The new SRI portfolio managers at Henderson have inherited detailed investment mandates for all of Henderson’s SRI funds. This includes the positive growth themes, such as health care, education, and cleaner energy, a carefully selected and strict set of positive and negative screening criteria, as well as commitment to ESG voting and engagement practices.
EIRIS and ethical screens
As the provider of choice for most large UK retail funds, there is an exceptionally good match between EIRIS’ research and Henderson’s exclusion criteria. These include the usual suspects, such as alcohol, pornography and tobacco, but also stricter screens on issues such as intensive meat & poultry production, road building, and mining & quarrying, to mention a few. EIRIS research also encompasses a very broad range of positive investment themes including identification of solution providers (such as companies supplying specialist equipment for devices with health & safety or environmental application) to companies active in the community or with advanced codes of ethics, making EIRIS particularly well placed to support Henderson’s progressive investment approach. The results of all of EIRIS’ screens can be generated both on an exclusion basis and as a positive/negative score, or a combination of both.
EIRIS provides Henderson with bespoke sustainability tools
However EIRIS’ role at Henderson extends far beyond screening. EIRIS is working with all fund managers now managing the SRI funds as well as the Henderson governance team on how to use and integrate EIRIS data on many different levels.
EIRIS does not provide Henderson with a list of predefined exclusions or preferred stocks, but instead provides access to their data management tool, EIRIS Portfolio Manager (EPM). EPM contains data on over 3000 companies, assessed on over 300 individual indicators, including 80 core ESG risk criteria.
The research is undertaken by over 40 highly-skilled analysts with both sector and issue expertise. EPM users have the choice between assessments being 100% customised to their area of interests by applying tailor-made investment policies to a portfolio or universe, or to benefit from EIRIS’ experience and ‘viewpoints’ by making use of default ratings and rankings. Henderson is, for example, looking to integrate a combination of their own fund-specific screens with broader ESG assessments on Sustainability performance and compliance with the UN Global Compact.
EIRIS Sustainability Rating
The EIRIS Sustainability Rating, for example, can be used either to support a best-in-class/worst-in-class approach, as a risk assessment tool, or as a more general ‘sense check’ on actual, or intended, investments. The tool grades companies from A to E on their overall exposure, management response and performance on salient sustainability issues.
EIRIS Convention Watch and PRI toolkit
EIRIS’ Convention Watch tool looks at companies breaching the spirit of the UN Global Compact whereas the PRI Toolkit is designed to meet investor’s commitments to the UN Principles for Responsible Investment (UN PRI), in particular Principles 1-3 on integration, engagement and reporting. All default policies can be amended on client requests and they can also be run in parallel with customised screens. This combined approach will ensure Henderson has a solid ESG basis to help inform investment decisions.
EIRIS engagement support
Henderson also uses research and analysis from EIRIS in support of its’ engagement and other active ownership strategies. Engagement at Henderson always has been undertaken by fund managers with support from the in-house governance team and this remains unchanged - as does Henderson’s overall approach to engagement. EIRIS has a dedicated engagement service, and currently engages with around 120 companies globally on a variety of ESG issues on behalf of investors. Furthermore, all EIRIS data is presented with engagement in mind; highlighting not only where a company gets things right and wrong on ESG issues, but also what the company in question should do to be considered a best practice company in its sector. Henderson’s governance team has access to EPM, EIRIS’ analysts and consultants on the same basis as Henderson fund managers.
Next year marks EIRIS’ 30 year anniversary. As we look ahead into the future it’s clear that huge challenges associated with globalisation such as food and water security, climate change, and natural resource scarcity lay ahead. EIRIS will continue to offer those products and services which support investors – including Henderson – in their journey towards integrating material ESG issues across all their funds – not just SRI.