Environmental, social and governance

Our world is changing faster than ever. As environmental stresses and social pressures become more acute, the financial importance of effectively managing environmental and social change is rising. High standards of governance and corporate and social responsibility are important to us and we believe they are likely to lead to outperformance in the long term.

As active fund managers, identifying companies that will thrive against this backdrop will help us achieve better outcomes for our clients. This is why we are committed to the integration of environmental, social and governance (ESG) factors into our investment processes across geographies and asset classes.

Schroders has always been at the forefront of responsible investing, being amongst the first institutions to add dedicated ESG resources, in 1998. This team has now grown to 11 and has been further strengthened by the addition of a Head of Sustainable Research in 2016. Transparency is key in this area. As well as our quarterly and annual Responsible Investment reports, we regularly publish thematic research, all of which is available at www.schroders.com/esg.

Signatory and association member of UN PRI (logo)

Signatory and association member of UN PRI.

We have a long track record of managing exclusion mandates according to clients’ ethical criteria, with 9% of Group AUM (over £33 billion) dedicated to this area.

Our strengths are also reflected in the award of an A+ rating for our ESG strategy, the highest achievable, from the United Nations Principles for Responsible Investment (UN PRI*) for each of the last two years. We were also assessed by the Financial Reporting Council (FRC) as a top tier signatory for the UK Stewardship Code*, reflecting our commitment to being actively engaged owners.

In 2016, we engaged with more than 530 companies across the world on ESG issues on 761 occasions. This was a 54% increase in engagements from 2015 and covered topics such as climate change, human rights, bribery and corruption, board structure and remuneration. We also voted on resolutions at 5,168 company meetings.

Engagements with companies on ESG issues

Engagements with companies on ESG issues (bar chart)

† Governance engagements included from 2014 onwards.

Company resolutions voted on

Company resolutions voted on (bar chart)

Our commitment to responsible investing has also led to broader engagement with stakeholders. We have partnered with a number of non-governmental organisations, including the Carbon Disclosure Project (CDP) and Action on Sugar, across a wide range of topics including corporate disclosure, implementation of the living wage and nutrition.

Climate change risk

Climate change is a major investment risk, and one to which we are devoting increasing resources. Our work has four main strands: research on the investment implications, education for clients, engaging for improved corporate disclosure, and working with policy makers on the framework for a transition to a low carbon economy.

Over the past four years we have published thematic reports assessing the impact of climate change across a range of industries from aviation to shipping and coal. In 2016, we wrote about the ‘Climate Conundrum: How to assess climate risks in your portfolio’ and ran a series of seminars for clients in different geographies.

Climate change is a major engagement topic and we have been assertive in using our votes to promote change, working alongside the ‘Aiming for A’ investor coalition. We have also responded to calls for evidence on topics directly and indirectly related to climate change by the European Union and the Financial Stability Board.

Global engagement with companies on ESG issues in 2016

Global engagement with companies on ESG issues in 2016 (graphic)

* See glossary.