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 SJPI Sustainable and Responsible Equity fund, we have appointed Impax Asset Management 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, which includes replacing them if needed.

SJPI Sustainable and Responsible Equity

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

Managed by Impax, the fund aims to achieve capital appreciation over a period of five years by investing worldwide in companies which demonstrate strong ESG credentials.

Such companies should be positioned to benefit from positive opportunities arising from the transition to a more sustainable global economy. In addition, Impax focuses on risks arising from the transition. Using a combination of proprietary research and data from third parties, it looks for companies with robust policies, processes, management systems and adequate disclosures.

The fund is subject to the St. James’s Place Exclusions Policy, which can be found under Our reports and policies section of our Responsible Investing webpage.

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 places strong focus on risks arising from the transition to a more sustainable global economy, as well as seeking to harness the opportunities. The environmental and social characteristics promoted by this fund are economic activities in one or more of the following areas of opportunity:

• enhancing productivity
• addressing climate change (both mitigation and adaptation)
• resource efficiency
• wellbeing and nutrition
• access to finance
• digital infrastructure
• evolving healthcare challenge
• meeting basic needs

The fund aims to achieve capital appreciation over the medium to long term by investing worldwide in companies which demonstrate strong ESG credentials. Such companies should be positioned to benefit from positive opportunities arising from the transition to a more sustainable global economy.

In addition, the fund focuses on risks arising from the transition. Impax looks for companies with robust policies, processes, management systems and adequate disclosures.

The fund manager has developed its own internally generated proprietary methodology for analysing and scoring companies on ESG quality. Before investing, Impax analyses companies’ governance structures, considering what constitutes common and best global practice for governance and identifying potential outliers.

Once the governance and other ESG analytical data is gathered for a company or issuer, an ESG report is produced and a proprietary ESG score is assigned. Where ESG quality is not sufficiently evidenced, a company or issuer is excluded from the investable universe. In cases where a company has a low ESG score, but is not excluded, the company will have a capped position size in the portfolio, for risk management reasons.

About exclusions:

Fossil fuels

The fund excludes investments relating to fossil fuel exploration, production, refining and processing. Companies with more than 0% revenue or profits derived from these activities will be excluded.

Storage and distribution exclusions

Companies with more than 5% revenue or profits from direct storage and distribution activities will ordinarily be excluded. However, companies may be included if they are leaders in the transition to a zero-emissions energy economy with reduction targets that are compatible with the Paris Agreement's target of limiting future warming to 2°C.

Utility power generation

Companies with more than 5% revenue or profits from the power generation sector will ordinarily be excluded. However, they may be included if they are leaders in the transition to a zero-emissions energy economy with reduction targets compatible with the Paris Agreement's target of limiting future warming to 2°C.

The fund will invest in equities and aims to invest at least 90% of total assets in companies and issuers which are aligned with one or more of the environmental or social characteristics (1 below). It is intended that up to 10% of the investments are not aligned with these characteristics (2 below).

1. Aligned with environmental and social characteristics includes the investments used to attain the environmental or social characteristics promoted by the financial product. This includes two subcategories (subcategory 1.2 below, and not 1.1, being applicable in this case):

1.1: sustainable investments with environmental or social standards

1.2: investments aligned with the environmental and social characteristics that do not qualify as sustainable investments

2. Other includes the remaining investments, which are neither aligned with the environmental or social characteristics nor qualified as sustainable investments.

Impax reports the fund’s exposure to economic activities delivering environmental and social characteristics. GHG emissions for the fund (tCO2e per $10m invested for one year) and avoided GHG emissions (tCO2e per $10m invested for one year) are also reported.

Impax uses its investment tool, which is called the Sustainability Lens, to invest in one or more of the opportunities with environmental and social characteristics set out under "Environmental or social characteristics of the financial products" above. The use of the Sustainability Lens is overseen by the Impax Lens Committee, which meets periodically. At those meetings, investment team members are required to articulate the transition to a sustainable economy case for an investment, which is subject to challenge and review by the Committee.

Impax also considers principal adverse impacts in its investment decisions, via its ESG analysis, which is updated periodically.

Engaging with investee companies, Impax sets strategic engagement areas every 12 months, and specific objectives that it seeks to reach with the engagements.

For analysing opportunities and risks

The Sustainability Lens is an investment tool which analyses opportunities in certain social and environmental opportunities. It also looks at risks across categories of major public companies, called ‘sub-industries’, that are set by the MSCI in its Global Industry Classification Standard (GICS). Impax regularly reviews the focus and ratings of the Lens across different subsectors considering current opportunities and risks. This means that any adjustment to their perspective on an emerging sustainability theme is promptly reflected in the tool. 

The Lens helps Impax find areas where there are compelling opportunities and can signal where opportunities are not well understood by the market. They also try to focus on areas where the opportunities are likely to build over time and where the valuation of companies may re-rate as the market becomes more aware of their potential.

For assessing companies’ ESG quality 

Impax has developed its own internally generated proprietary methodology for analysing and scoring companies on ESG quality. It uses external data as an input. 

Prior to investing, the fund manager analyses companies’ governance structures, considering what constitutes common and best global practice for governance and identifying potential outliers. Once the governance and other ESG analytical data is gathered for a company or issuer, an ESG report is produced and a proprietary ESG score is assigned. Where sufficient ESG quality is not achieved, a company or issuer is excluded from the investable universe. In cases where a company has a low ESG score, but is not excluded, the company will have a capped position size in the portfolio, for risk management reasons. 

After investing, the fund manager exercises proxy voting which is predominantly related to governance issues such as the election of directors, board structures and management remuneration. When practicable, they seek to engage with the company before voting against management’s recommendation on an AGM resolution. The fund manager is also in dialogue with companies throughout the year to discuss and comment on proposed governance structures.

Impax does not seek to exclude a certain number of companies or issuers but seeks an absolute level of ESG quality based on a qualitative judgement.

Impax analyses disclosures and reports, which come directly from investee companies or from direct contact with company management. Disclosures and reports may include annual and sustainability reports, 10-K filings (annual reports filed by publicly traded companies about financial performance, as required by the US Securities and Exchange Commission), websites, and proxy statements. In an effort to ensure the data is high quality, Impax provides companies with a variety of resources, including guidance for ESG data requests. 

Impax also uses third-party ESG research as an input in the analysis of companies. Thorough due diligence is performed before appointing a data provider, looking at the quality of service offering, any material gaps in the product or service coverage, complexity of the product/service, ease of use, and cost. Regular, formal reviews are carried out once appointed.

Limitations of ESG data availability

Given the limited history and availability of climate and emissions data, which is often used to construct models, Impax cautions against overinterpreting simulated returns. Also, future risks and opportunities may not have manifested in historic returns. 

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. To mitigate this, Impax follows up directly with companies where it identifies incomplete or conflicting data. 

Impax has developed its own methodology for analysing and scoring companies. It also estimates key performance indicators where there is robust industry data to reduce the effect of data limitations on the promoted environmental and social characteristics.

Nevertheless, data limitations remain.

All investee companies must meet financial and ESG criteria before entering the fund’s universe of investable companies.
 
Members of Impax’s investment team are responsible for integrating ESG analysis into the investment process. Through screening, Impax intends to avoid companies involved in significant controversies that violate global norms related to human rights, labour, environment, and corruption.
 
Impax conducts and reviews a detailed ESG analysis of new investee companies considered for the investable universe on a periodic basis.

The Impax Sustainability & Stewardship team is responsible for the oversight, peer-review and scoring of the ESG analysis, coordination of focus areas of engagement and further development of ESG, sustainability and stewardship approaches and methodologies. Additional oversight comes from the Impax Compliance team, which conducts monitoring on the investment process, with investment risk oversight.

Impax has implemented specific management procedures applicable to sustainability-related controversies in investee companies.

Bottom-up, company-specific engagement

Impax identifies company-specific ESG issues and engages with the company about these. The objective is typically to solve or improve the issue.

Top-down, strategic engagement

The fund manager assesses and outlines the engagement priorities for the year. These are based on market developments and emerging sustainability issues that are considered relevant and material for companies and issuers. Impax focuses its engagement on companies with exposure to these issues.

Escalations

If a company is felt to be unresponsive to engagement, Impax will escalate the dialogue by: 

• Seeking alternative or more senior contacts within the company or issuer 
• Intervening or engaging together with other shareholders 
• Intervening or engaging together with other institutions or organisations
• Highlighting the issue and/or joint engagements regarding the issue through institutional platforms and/or
• Filing or co-filing resolutions at General Meetings

If interventions are unsuccessful, the company is excluded from the investable universe.

Impax’s full engagement policy is available on its Engagement webpage.

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