ESG and STEWARDSHIP POLICY:
AR’s belief is that Environmental, Social and Governance (ESG) factors based on SASB materiality framework may affect investment performance over the long run and require appropriate consideration to protect the client’s investment. AR is of the view that behaving in a socially responsible manner should reduce potential liability and therefore be an additional factor that guides AR’s risk management and proxy voting standards.
1. An ESG Risk Management Framework based on SASB Guidelines
AR’s ESG framework is part of its risk management process. This framework is based on fundamental research using the SASB materiality matrix, to identify potential red flags. Red flags can be identified for companies operating within certain sectors and subsectors, by incorporating and effectively managing ESG principles and material factors for the companies in a specific sector and industry. AR’s framework is based on fundamental analysis of material factors of the SASB materiality matrix. Link to the materiality map: https://materiality.sasb.org/. Each AR Investment Team member, including the CIO and CEO, is accountable for executing AR’s ESG framework.
2. AR’s screening process
Exclude deep cyclicals. As a result of AR’s continued aversion to investing in deep-cyclical and commodity-based sectors (which is a core tenet of its investment approach), AR’s strategies (whether ESG denoted or not) may inherently carry relatively minimal exposure to companies involved with fossil fuels, carbon emissions, and greenhouse gases.
In addition, Criteria 3 of the investment process (Management’s Operational Track Record), may address Governance factors included in SASB materiality map for a specific company in an industry.
4. Ethical filter
Applied Research offers two ESG-based strategies with an additional ethical filter superimposed on the two strategies presented (ARI Global and ARI Global Opportunities). On top of the regular ESG research framework based on the SASB materiality matrix, both strategies incorporate a specialized ESG product filter that prohibits investments in companies that operate within (and obtain a significant percentage of sales from) a handful of pre-defined “unattractive” industry sub-groups such as: adult entertainment, gambling, tobacco, alcohol, and firearms.
5. ESG Stewardship and Engagement- Proxy Voting, and Vendor Engagement
- Proxy Voting. When shareholder proposals on the proxy include ESG, AR’s policy is to vote in favor of ESG proposals. AR’s belief is that these ESG factors may affect investment performance over the long run and require appropriate consideration to protect the client’s investment. AR is of the view that behaving in a socially responsible manner should reduce potential liability and therefore be an additional factor that guides AR’s risk management and proxy voting standards.
- AR aims to engage in its Community on material factors for assets managers according to SASB.
- AR aims to engage with vendors to promote Diversity and Inclusion in the Investment Management industry. This includes vendor diversity such as Minority Brokers for example and various organizations that promote diversity in the investment management industry.