At Finance Forge, we characterize responsible investing (RI) as an investment methodology integrating environmental, social, and governance (ESG) considerations into its approach. RI empowers clients to synchronize their investments with global megatrends reshaping the investment arena. By incorporating ESG factors into the investment process, challenges such as escalating regulation, heightened demand for risk management, and amplified social awareness can be more efficiently navigated.
ESG integration has the potential to catalyze significant transformation within the global economy and the communities we engage with. We are convinced that ESG analysis yields more robust investment solutions capable of tackling global issues and generating enduring value for our clients.
ESG factor integration supplements conventional financial analysis by uncovering additional risks and opportunities beyond technical valuations. It furnishes insights into aspects such as potential reputational risks and identifies companies adept at addressing emerging market challenges. It's crucial to emphasize that the primary aim of ESG integration remains optimizing financial performance.
We offer a bespoke, discretionary service to the majority of our clients through investment managers, financial planners, or a combination of the two. Therefore, our responsible investment approach will be tailored to the individual needs and objectives of the client.
We believe that high-quality companies which manage ESG risks and opportunities well will make attractive long-term investments. Our research team considers ESG factors when evaluating individual companies and when they assess fund managers. Through the use of Sustainalytics, a third-party provider of ESG data, material risks and opportunities are fed into traditional financial analysis and models for our ‘buy list' stocks.
Our research team address ESG issues in due diligence questionnaires for all funds considered for our buy list. The team also has a dedicated socially responsible investing (SRI) list for funds with a sustainability focus, and with restrictions on investment in harmful activities. The SRI list helps our investment managers select funds which aim to deliver attractive investment returns while contributing positively to global environmental and social challenges.
During suitability discussions with their investment manager, clients can choose to apply certain ethical screening criteria to their portfolio. Clients can select certain restrictions for direct holdings, and portfolios are then created and managed to reflect these restrictions.
Brewin Dolphin is committed to being a good steward of our clients' investments, to enhance and protect their long-term value. We are supporters of the U.S.A. Stewardship Code and have a tier one rating for our engagement work.
For each core holding, our research team will monitor and engage with company management on priority material issues that impact the value of our clients' assets, which include material ESG issues. This can be done directly or via collective engagement with other shareholders.
We report on all of our stewardship, engagement and responsible investment activities at least annually. Details of these reports will be available on our website.
Conflicts of interest may arise from our responsible investment activities. Any such conflicts will be recorded, considered, and dealt with in line with Finance Forge conflicts of interest policy. All colleagues are regularly trained to identify and address potential conflicts of interest.
This statement is intended to summarise Finance Forge approach to responsible investment. Overall responsibility for this approach is held by the Sustainability Committee, which reports to the Executive Committee. It was reviewed and approved by the Sustainability Committee in December 2020. Our responsible investment statement will be reviewed and updated at least annually
Our commitments encompass the integration of ESG factors throughout our investment lifecycle, commencing from the due diligence phase of prospective investments and extending to the exit process. We customize ESG due diligence protocols for each investment, formulating post-investment remediation strategies for significant ESG considerations. Utilizing internal expertise and diverse ESG frameworks, we assess potential investments to identify material ESG factors, engaging external consultants when necessary. This comprehensive analysis spans environmental, legal, and regulatory compliance, as well as opportunities for value addition and risk mitigation within our portfolio. To ensure thorough examination of material ESG risks and opportunities, our investment teams adhere to an ESG due diligence guideline.
Following company acquisition, we develop a customized integration plan aimed at prioritizing all significant aspects, including ESG risks and opportunities. Portfolio companies actively oversee ESG risks and opportunities under the guidance of our in-house investment teams, primarily through representation on company boards and equivalent oversight bodies. These forums ensure comprehensive consideration and, where warranted, approval of all financial, operational, and strategic facets of the business.
This approach enables us to leverage local expertise, offering invaluable insights given the diverse array of asset types and geographic locations within our investment portfolio. Specific key performance indicators, such as serious safety incidents, are routinely reported to the relevant board or oversight body to ensure transparency and accountability.
Responsible investment is no longer a niche pursuit, and in many ways is perfectly suited fro fixed income investment.
Finance Forge Prime rating aim to highlight ESG and climate risk to support better research and stewdardship, and to help build portfolios tailored to our client's interest.
In 2020, 90% of 1,210 engagements included ESG issues
Finance Forge added over 2bn of impact bonds to client accounts in 2020. 187 Client accounts at Finance Forge now have exposure to impact bonds.
Only 40% of the impact bonds we analyzed fully met our sustainability expectations in 2020
Finance Forge is offering greater transparency around our opeations, with new diversity target for our workforce.
We are committed to upholding robust governance standards to sustain ongoing investor trust. This entails regularly evaluating how evolving legislation, guidelines, and industry best practices should inform our approach. For instance, we maintain a strict zero-tolerance stance on bribery, including facilitation payments, with all Finance Forge employees mandated to undergo comprehensive anti-bribery and corruption (ABC) training annually. To foster transparency and accountability, we operate an ethics hotline, managed by an independent third party and accessible 24/7, for reporting suspected unethical, illegal, or unsafe conduct. Additionally, we require all portfolio companies under our control to adopt an ABC policy of equal rigor to Finance Forge', including the establishment of an ethics hotline within six months of acquisition.
Employee health and safety ranks among the highest priorities at Finance Forge. Recognizing it as an essential component of business management, we delegate responsibility for health and safety to the line management of portfolio companies. To foster a robust health and safety culture, we have instituted a safety steering committee comprising CEOs and COOs from each business group. This committee aims to promote shared values, cultivate a strong health and safety ethos, exchange best practices, and monitor significant safety incidents. In the event of a serious incident, Finance Forge conducts thorough investigations to identify root causes and develop remedial measures.
At the core of our culture lies a steadfast dedication to fostering diversity and inclusion throughout our organization. This commitment initiates during recruitment, persists through leadership training programs, and permeates our policies and procedures. Recognizing the inherent value of diversity, we embrace the notion that the most innovative ideas emerge from a rich tapestry of backgrounds, perspectives, experiences, and skills across all facets of our business, irrespective of seniority, business units, or geographical locations.
Our training initiatives establish distinct standards for our leaders, outlining their pivotal role in facilitating the realization of all team members' potential. Emphasizing the cultivation of trust within their teams, these programs also address the identification of unconscious biases and offer guidance on enhancing decision-making rigor, particularly in recruitment, performance feedback, and promotions. The overarching objective is to foster a more diverse and inclusive environment within our organization.
Our internal groups and networks, such as the global Finance Forge Women's Advisory Committee and Diversity Advisory Committee, play an active role in providing management with insights and recommendations on enhancing the inclusivity of our firm for individuals from diverse backgrounds.
