Key points

  • ESG concerns have long been central to our investment process
  • ESG issues play a key role in the filtering of the investment strategy ideas that populate our multi-strategy portfolios
  • ESG factors influence the development of ideas across all asset classes
  • Investment strategies included in the multi-strategy portfolios will have been challenged from an ESG perspective
  • As an example, the views of the Responsible Investment team were sought before an investment strategy on Japan was adopted in the multi-strategy portfolios

ESG concerns lie at the heart of our investment process

At Aviva Investors, we have always believed that companies that conduct their business in a responsible and sustainable manner are more likely to succeed over time than those which do not. As businesses become aware of the benefits of responsible and sustainable polices, society as a whole, our customers included, will benefit. That is why we were one of the first global fund managers to integrate environmental, social and governance (ESG) issues into our investment decision making.

Today, we believe we’re among the leaders in our industry in terms of incorporating ESG concerns into our investment process. We are responsible owners, encouraging greater transparency, sustainability and better corporate governance. In this way, we influence companies to behave better and in a way that helps to reduce the risks for our clients.

Testing investment strategies from an ESG standpoint

Our conviction in the importance of ESG issues means that they play a key role in filtering investment strategy ideas. Consequently, we explicitly consider the ESG credentials when deciding on strategies for inclusion in our Aviva Investors Multi-Strategy (AIMS) range of funds. These portfolios look to achieve their targets by combining a diverse range of strategies with different drivers of performance. They are very flexible, are not constrained by a benchmark, are not wholly dependent on ideas that are linked to the economic cycle and can deploy tools that exploit falling and volatile markets to generate positive returns for investors.

The investment strategies are first discussed and analysed in what we call our Strategic Investment Group (SIG), a company-wide forum that provides the portfolio managers with investment ideas. Critically, all of the ideas are challenged from an ESG perspective so that the views of our team of corporate governance and responsible investment professionals are part of the debate.

But even before these ideas have been debated at the SIG, ESG factors will have influenced their development. This is because we also have a dedicated Responsible Investment Officer (RIO) network at Aviva Investors. This consists of over 30 fund managers and analysts who work directly with our Global Responsible Investment team to add value through the integration of ESG factors into the specific investment analysis and decision-making process of each investment desk.

Influencing the investment outlook

To illustrate how ESG factors feed into the AIMS investment process, let’s take the example of a strategy that we currently hold in AIMS. As part of our investment process, we construct an investment outlook – which all teams including the Global Responsible Investment (GRI) team contribute to. This outlook currently includes a positive view on prospects for the Japanese economy as we believe the authorities’ stimulative policies are likely to succeed.

Our view on Japan

The GRI team has a positive outlook on improving governance standards in Japan following the introduction of measures to bring Japan’s corporate governance practices further in line with global practices. In 2014 Japan introduced a Stewardship Code, a set of guidelines aimed at improving returns through more active engagement between investors and companies. This year has also seen the implementation of a Corporate Governance Code, which should encourage companies to behave in a more shareholder-friendly manner. The input of the GRI team was considered and the outlook for Japan evaluated and approved at the SIG. Opportunities in both equities and the currency were identified.

This is just one example of the way in which ESG issues influence the construction of the AIMS portfolios.

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Unless stated otherwise, any sources, views and opinions expressed are those of Aviva Investors Global Services Limited (Aviva Investors) as at 22 December 2015. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested.

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