Jupiter’s ESG investment approach is fund manager led and this gives the fund managers the flexibility to integrate their ESG analysis into their investment approach. We believe that only through integration at a fund manager level can ESG issues truly be analysed and aid securities analysis through risk identification and mitigation as well as alpha generation. Our fund managers are supported by the Governance and Sustainability Team (‘GS Team’) who work with them on ESG engagement and proxy voting matters and provide input via a scheduled review process.

Our unconstrained, high conviction approach to active fund management is aligned with Jupiter’s approach and lends itself well to the incorporation and analysis of material ESG risk factors, incorporating direct engagement with issuers. Consideration of material ESG risks has always been a part of our process as credit analysts. The team’s approach has continued to evolve, just as the industry as a whole has evolved. This flexible investment strategy together with a broad investment mandate are, in our opinion, a significant driver of returns.

The fund managers and their team conduct thorough analysis on every company and government bond in which they invest. That means spending a lot of time conducting detailed research and meeting company management. This includes the identification and analysis of material ESG risk factors pertaining to a particular bond. The fixed income team integrate analysis of ESG considerations into their investment process, both when researching potential investment opportunities, considering portfolio construction and as part of an ongoing process of monitoring and engagement with investee companies.

As bond investors, we are ultimately looking to invest in issuers which are deleveraging and exhibit improved credit fundamentals. Our long experience of credit markets indicates to us that weak governance and material environmental and social risks can derail seemingly strong or improving credit stories, and in extreme situations can result in credit events such as default. Therefore, our ability to manage downside risk on behalf of clients depends on rigorous consideration of potential ESG risks alongside traditional financial analysis techniques. We do not view these factors in isolation but concentrate on trying to understand how these factors impact medium- and long-term investment performance and identify which, in our view, are relevant and material to investment decisions.

In selecting our external research providers we choose reputable organisations who can demonstrate a robust approach to research governance and validation. This forms one of the criteria on which we select providers and is reviewed when we review our subscriptions. Coverage forms another core pillar of provider selection and the team selected RepRisk, a specialist ESG data provider, on the basis of its strong coverage of both investment grade and high yield issuers, many of which are private companies.

To strengthen Jupiter’s capabilities, the CIO Office has invested in third-party ESG risk data and additional ESG personnel to help fund managers with their integration activities. The data is deployed in two ways: i) to augment day-to-day investee company monitoring, engagement and voting assessment at portfolio level and ii) CIO Office analysis of the ESG risk profile of our total assets under management, as further outlined below: 

i)             The data is used in conjunction with our existing research capabilities to enhance our understanding of companies, monitor for controversies, contribute to our engagement planning and develop the dialogue between fund managers and the GS team.

ii)            The data is utilised by the CIO Office with respect to management oversight. This involves analysis of our total assets under management to assess the overall ESG risk profile of our organisation. This process includes information relating to controversies and the environment, and specifically climate-related risks and opportunities. The CIO Office also uses this data to review individual portfolios and consult managers during the formal review process.

Our current ESG data providers are:

•            Sustainalytics - ESG rating (corporates) ESG rating, (sovereign), carbon risk rating, product involvement screening data (i.e. tobacco, coal). 

•            RepRisk - News aggregation service, monitors potential controversies and breaches of global business norms.

•            Bloomberg - ESG data and carbon footprinting tool.

•            CDP - Global GHG emissions and environmental impact database.

•            Transition Pathway Initiative - Assesses companies’ preparedness for the transition to a low carbon economy.

Effective stewardship means maximising internal resources. One of the developments from the period was strengthening our Data Science Team and for them to also take an active leadership role to enhance ESG monitoring capabilities. Our Data Science and GS Team have worked in partnership to create an internal ESG Hub which is an online platform that gathers ESG risk data from third party providers and therefore allows not only our investment teams to be able to access ESG risk data across their portfolios or other stocks (as part of ESG integration) in an efficient manner, it is simultaneously used as a management tool for the CIO office to oversee fund managers. The data science capabilities are important as a great level of expertise is required in order to cleanse the data and challenge our data providers. The initial aim for the internal ESG hub is for it to channel third party data, but the next development will be to tailor metrics and weights in accordance to fund management preferences.The long-term goal will aim to use machine learning to see if we can use modelling to predict future ESG performance.