ESG integration

We integrate analysis of environmental, social and corporate governance (ESG) factors into our investment and risk-management processes firmwide — with the aim of better assessing risks and opportunities in client portfolios.

OUR APPROACH AND PHILOSOPHY

We approach ESG integration as a tailored process that can be applied to all asset classes. Wellington Management’s culture is built to support collaboration and our open-architecture “community of investors” naturally lends itself to the integration of ESG considerations. Our ESG Research team helps our portfolio managers and analysts gather deeper intelligence on ESG topics and integrate these considerations into the investment process. The team also engages with company management on ESG topics and executes proxy voting for over 5,000 company meetings annually.

We partner with a wide variety of clients, from corporate and public pensions to endowments and foundations, to solve investment problems. We believe our ability to integrate ESG issues into our investment process contributes to our mission to exceed the investment objectives and service expectations of our clients. Read more about Wellington’s ESG philosophy.

COMPANY ENGAGEMENT AND PROXY VOTING ARE KEY TO OUR PROCESS

The goal of our stewardship activities — engaging with company managements and voting proxies on our clients’ behalf — is to support decisions that we believe will maximise the long-term value of securities we hold in client portfolios.

We engage directly with company managements to identify and understand ESG risks. Read more about Wellington’s Engagement PolicyWe also vote proxies in a manner that we believe should maximise the economic value of our clients’ holdings. Importantly, we evaluate each proposal on its merits and vote according to our own Global Proxy Voting Guidelines, which set forth general guidance. We do not automatically vote proxies either with management or in accordance with the recommendations of third-party proxy providers. Learn more about our Global Proxy Policy and Procedures.

Swords Brendan

We see it as our fiduciary duty to take into consideration issues that may impact the immediate or long-term financial performance of our clients’ portfolios.

Brendan Swords, CFA, Chief Executive Officer

COLLABORATION WITH INDUSTRY INITIATIVES

We are signatories to the UN Principles for Responsible Investment (PRI), the PRI Statement on ESG in credit ratings, the Statement of Support for the Task Force for Climate-Related Financial Disclosures (TCFD), the Transition Pathway Initiative, as well as regional and global governance codes, including the Hong Kong Principles of Responsible Ownership, Investor Stewardship Group (US), the Japan Stewardship Code, and the UK Stewardship Code. In addition, we partner with other asset management firms and broader industry organizations to share insights on corporate governance trends and local market considerations. We are members of:

  • The International Corporate Governance Network
  • The Asian Corporate Governance Association
  • GRESB
  • The Global Impact Investing Network (GIIN)

We also engage with a number of other ESG-related initiatives such as:

  • The Investor Network on Climate Risk
  • The UN Global Compact (UNGC)

OUR PERSPECTIVES ON CLIMATE CHANGE

Wellington Management recognises that an international transition toward a lower-carbon economy is underway and believes this is important for our clients’ investments, and for the sustainability of financial markets, the global economy and our planet.

Climate change and related policy movements toward a low-carbon future may present an array of near- and long-term risks and opportunities. At its core, we view climate change as being about greater volatility and less-predictable outcomes. Read more about our perspectives on climate change.

STRATEGIC CLIMATE SCIENCE INITIATIVE

Wellington has entered into a collaborative initiative with the Woods Hole Research Center (WHRC) — the world’s leading independent climate research institute — to integrate climate science and asset management. Our new alliance will focus on creating quantitative models to help analyze and better understand how and where climate change may impact global capital markets. A broad range of projects are planned, including developing investor tools and innovative analytical methods seeking to improve climate risk assessment and investment outcomes. Read the full press release.

In emerging markets, companies pursuing high ESG standards really stand out. They are often working to change their business models for long-term sustainability, striving to treat employees better and incentivising them for high performance. Shareholder returns are typically a top priority for these companies, and they have the potential to be long-term outperformers.

Juanjuan Niska, CFA, Global Industry Analyst, Emerging Market Utilities

ESG FAQS

Q: What does ESG mean?

A: ESG stands for environmental, social and (corporate) governance and is used to describe a group of issues that can have a material impact on the long-term success of the company and, potentially, investment returns. Examples of ESG issues include energy consumption and greenhouse gas emissions, supply-chain risk management, gender diversity, employee productivity, independent board leadership and CEO compensation.

Q: Why integrate ESG issues into the investment process?

A: In certain instances, ESG issues can have a material impact on the investment thesis and, as such, should be factored into both investment decision making and engagement activities as appropriate.

Q: What is our ESG philosophy and approach?

A: Our portfolio management and ESG Research teams view ESG analysis and integration as both return enhancing and risk mitigating. Each of our portfolio managers and investment teams develops their own investment approach whereby ESG considerations are integrated into their research and decision-making processes to the extent that they believe these issues may affect the long-term success of a company and investment returns. This can manifest itself within the investment thesis or portfolio weighting for a particular security, as well as within our proxy voting and company engagement efforts.

As of 30 June 2021

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