At TwentyFour, environmental, social and governance (ESG) analysis is integral to our primary goal of delivering capital preservation and performance to our clients.
Our research and our experience as a specialist fixed income manager tells us ESG factors can have a measurable impact on asset values, and we believe their influence is only likely to grow in the future.
Our ESG methodology is embedded within our regular investment process across all strategies, and it is also the basis for our more targeted Sustainable funds. We believe this approach helps us target the maximum risk-adjusted returns for our clients while promoting better societal outcomes.
We don’t follow ESG benchmarks or labels. An active sense check is applied at every step of our process, which enables portfolio managers to independently scrutinise the data given by bond issuers and our external data provider.
Our ESG methodology is specifically tailored to the demands of fixed income, with an additional focus given to more nuanced factors such as Momentum (transition), Controversies and Engagement.
Our ESG scoring system is run through the same relative value software TwentyFour portfolio managers use every day – Observatory. This quickly highlights any area of concern which may require further investigation.
Every portfolio manager at TwentyFour is responsible for their own ESG analysis on every investment they make and this work is part of their performance appraisal, ensuring accountability in the application of our ESG process.
The data we use for our fundamental ESG analysis comes from a single external provider. In our view combining data from multiple providers is confusing for all concerned, while a single data source improves understanding.
The rapid growth in ESG’s popularity has been accompanied by confusion around the breadth of definitions and approaches deployed by asset managers. As a signatory to the UK Stewardship Code and the UN’s Principles for Responsible Investment, we are committed to educating investors about our process and giving transparency on our engagements with firms on ESG issues.
TwentyFour’s ESG Committee oversees all our ESG and Sustainable activities. The committee features members from all functions of the business, including several partners, and is chaired by members of our Executive Committee.
We believe it is self-evident that sustainability is a major contributor to long term investment returns.
As a fixed income portfolio manager, our first priority when we purchase bonds on behalf of our clients is that the issuer can continue to pay the coupons and return the principal at maturity.
Therefore, we only want to allocate capital to companies with sustainable business models. Any business making short term gains with unsustainable practices would present a significant risk to our clients’ capital and their long term investment objectives.
We see environmental, social and governance (ESG) considerations as a financial risk to our investments like any other.
Every strategy at TwentyFour is run to a uniform ESG standard, an approach known as ESG integration. This means ESG is embedded right into our regular investment process; our portfolio managers are responsible for performing a thorough ESG analysis on every investment they make.
For investors that wish to go further, we also offer a range of Sustainable funds which are designed to actively promote a range of sustainable objectives.
