SCPF uses custom ESG benchmarks for a significant part of its listed equity portfolio. ESG considerations specific to SCPF are integrated in the construction methodology of these benchmarks.
Furthermore, all SAMCo Equity portfolio managers have access to MSCI ESG data. This includes ESG Ratings, Controversy Scores, Climate Change Metrics and Research. The data is used as input for portfolio monitoring - with both internal & external portfolios in scope - and is considered as part of the risk/return analysis when making investment decisions. Practical implementation differs depending on the type of equity portfolio. For fundamental portfolios, this will entail a review and discussion of available data points and research reports, potentially combined with company engagement. For quantitative portfolios, the focus will be on data analyses. As an example, quant portfolio managers use SAMCo-developed rebalancing software to analyse the ESG positioning impact (loadings ‘before’ and ‘after’) of a potential trade.
In addition, Hermes EOS monitors the companies in which SCPF invests in order to ensure that they are taking appropriate steps to produce sustainable financial returns for shareholders. Hermes EOS also seeks to identify any situation where long-term shareholder value may be compromised due to unsatisfactory environmental, social and ethical performance or the risk of governance or strategic failure. Hermes EOS also takes account of the extent to which companies are demonstrating alignment with the general principles of the United Nations Global Compact. Where concerns are raised through the monitoring processes, or through another channel, Hermes EOS considers engagement with the company in question.
Finally, SCPF has an exclusion list that consists of companies involved in the manufacture, sale or distribution of cluster munitions and anti-personnel landmines as well as companies that are divested/excluded because of controversial conduct/UNGC non-compliance combined with unsuccessful engagement (or direct divestment in case of overtly unacceptable activities).