factors such as price/book multiples through to corporate governance behaviour, are included in their "Alpha Score", which is the forecasted return of the stock. Social, governance and environmental considerations are applied as part of the judgmental overlay applied in the investment process, with the exception of one of our sub-funds, which applies all three ESG considerations on a discretionary basis, but does not systemically incorporate social scores for US stocks on an ex ante basis.