International funds

Our investment approach

At St. James’s Place, we recognise that the best investment expertise is not confined to one single firm or manager. Therefore, we outsource the management of our funds, giving us the freedom to select from some of the best managers worldwide. In the case of the SJPI Global Equity fund, we have appointed Los Angeles Capital Management (‘LACM’), Man Numeric (‘Man’) and State Street Global Advisors (‘SSGA’) to manage the fund.

The SJP Investment Committee is responsible for the oversight of our investment policies, including our responsible investment policy. The Committee is supported by our in-house investment team.

Our external fund managers make independent investment decisions they believe will be in the best long-term interests of clients. We set various requirements via our segregated mandates and monitor their decisions. In addition, we conduct annual manager reviews, where we review their stewardship views and activities.

We expect all fund managers to consider the material environmental, social and governance (ESG) risks and opportunities within their investment decision-making and to engage with companies on those factors identified. We introduced a minimum standard in 2020, stating that all our fund managers must be signed up to the UN-supported Principles for Responsible Investment. This provides a baseline standard for their ESG process and requires managers to create annual reports on their approach that are independently assessed.

We consider a fund manager’s approach to responsible investing as part of our overall assessment of their performance. Our internal structure enables us to monitor a manager’s performance in this regard, and potentially act where required – including replacing them if needed.

SJPI Global Equity

The SJPI Global Equity fund cross invests into the SJP Global Equity unit trust fund. The management and oversight activity described throughout relates to the SJP unit trust of the same name.

The fund's investment objective is to achieve long-term capital appreciation by investing worldwide in equities. It will invest in a broadly diversified range of global companies, with a minimum of 60% invested in an actively managed equity portfolio. The remainder of the fund will follow a passive approach designed to achieve returns that are similar to the MSCI All-Country World Index (‘the Index’).

The fund will integrate material environmental, social and governance factors within the investment process. It will be tilted towards companies aligned with the transition to a low-carbon economy through their reduction in carbon emissions and increasing green revenues.

The fund is expected to have a carbon footprint which will remain below that of the MSCI All-Country World Index. It is permitted to invest in other types of transferable securities, units and/or shares in collective investment schemes, money market instruments and deposits.

The fund is subject to the St. James’s Place Exclusions Policy.

This financial product promotes environmental or social characteristics but does not have as its objective sustainable investment. *

*As defined by the Sustainable Finance Disclosure Regulation 2019/2088.

The fund managers target positive environmental and social characteristics by identifying companies aligned with the transition to a low carbon economy through their reduction in carbon emissions, transition risks and increasing green revenues. The fund is expected to have a carbon footprint which will remain below that of the MSCI All Countries World Index.

Positive environmental and social characteristics can be targeted by:

1. Investing in companies that are reducing their carbon emissions and increasing green revenues, which shows that they are well positioned against the risks and taking advantage of the opportunities associated with climate change.
2. Assessing the risk-and-return benefits of each investee company, working with them through proxy voting and engagement to help improve their consideration of ESG factors and long-term value creation.
3. Applying negative and norms-based screens, which help the fund managers identify companies adhering to certain ESG criteria.
4. Seeking to improve the fund’s ESG profile relative to the Index by overweighting and underweighting securities with stronger and weaker ESG profiles respectively. This can be done using a proprietary ESG scoring framework.

Overall fund

The fund will invest in a broadly diversified range of global companies. Around 60% of the fund is actively managed by LACM and Man using quantitative strategies that systematically identify and exploit potential investment opportunities. The rest of the fund, managed by SSGA, follows a passive approach designed to achieve returns that are similar to the MSCI All-Country World Index.

Individual strategies

LACM integrates ESG data into a broader stock selection model, and also incorporates its dedicated ESG Model within the portfolio construction process, to develop a portfolio that includes high-quality companies balancing risk, return and sustainability. It does this by analysing sustainability risks, including those relating to climate change and good governance via proprietary modelling, and:

• identifying companies well positioned for a low-carbon economy
• adjusting valuations in response to ESG news events
• using metrics for the quality of governance and management
• using dynamic peer-group assessments to capture ESG themes across companies
• analysing an issuer’s fundamental momentum
• using an explicit ESG factor that captures the sentiment associated with ESG; and
• incorporating Climate Opportunities and Resilience factors that identify companies best positioned for a low carbon economy and more likely to withstand increased extreme weather events which may affect business operations or employee productivity.

In addition to the Firm’s dedicated ESG model and above sustainability criteria being included within the Firm’s stock selection model, the ESG Model is embedded in the portfolio construction process to further build a portfolio that systematically considers sustainability risks and orientates the strategy towards companies better managing material ESG issues most relevant within each sub-industry. In addition to emphasising financial materiality, this ESG model integrates raw emissions data and proprietary modelling of carbon intensity, among other climate criteria, emphasising the focus on long-term sustainability.

Additionally, within the portfolio construction process LACM consider forward-looking climate risk data and tilts towards climate opportunities based on a proprietary model that utilises machine learning techniques. Such metrics are incorporated to orientate the strategy towards companies more likely to withstand extreme weather events and those likely to benefit from a transition to a lower carbon economy while pursuing green revenue opportunities.

Furthermore, a 50% reduction in carbon emissions intensity relative to the Benchmark Index is applied when constructing the portfolio.

Man evaluates companies holistically, buying stocks that have desirable ESG characteristics while also making sure they are cheap, have positive trends, and are high quality.

To achieve this, Man uses proprietary ESG models, which incorporate analysis of multiple factors including carbon intensity, board oversight and control, and ethical policies.

State Street implement the strategy of the Fund, by constructing a portfolio of securities taking into account certain sustainability and climate-related factors such as: carbon intensity (emissions scaled by revenue), fossil fuel reserves, green revenues, brown revenues, ratings for climate adaptation and a sustainability score.

The resulting strategy intends to provide higher exposure (relative to benchmark), to companies that are assessed to be mitigating and adapting to climate related risks. The securities in the fund are selected primarily from the constituents of the benchmark and the fund manager applies the negative and norms-based sustainability screen prior to the construction of the fund and on an ongoing basis.

Application of the sustainability screens results in the exclusion of securities from the portfolio based on an assessment of adherence to certain sustainability criteria.

While the fund aims to support climate change mitigation through a reduction in carbon emissions versus the Index, it does not directly invest in sustainable investments as defined by the Sustainable Financial Disclosures Regulation.

The fund does not have any proportion of investments specifically allocated to sustainable investments allowing the fund managers investment flexibility. Investments will support climate change but may not be considered sustainable on an overall basis as other environmental or social characteristics could be insufficient to qualify.

Optimisation processes are used within the fund to balance its multiple priorities, including the desired environmental and social characteristics. Optimisation allows for the most efficient trade-off between these priorities, while also addressing liquidity needs, turnover, and transaction costs.

Monitoring activity is undertaken by our in-house investment team. Our responsible investment specialists monitor our fund managers’ approach to ESG integration and stewardship.

Our fund managers are expected to fully integrate ESG factors into their investment decision-making and monitor the companies they invest in using a combination of data. This includes self-reported data from investee companies as well as data from third-party providers. Criteria will be pertinent to achieving a low-carbon economy, addressing future climate related risks, and increasing climate solutions.

In addition, we expect the active managers within this fund to be responsible stewards of capital and engage with the companies they invest in on ESG topics they identify as material. Monitoring meetings are held with the fund managers to ensure the mandates are being managed effectively.

At St. James’s Place, we ensure that the fund managers we appoint are signed up to the UN-supported Principles for Responsible Investment. This provides assurance a well-recognised standard for ESG integration is being followed in the management of our funds.

The fund managers have multiple means of ensuring the environmental and social characteristics of the fund are met. These include:

Integration of ESG models

The active fund managers apply their proprietary ESG models to help inform stock selection. They use both in-house research and data from third parties to integrate these considerations into the portfolio construction process. This allows the fund managers to systematically consider sustainability risks, including those relating to climate change and good governance principles, in their investment decision-making.

ESG metrics considered within the fund include:

• Governance factors relating to management quality, board oversight, accounting, and compensation
• Environmental factors such as resource usage, adherence to reporting standards and valuation adjustments for news events relating to a company and their suppliers
• Social factors including employee training and development, diversity and inclusion levels of workforce, labour and safety standards, and data privacy
• Dynamic peer group assessments that capture ESG themes across companies
• Climate opportunities and resilience factors that identify companies best positioned for a low carbon economy and more likely to withstand increased extreme weather events which may affect business operations or employee productivity.
• Positive screening based on ESG criteria to identify companies aligned to the transition to a low carbon economy.

Exposures and budgeting

Carbon emissions budgets are applied within the portfolio to ensure the fund’s emissions are lower than the Index’s while remaining ‘alpha-aware’.

Exclusions

Values-based, norms-based, and negative screening are applied by the fund managers to ensure that companies not adhering to certain ESG criteria are excluded. The fund is also subject to the St. James’s Place Exclusions Divestment Policy, which can be found here.

The fund managers use a combination of data directly from investee companies, third-party ESG data providers and proprietary research tools.

Output from the data providers is continually assessed by the fund managers to help identify any material gaps and discrepancies, as well as better understand how additional inputs may be utilised to enhance the investment decision making process. This ongoing assessment enables the fund managers to assess the proportion of estimated data at any given time.

Limitations of ESG data availability

There may be circumstances where data from one source does not align with equivalent data from other sources. In addition, obtaining complete and accurate data can sometimes be challenging, and there may be occasions where data is incomplete, missing or contested.

Like most models, those used by the fund managers are sensitive to the quality of input data. Different data vendors have diverged methodologies, various data sources, with different updating frequency and normalisation methods. Furthermore, ESG metrics can be subjective and backward-looking; there are few consistent ESG reporting standards and reporting of ESG metrics is inconsistent by geography. The lack of reporting standards and broad universes also means that some data might be estimated.

Given the variance in ESG data it is important to understand the different data providers’ models and methodologies to interpret the data they provide.

Inconsistencies between data sources

ESG and climate data providers generally develop their own sourcing processes, treatment of missing data and research methodologies. Therefore, ratings for individual investee companies can vary widely across different providers and data sets.

Quality of data from investee companies

The quality of the underlying data is largely a function of what is reported by investee companies. Reporting companies are at various stages of sophistication in their ability to report on ESG-related data, and accordingly, getting complete and accurate data can sometimes be challenging.

All three managers adhere to internationally recognised standards for due diligence and reporting. They have dedicated teams or groups responsible for implementing their policies, educating their stakeholders, and ensuring that responsible investing principles are integrated into their investment processes.

The active managers engage collaboratively or may directly engage with individual companies to solve or improve specific ESG issues or push for greater disclosure on ESG issues.

For more information, see our Stewardship and Engagement Report, which can be found under Our reports and policies here.

The fund expects to have a carbon footprint which will remain below that of the MSCI All Country World Index. However, this is a broad market index that does not specifically promote ESG characteristics. For more information about how the Index is calculated, see the ⁠MSCI Index Methodology webpage.

Our investment approach

At St. James’s Place, we recognise that the best investment expertise is not confined to one single firm or manager. Therefore, we outsource the management of our funds, giving us the freedom to select from some of the best managers worldwide. In the case of the SJP Sustainable and Responsible Equity fund, Schroder Investment Management (“Schroders”) have been appointed to manage the fund.

Our external fund managers make independent investment decisions they believe will be in the best long-term interests of clients. We set various requirements and monitor their decisions. In addition, we conduct annual manager reviews, where we review their stewardship views and activities.

We expect all fund managers to consider the material environmental, social and governance (ESG) risks and opportunities within their investment decision-making and to engage with companies on those factors identified. We introduced a minimum standard in 2020, stating that all our fund managers must be signed up to the UN-supported Principles for Responsible Investment. This provides a baseline standard for their ESG process and requires managers to create annual reports on their approach that are independently assessed. 

The SJP Investment Committee, is responsible for the oversight of our investment policies, including our responsible investment policy. The Committee is supported by our in-house investment team. 

We consider a fund manager’s approach to responsible investing as part of our overall assessment of their performance. Our internal structure enables us to monitor a manager’s performance in this regard, and potentially act where required, which includes replacing them if needed.

The fund has a UK ‘Sustainability Focus label.’ This means it aims to invest mainly in assets that are environmentally and/or socially sustainable. 

The fund aims to achieve capital growth over five years by investing in companies deemed to be sustainable. These are companies that make a positive contribution to people and/or the planet through the way they are managed and/or the goods and services they sell.

This financial product promotes environmental or social characteristics but does not have as its objective sustainable investment.*

This means that it invests in assets that promote these characteristics, but the overall investment objective remains capital growth.

Proportion of investments

The fund invests in alignment with the requirements of the UK Sustainability Disclosure Requirements (SDR) Sustainability Focus label. At least 70% of the gross value of the fund will be invested in equities categorised as environmentally or socially sustainable. 

The fund may also hold other assets that are not aligned with its sustainability objective for liquidity, risk management or diversification purposes. These may include assets that are treated as neutral for sustainability purposes such as cash, money market instruments, and derivatives used with the aim of reducing risk or managing the fund more efficiently. 

No significant harm

While the fund aims to invest in companies that provide a positive contribution to people and/or the planet. Such companies will still provide some negative outcomes in other areas. For example:

An electric car manufacturer may produce an environmental impact but could also produce a social cost if it pays its employees less than a living wage.

A company’s contribution to people and/or the planet is a the sustainability criteria Schroders use when selecting companies to invest in. The consideration of principal adverse impacts feeds into this assessment. Both environmental and social costs and benefits of a company determine its overall contribution. A planet score and a people is calculated for each company. 

• Planet score - considers the costs and benefits of climate and environment-related indicators such as greenhouse gas emissions and biodiversity loss. 
• People score – considers the costs and benefits of Indicators for social and employee, respect for human rights, anti-corruption and anti-bribery matters.

The ‘methodologies’ section outlines this assessment process in more detail.

Alignment with OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights 

Schroders will exclude companies that have material ESG misconduct/controversy. This is measured by breaches of relevant principles such as:

• UN Global Compact Principles
• OECD Guidelines for Multinational Enterprises
• UN Guiding Principles on Business and Human Rights

The environmental and social characteristics promoted by this fund are economic activities, including the following areas of opportunity:

• reducing greenhouse gas emissions which helps to slow down climate change
• employee wellbeing such as paying more than living wages or providing training to employees, which supports their professional development and prosperity
• customer wellbeing such as developing new products and services that improve customers’ quality of life
• healthy, inclusive and connected communities such as providing access to clean water and sanitation which promotes good health
• effective and accountable institutions such as promoting financial stability, which supports people’s prosperity and financial security

The fund aims to achieve capital growth over five years by investing in companies deemed to be sustainable. These are companies that make a positive contribution to people (society) and/or the planet (environment) through the way they are managed and/or the goods and services they sell. 

In managing its portfolio of assets for the fund, Schroders use its own proprietary sustainability tool, SustainExTM to assess the environmental and social costs and benefits of a company based on a suite of metrics. This is supplemented by additional research and sustainability assessments undertaken by Schroders’ investment teams. The outcome of this analysis determines whether a company is deemed sustainable i.e. provides a positive contribution to the environment and/or society across the areas of opportunity outlined in the previous section. Only companies that align with the fund’s sustainability objective will be considered for investment.

The ‘methodologies’ section provides more detail on the fund’s investment strategy. 

Exclusions:

No investment will be held if there would be a conflict with the fund’s sustainability objective. Such companies are defined as those that are directly and materially exposed to activities that are significantly damaging to the environment, complicit in cases of severe human rights abuses and incidents, or engaged in major corruption. 

Schroders also apply restrictions on investing in companies with direct exposure above a certain level to specific harmful activities or products. The fund’s exclusion list is outlined below:

The fund invests in alignment with the requirements of the UK Sustainability Disclosure Requirements (SDR) Sustainability Focus label. At least 70% of the gross value of the fund will be invested in equities categorised as environmentally or socially sustainable. 

The fund may also hold other assets that are not aligned with its sustainability objective for liquidity, risk management or diversification purposes. These may include assets that are treated as neutral for sustainability purposes such as cash, money market instruments, and derivatives used with the aim of reducing risk or managing the fund more efficiently. 

Schroders monitor and review the fund’s holdings against its sustainability criteria on an ongoing basis. In instances where new materially adverse information arises or a material controversy is identified, no further investment in the company will be made while the investment adviser evaluates the effect and considers next steps. 

If Schroders subsequently no longer deem a company to be a sustainable investment, they will usually aim to sell the investment. Schroders may also engage with the company to obtain more information to inform its assessment and/or to encourage the company to address its concerns, with a view to the asset meeting the sustainability criteria again. 

Schroders report on the Key Performance Indicators (“KPIs”) outlined below which aim to illustrate whether the fund has invested in companies that meet the sustainability objective:

• Overall sustainability score of the Scheme

• Overall planet score of the Scheme

• Overall people score of the Scheme

• Percentage of investments that are sustainable

• Investments that are classified as sustainable based on Panel review

• The St. James’s Place investment team will undertake a sustainable investment assessment of the fund, at least annually, which will be a key input into evaluating Schroders’ effectiveness in meeting the Scheme’s sustainability objective.

A company is classified as sustainable if it:

• achieves a positive score from the investment adviser’s systematic model, SustainExTM or 

• Schroders’ Sustainable Investment Panel ‘ the Panel’ determines the company would achieve a positive SustainExTM score if additional robust evidence was available to the model and included in the calculation of the score. The Panel is an independent panel of sustainable investment experts at Schroders who can provide support to Schroders’ investment teams on sustainable investing matters.

Schroders’  SustainExTM tool calculates the combined environmental and social costs and benefits of each company by scoring it against a list of metrics. 

If a company achieves a positive score, it’s determined that the company operates sustainably, making a positive contribution in at least one of the following areas: the environment; employee wellbeing; customer wellbeing; healthy, inclusive and connected communities; and/or effective and accountable institutions. Companies with a positive score are considered sustainable. 

The Panel review process gives Schroders flexibility to seek approval for companies where standard data or modelling limitations mean that relevant evidence is not taken into account. This means that legitimately sustainable companies are not excluded because they fail a systematic test. Evidence approved via the Panel is reviewed against a standard framework, in order to maintain a consistent process across companies. The framework does not vary based on the type of company, even though the evidence submitted may be different.

Schroders’ sustainable value and sustainable growth investment teams also undertake additional research to assess the sustainability of a company through additional sustainability assessments such as an ESG leaders assessment and sustainability quotient assessment, to determine whether a company provides overall benefit to society and is best-in-class versus industry peers in its approach to sustainability. 

The data driving Schroder’s tool SustainExTM comes from a range of sources, including third-party market data vendors as well as specialist sustainability data providers. To ensure that the data used is robust, it is subject to a data acceptability assessment. This includes consideration of the accuracy of the data, its coverage, delivery mechanism, use of identifiers to match the data points to companies and countries, timeliness, and longevity. 

Data quality checks are also performed on an ongoing basis. This helps the investment adviser to identify where the data has changed and why, as well as highlighting potentially inaccurate data. 

To ensure that SustainExTM remains a robust and reliable measure of sustainability, the investment adviser is committed to continuous enhancement, addressing both new metrics and refinements to existing ones. This structured, evidence-based approach enables us to enhance SustainExTM continually, ensuring it effectively measures alignment with the fund’s sustainability objective.

Schroders’ SustainEx™ tool is reliant on third party data (including estimates) as well as their own modelling assumptions, and the outcome may differ from other sustainability tools and measures. Schroders’ proprietary methodologies will evolve and develop over time as they continue to assess, refine and add to the metrics used. 

Where there is inconsistent or incomplete reporting and disclosure of metrics across companies, Schroders SustainExTM model will use estimated values with similar characteristics. Where possible, Schroders’ investment teams will seek to identify other information provided by the company that is a better reflection and more accurate than the estimates that would otherwise be applied. 

A process is in place to promptly correct data errors if necessary. All data providers are also subject to the investment adviser’s Group Procurement and Outsource and Supplier Oversight Policies, which include detailed requirements with respect to the initial due diligence required as part of supplier selection, and ongoing monitoring.

The Panel review process also gives Schroders flexibility to seek approval for companies where standard data or modelling limitations mean that relevant evidence is not taken into account. 

All companies must align with the fund’s sustainability objective to be a potential investment. Members of Schroders’ investment teams are responsible for the sustainability analysis of companies recommended to be invested in the fund. Additional oversight comes from the Panel who will review additional evidence and sustainability analysis of a company in cases where this information isn’t available in Schroders’ SustainExTM tool. 

All data providers are also subject to the investment adviser’s Group Procurement and Outsource and Supplier Oversight Policies, which include detailed requirements with respect to the initial due diligence required as part of supplier selection, and ongoing monitoring.

Schroders engage with selected companies held by the fund to support the achievement of the fund’s sustainability objective. This means working with companies, where appropriate, to try to increase their positive contributions, and reduce the size of their negative contributions to the environment and society. 

As the Scheme aims to select companies that provide a positive contribution to people and/or the planet, the investment adviser typically engages with companies around the following broad stakeholder considerations: the environment, employees, customers, communities and institutions.

Engagements may include conversations with management teams and can cover business practices, operations, governance and products and services. Engagements may be initiated by Schroders should concerns arise from the analysis undertaken as part of the Scheme’s sustainable investment strategy. Engagements are expected to be structured around a standard set of principles: 

• Identify material sustainability issues.
• Establish dialogue, to understand a company’s sustainability practices, strategies and performance to help assess a company’s consideration of sustainability risks and opportunities. 
• Set goals, to communicate clear expectations to companies regarding their sustainability practices. 
• Monitor and track progress, assessing company action towards engagement outcomes. 

Schroders may escalate engagement, such as through using voting rights to try to effect positive change on sustainability matters, which may include coordinated engagement and voting with other investment teams, asset managers or asset owners where the investment adviser believes this will have greater effect. 

There is no reference benchmark for the purpose of attaining the environmental or social characteristics promoted by this fund.