Investing in the social transition
The ‘S’ in ESG is multifaceted but can fundamentally be drawn back to the unequal distribution of human rights and resources – the right to a decent job and income, education, and access to healthcare. The socio-economic implications of inequality can impede growth and increase the risk of financial crises and poor public policy decisions, as well as fuel social unrest1.
We believe investors can play a positive and influential role and capture a significant investment opportunity as markets increasingly price in the risks and opportunities of social inequality.
Our Social Transition Global Equity strategy targets opportunities aligned to the principles of the United Nations’ Sustainable Development Goals that support and benefit from the transition to a more socially equitable economy. We invest with an active, high-conviction approach to address the needs of investors seeking two objectives:
We go beyond a simple approach of only investing in companies providing solutions to tackle inequality, to also invest in companies transitioning their business models towards a more socially equitable economy. Moreover, we seek to drive further positive change by engaging with investee companies and policymakers to tackle key market failures.
Our proprietary transition risk framework helps identify winners from the social transition across a wider opportunity set, increasing portfolio diversification. Our approach aims to deliver more resilient performance over the long term, uncover more alpha opportunities, and more effectively support the social transition.
We engage with every company in the portfolio on specific social issues. Our three-year structured engagement programme systematically tracks all companies from leaders to laggards, with an escalation pathway that could ultimately lead to divestment if we are not satisfied with their progress. We believe this bespoke programme with teeth is the most effective way to support the social transition.
We have a longstanding track record in actively engaging with policymakers on market reform to correct material market failures. We have specific market reform initiatives relating to the transition to a more socially equitable economy that can help deliver positive social outcomes.
Investment opportunities in the strategy are linked to the following investment themes and aligned with the principles of the following United Nations Sustainable Development Goals:
The social transition
Recognising that being a good corporate citizen is the right thing to do and pays off is something investors and the financial community need to think harder about, argue Vaidehee Sachdev and Matt Kirby.
Social Transition Global Equity strategy
Aviva Investors Social Transition Global Equity Fund
This strategy aims to deliver long-term capital growth by investing in companies globally that either provide solutions to social inequality or transitioning their business models to manage their social impact, while avoiding those that do not meet minimum social criteria.
For further information on the risks and risk profiles of our funds, please refer to the relevant KIID and Prospectus.
Social Transition Global Equity team
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Climate Transition Equities
A range of strategies investing in companies that can play a major role in the transition to a low-carbon world.
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Natural Capital Transition Global Equity Fund
An equity strategy seeking positive environmental outcomes while delivering long-term capital growth.
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1. Adapted from Dabla Norris (2015)