Jupiter approach document SUSTAINABILITY Sustainability Investment Policy - September 2017 WWW.JUPITERAM.COM On the planet to perform
Introduction to sustainable investment at Jupiter: Jupiter was founded in 1985 with the aim of delivering strong performance for investors over the medium to long term through active fund management. We launched one of the UK s first green unit trusts in 1988, and since then we have been at the forefront of sustainable investing. We have developed a deep knowledge of environmental and social issues. This helps us, we believe, to add value for investors across our investments. Our responsibility to clients: Our primary responsibility is to our clients who entrust their savings to our management. We aim to make a positive contribution to society as managers of other people s money. We seek to do so by aiming to increase the value of our clients savings, and the way we serve clients. 2. The importance of sustainable investment returns The ability of companies to manage social and environmental issues underpins the long term strength of their business models, and can be key determinants of returns. We consider how companies respond to changing environmental and social conditions and the demands of their employees, customers, communities and the other stakeholders who are the key drivers of their long term financial success. Social and environmental trends may take decades to become meaningful, but we aim to identify trends that are already having, or likely to have within our investment horizon, a material investment impact. We then analyse how companies are responding to them, both in terms of products and services they provide and their own operations. 3. An integrated collaborative approach. Our approach is that sustainability specialists and the investment teams conduct sustainability research in collaboration. Financially material environmental and social factors are analysed by the Environmental and Sustainable Strategy team, with extensive input from the investment teams who they sit amidst. Sustainability specialists have extensive knowledge of environmental and social issues. The investment teams have a much greater knowledge of the specific companies they invest in. External sources of information include management meetings, broker research, the media and external environmental, social and governance research provider Sustainalytics. Sustainability Specialists Broker Research, Sustainalytics, Media Company meetings and reporting Investment Teams Our sustainable investment philosophy: 1. Our sustainable investment approach is focused on trying to improve our investment outcomes We believe that our sustainable investment research can improve investment returns by carefully assessing companies abilities to manage social and environmental issues, and how this may affect financial results We do not view environmental and social 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. We feed this analysis into the variety of investment approaches employed across Jupiter. Specific company research is then provided to the investment teams and discussed with them at dedicated meetings at regular intervals. At Jupiter each investment team has their own investment process, so it is up to them to decide how to feed this research into their in-depth companylevel analysis. For research with relevance across Jupiter s investment teams, this is also distributed by means of presentation to the investment floor. This ensures a systematic approach to integration into the investment research process. Sustainability investment analysis: September 2017 1 Jupiter Asset Management Limited
Long term environmental and social factors we consider in this research Environment Communities Customers Local pollution impact Greenhouse Gas Emissions Changing product efficiency expectations Energy and water use Concentration of economic growth in infrastructure intensive industrialising economies Changing resource constraints Volatile weather patterns Growing concentration of energy and water use in supply chains Overall social licence to operate from local community Local operating practices and community relationships Where they are, who they are, what they buy and how they buy Growth drivers Competitive advantage of products and services How products and services are evolving to meet changing customer needs Brand perception Demographic trends including aging population and growth in emerging markets middle class Technological change Suppliers Regulation Employess Globalisation and greater supply chain length and complexity Reliance on key suppliers Sharing of intellectual property Continuity and Reputational risk, with companies more responsible for supply chain Shift in resource production to less stable economies Opportunities and risk offered by increased regulation Public sector spending constraints Political risk Reputational and financial risks of tax planning strategies Cost, relationships, safety record, health risks Growth in working age populations has peaked globally International migration Sustainability investment analysis: September 2017 2 Jupiter Asset Management Limited
How we apply these factors to different industry sectors: Each industry and company faces different challenges and opportunities and this framework is tailored accordingly, with a focus on what we view as the most financially material factors for each sector. We use our own list, with input from the materiality matrix developed by the Sustainability Accounting Standards Board (SASB). For example, for extractives companies the areas of focus for analysis are: local pollution impacts, employee health and safety, local community relations and the potential impact on demand of environmental and social trends. For companies where our analysis cannot detect any financially material environmental and social issues, we will say this rather than comment, for example, on levels of disclosure on non-material issues. Integration into financial estimates When determining which financial figures are impacted by environmental and social issues, this varies considerably across profit and loss, cash flow and balance sheet statements. The impact on revenue, capital expenditure and gross margins are the most frequent figures which are quantified. Some environmental and social factors are subjective. Many of the factors that are important are not directly quantifiable, and may be better suited to discussions with management than objective analysis. This is why our sustainability investment analysis is closely linked to our Stewardship approach. Approaches we do not use We avoid providing an overall combined ESG score for the companies we invest in, as we think this is too simplistic and does not add value to the investment process. How this links with our Stewardship approach At Jupiter, we aim to act in the best interests of all our stakeholders by engaging with the companies that we invest in. As appropriate, Jupiter will aim to engage and vote on issues affecting the long-term value of a company in which it is invested. As part of this, we also ask companies to present us with their plans for maintaining social and environmental sustainability within their business. Jupiter has a formal Stewardship Committee. The aim of the Committee is to develop and deliver a co-ordinated approach to engagement with chairmen, directors and independent non-executive directors for Jupiter s fund management department, and through this process, to enable fund managers to gain investment insight, inform decision making and influence investee companies where relevant, on behalf of our clients. The Committee is chaired by the Chief Investment Officer and comprises fund managers and members of the Governance Research and Environmental and Sustainability Teams. Example of how this works in practice Emerging markets environmental and social review: This company-level review of all the holdings within one of Jupiter s Emerging Market strategies highlighted the following company issues: A large natural resources company with a history of extensive local pollution issues: The review quantified that the scale of planned spending on specific environmental projects as proportion of stay-inbusiness/commercial spending over that period, but was wellplanned and manageable even with no government support. The risk of one-off environmental incidents leading the government to levy fines is very small, given the company s importance to local employment and tax revenues. A large Asia internet company with a substantial revenue from online computer games: The review analysed the social risk from highly addictive computer games. The review also considered the associated growing regulatory risk: thousands of complaints have been filed in after parents caught their children stealing money for in game purchases. In its core home market, being addicted to gaming is considered a clinical disorder, and to local regulators the gaming industry is seen as a serious problem which is likely to experience growing enforcement of usage and age restrictions. Sustainability investment analysis: September 2017 3 Jupiter Asset Management Limited
Oversight of sustainability investment research: Sustainability Review Committee Our Sustainability Review Committee, also chaired by the Chief Investment Officer, comprises fund managers, members of the Governance Research and Environmental and Sustainability teams and an external consultant. This Committee meets quarterly, reviews Jupiter s engagement activity with companies on social and environmental issues and monitors what we view as key risks and opportunities across Jupiter s funds. Common membership of both committees by governance and sustainability analysts ensures co-ordination and consistency across our stewardship and sustainability work. Other sustainable investment activities Investor initiatives: We also participate in ongoing initiatives such as United Nations Principles for Responsible Investment (UN PRI). We have been signatories since 2008 and we continue to work on our obligation as a signatory to embed PRI s six investment principles into our investment approach: This document is for informational purposes only and is not investment advice. Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested. We recommend you discuss any investment decisions with a financial adviser, particularly if you are unsure whether an investment is suitable. Jupiter is unable to provide investment advice. The views expressed are those of the author at the time of preparation and may be subject to change. This is particularly true during periods of rapidly changing market circumstances. Every effort is made to ensure the accuracy of any information provided but no assurances or warranties are given. Jupiter Asset Management Limited is authorised and regulated by the Financial Conduct Authority and its registered address is The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ. No part of this commentary may be reproduced in any manner without the prior permission of Jupiter Asset Management Limited. incorporation of ESG issues into investment analysis; active ownership; seeking the appropriate disclosure on ESG issues by investee companies; promotion of implementation of the principles within the investment industry; working together to implement the principles and reporting on activities and progress towards implementing the principles. The result of this assessment can be seen on request. We also support ongoing investor initiatives such as the CDP. We also support one-off initiatives such as the 2014 Global Investor Statement on Climate Change and 2015 Paris Paris Pledge for Action as we believe that they support long term sustainable growth and are in the interest of our investors given our sustainable investment approach. Collaborative engagements: We seek to take part in collaborative engagements with other investors, given the greater collective influence that we gain when working with other asset managers and asset owners. Sustainability investment analysis: September 2017 3 Jupiter Asset Management Limited
For further information: Visit www.jupiteram.com for more information on Jupiter s corporate governance and engagement activities. Sustainability Investment Analyst Mark Evans Email: mark.evans@jupiteram.com Jupiter Asset Management Limited, The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ. While every effort has been made to ensure that information is correct, we are unable to give any guarantee or warranty as to its accuracy. Jupiter Asset Management Limited is registered in England and Wales no 2036243. It is authorised and regulated by the Financial Conduct Authority whose address is 25 The North Colonnade, Canary Wharf, London E14 5HS and it is a subsidiary of Jupiter Investment Management Group Limited. For your security we may record or randomly monitor all telephone calls. Editorial opinions expressed in this publication are not necessarily those of Jupiter Asset Management Limited and should not be interpreted as investment advice. 10561-09.17