Responsible investing

As responsible investors we prioritize our fiduciary duty to clients. We see ESG integration as prudent risk management. 

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Responsible by nature

At Sparinvest, our clear aim is to fulfil our fiduciary duty to clients as responsibly as possible. As prudent investors, we have always believed that non-financial considerations such as environmental, social and governance (ESG) issues can create or destroy long-term shareholder value in the companies in which we invest. For this reason, we signed UNPRI in 2009.

Our Responsible Investment Policy is:

  • Based on the United Nations Principles for Responsible Investment
  • Designed to add value
  • Applicable to all strategies
  • ESG integration in investment process
  • Active ownership, directed by fund managers
  • Clearly differentiated from Ethical Investment

Benefits for investors: 

  • The UN Principles for Responsible Investment are designed to be pragmatic and to focus the attention of the fund management industry on all potential risks to long-term capital investment beyond pure financial risks. Sparinvest has always had a financial and non-financial risk-focused approach to investing.

  • Designed to add value – we believe that unaddressed ESG factors can contribute to the risk of permanent loss of capital whereas improvement in a company’s ESG record can add overall value. It is the latter that we aim for through inclusion and active ownership.

  • Applicable to all strategies – because we believe in the positive effects of responsible investment, we have adopted a Responsible Investment Policy that covers all our strategies - including property.

  • ESG integration in investment process – Sparinvest has always considered ESG-related risks and opportunities before investing. Since signing UN PRI, this aspect of risk management has now been formalized and strengthened through additional research provision, giving our fund managers an even clearer picture of long-term sector-based trends and risks.

  • Active ownership, directed by fund managers – our fund managers are very closely involved in our active ownership approach, directing voting decisions and entering respectful dialogue with company managment. The intention is always to improve ESG performance to add investment value over time.

  • Clearly differentiated from Ethical Investment – Within the asset management industry, the terms ‘Responsible Investment’ and ‘Ethical Investment’ are often used interchangeably, leading to a degree of confusion. At Sparinvest, we are clear on the difference and offer Ethical investors a separate range of investment solutions based on the idea of screening for exclusion.

In 2012, Sparinvest was voted by the SRI industry one of the best users of ESG research information in asset management.

Responsible investment

Defined by the United Nations Principles
  • Emphasizes the asset manager’s first duty to the client is fiduciary. The primary objective of asset management is to generate positive returns;
  • Asks fund managers to integrate environmental, social and governance (ESG) risks factors into the investment analysis and decision-making process;
  • Promotes `active investment’ – including voting at shareholder meetings and entering into dialogue with companies – to address ESG concerns;
  • Does not require asset managers to avoid investment in companies with bad ESG records, but rather encourages them to engage with company management to express their concerns, raise awareness and work for improvement.

Ethical investment

Defined by client's wishes
  • Places the emphasis on the client’s ethical/moral concerns so that these become the dominant influence over portfolio construction;
  • Involves either positive screening to select investments on grounds of good behaviour or
  • Negative screening to deselect companies on grounds of bad behaviour;
  • Means exclusion of companies with bad ESG records rather than dialogue with them.

Ethical investment policy

Engagement and Exclusions

As an institutional investor, Sparinvest recognises that it can be well placed to influence corporate behaviour. Our active ownership programme aims to achieve this, using tools like voting on shareholdings, and engaging in dialogue with companies to encourage higher standards of corporate responsibility. Sometimes we take this dialogue alone, sometimes in partnership with other investors. 

All Sparinvest strategies exclude investments in: 

  • Banned weapons (anti-personnel mines, cluster munitions, biological weapons, chemical weapons, nuclear weapons outside the Nuclear Non-Proliferation Treaty)
  • Securities prohibited by EU Sanction

Ethical screening

Sparinvest makes its core strategies available with an additional ethical overlay, which excludes certain investments. Implementation of our exclusionary screening for ethical strategies is carried out in partnership with the external ESG specialists, ISS-Ethix.

The exclusionary criteria for these funds result from ongoing consultation with clients. At present, the standard ethical screening for Sparinvest portfolios consists of: 
  • A norm-based filter, screening for violations of global norms: environmental protection, human rights, labour standards, and anti-corruption;
  • A sector-based filter, screening for certain levels of corporate involvement in sectors such as: alcohol, tobacco, gambling, pornography, weapons, oil sands and thermal coal.

Within the ethically-screened funds, companies will be divested promptly for breaches of the sector screen, or for confirmed and unaddressed breaches of the normative framework. Norms-based analysis may also result in companies being given an ‘AMBER’ rating by ISS-Ethix. This may indicate an alleged but unconfirmed breach, a verified breach which the company is addressing, a potential breach which has not yet occurred, and other situations.

In such circumstances, the portfolio managers have the discretion – based on further qualitative analysis – to exclude/divest, or to invest/remain invested, but with engagement regarding the issue. We also make use of dialogue with companies through our engagement programme.

Ethical Mandates 

An ethical exclusion filter can be applied to any of Sparinvest’s strategies under the terms of a mandate or SIF. In such circumstances, the client can decide the exact scope of the exclusions required.