Responsible Investing
As long-term investors, we know that the investment decisions we make today impact communities in the future.
At Trafield we place responsible investment at the heart of what we do. We are entrusted with our clients’ money, and we invest it with today and tomorrow in mind. Every investment team has the autonomy to develop their own approach to ESG issues, but the common thread is a focus on considering how investment decisions will impact clients, communities and the environment.
Our strategic approach to RI continues to focus on enhancing the quality and relevance of our investment capabilities, embedding a culture of stewardship across the organisation and engaging all of our employees in our RI work.
We Have Been Monitoring Issues Across Our Investment Universe
We have identified four focus areas that are important to our clients and we expect them to grow in importance as company disclosure and public discourse on these topics are driven by regulatory change and consumer demand. They are: climate change, modern slavery, diversity and biodiversity. In order to address these systemic issues, we have established and joined working groups with other institutional investors, as well as developed frameworks for research, analysis and company engagement.
We believe that when it comes to responsible investment, active management is much more than a simple box-ticking exercise. Every decision about where we allocate capital is a vote on a company’s fitness to be in business.
Keeping ahead of regulatory change, to complement our rigorous programme of individual company engagement we band together with like-minded institutions to set higher expectations for companies seeking the support of our investors’ capital.
Recognising that no company is perfect, we encourage management to examine their supply chains for modern slavery, consider diversity in their workplace, and scrutinise the impact of its operations on communities and ecosystems. We invest in companies willing to discuss and improve their practices as they are on a journey to becoming a better global citizen, just as we are.
We are seeing this same trend in client conversations occurring across the markets we operate in. With a greater emphasis on the social aspect of ESG comes a greater need for transparency from the investment management industry on how these issues are managed.
Our Approach to RI:
Our Focus Areas
At Trafield, we’re driven by our Responsible Investment principles. Our commitment to RI research and analysis on topics of importance to ourselves and our clients enables us to make more informed decisions that not only benefit our clients, but our environment and our society. To do this, we use a wide variety of tools and resources some of which are listed below.
As long-term investors, we know that the investment decisions we make today impact communities in the future. We review our RI strategy every three years to build on our approach to stewardship, and ensure we are proactively thinking about how to address emerging issues in our investment processes.
At firm level we are currently focused on the following four key issues: climate change, human rights and modern slavery, diversity and biodiversity.
Climate Change
In August 2021, United Nations(UN) Secretary-General António Guterres called climate change a "code red for humanity." Launching the UN's Intergovernmental Panel on Climate Change (IPCC) latest report, he warned the world that "the alarm bells are deafening, and the evidence is irrefutable".
Just a few months later, the world's leaders gathered in Glasgow for COP26, the biggest and possibly most important climate change conference to date. Nations took a range of decisions in the collective effort to limit global temperature rise to 1.5 degrees.
While there were no perfect outcomes, the UN said that "after six years of strenuous negotiations, pending items that prevented the full implementation of the Paris agreement on carbon markets and transparency have finally been approved."
Against this background, it's fair to say that 2021 was an important year for climate change action.
Human rights and modern slavery
Modern slavery is a distressing and pervasive part of global supply chains and one of the most pressing human rights issues that investors can take action on.
There are multiple factors that drive modern slavery and allow it to flourish, including economic dislocation, endemic poverty and ongoing conflict and displacement. The COVID-19 pandemic has exacerbated these conditions, increasing the vulnerability of workers to modern slavery across the globe.
Diversity
Diversity matters because people matter. Everyone deserves the opportunity to be included in a broad range of work, leisure and community activities regardless of their gender, race, sexuality or any other difference. It is the right thing to do.
Moreover, greater diversity leads to better outcomes for our staff, our clients and the community. Different ways of thinking and different life experiences create more varied teams who can make better decisions.
Within our own business, we believe that having an inclusive culture, where our people are comfortable and supported to be who they are, regardless of their background, is the foundation that enables diversity to thrive across our business.
We also recognize the challenges we face in achieving better and broader diversity in our business and wider industry. Although there is not one single solution to reaching this goal, we need to hold ourselves to account, just as we hold the companies we invest in to account on this subject.
Nature and Biodiversity
Nature and biodiversity cannot be considered in isolation from climate change. The impacts of climate change such as temperature rises, increases in extreme weather events and increasing carbon dioxide in the atmosphere are already having substantial impacts on nature. At the same time, biodiversity conservation is critical to addressing climate change, meaning that these issues are mutually dependent.
There are significant investment implications of nature loss. More than half of the world’s economic output – US$44tn of economic value generation – is moderately or highly dependent on nature.3 As the Task Force on Nature-related Financial Disclosures points out, “nature loss therefore represents significant risk to corporate and financial stability”.
According to the Convention on Biological Diversity, biodiversity is “the variability among living organisms from all sources”.
Nature is all the existing systems on earth - the features, forces and processes, such as the weather, the sea and mountains. As such, biodiversity is a crucial part of nature. Nature risk is related to the loss of natural assets. It may directly impact business’ or economies’ operations, or negatively affect society in a way that creates market risks.