Jupiter was founded in 1985 with the aspiration of delivering investment performance through active fund management. More than thirty years later, our adherence to the same principle has earned us a reputation as a successful asset manager of equity portfolios, as well as fixed income, multi-asset and absolute return strategies.
Jupiter’s investment approach revolves around one concept: we seek to deliver outperformance over the medium to long term. Alongside an active and unconstrained approach to investment we recognise the importance of environmental, social and governance (ESG) criteria. Acting upon our fiduciary role as a responsible asset manager we encourage our investment experts to be the best possible stewards of clients’ assets. We seek high standards of corporate governance from the companies in which we invest, are signatories to the UN’s Principles of Responsible Investment (PRI) and the UK Stewardship Code. We also have in-house sustainability and stewardship committees, which include the CIO, members of the board and dedicated governance and sustainability specialists.
Is ESG integrated into your investment process? How? Which funds or does this apply to the entire firm?
At Jupiter, ESG related factors are integrated into our investment processes across the entire firm. Our stewardship approach is fund manager led and this gives the fund managers the flexibility to integrate their ESG analysis into their investment approach. We believe that only through integration at a fund manager level can ESG issues truly be analysed and aid securities analysis through risk identification and mitigation as well as alpha generation. Our fund managers are supported by the Governance & Sustainability Team who work with them on ESG integration, engagement and proxy voting.
The CIO function (CIO Office) has oversight on ESG matters. The CIO Office will look to understand how the individual strategy has executed and managed their own ESG priorities. Stewardship is a factor in the personal objectives of our investment personnel, and this includes fund managers and investment analysts. This means that stewardship priorities are well defined, integrated and relevant to the investment approach. The managers should be able to demonstrate stewardship through their approach to company dialogue and analysis which ultimately form tangible voting and engagement outcomes.
Under the terms of the EU Sustainable Financial Disclosure Regulation (SFDR), all our funds domiciled in Luxembourg and Dublin meet the ‘Article 6’ criteria, meaning that an assessment of sustainability risks is fully integrated into investment decision making. We aspire, over time, to move some of our strategies to ‘Article 8’ status, an enhanced sustainability threshold that carries a higher burden of proof around active promotion of ESG criteria, for which we’re working on appropriate and robust evidencing. Two of our Luxembourg domiciled funds have specific environmental-related mandates and so qualify for ‘Article 9’ status.
Who conducts ESG analysis within the team? Is it done by PM, financial analysts or a central ESG team?
Each fund manager is responsible for defining, evidencing and articulating their stewardship approach, in respect of their own strategies within the defined parameters of Jupiter’s policies and external commitments. Likewise, when it comes to active engagement with companies, the fund manager who made the decision to hold the asset leads engagement directly. This results in engagement that is constant, ongoing and fully integrated with the investment process.
Supporting our fund management teams is the Governance & Sustainability Research team (G&S Team). They are part of the fund management department and report to the CIO. The team work closely with our fund managers to deliver our stewardship commitments. Among other activities, the team helps identify relevant ESG factors that might affect the business performance of investee companies.
The CIO Office oversees these objectives and monitors, reviews and assists our investment personnel in meeting them. This approach does not curb the fund managers’ freedom to follow their investment convictions, but rather helps to ensure that there is a consistent approach to assessing and engaging with companies, as well as to governance and sustainability issues across different asset classes and in the organisation as a whole.
Please summarise the key ESG metrics that are core to your strategy?
Our fund managers and analysts carefully consider ESG risk factors pertaining to a company prior to making an investment decision. This process considers potential investee companies on a case-by-case basis, with due regard to the sectors in which they operate.
In addition to traditional bottom-up stock selection techniques, such as valuation, competitive position and industry dynamics, the assessment considers relevant ESG factors including the following where applicable:
- Governance: Succession (management and board levels); Board effectiveness, composition and independence; Risk tolerance and oversight; Executive remuneration
- Strategy and performance: Mergers and acquisitions; Corporate strategy and culture; Performance and financial issues
- Environment: Sustainability; Climate
- Trust and reputation
- Corporate reporting
- Human Capital: Remuneration; Culture and values; Development, diversity and engagement
- Social Impact: Human rights; Supply chain
ESG risks relating to any of these areas = may lead to the fund manager choosing not to invest in a company, as determined on a case by case basis. In relation to governance, we tend to focus on how effectively and efficiently a business is run with the aim of helping to preserve and enhance value in the long run. Environmental and social matters are assessed as part of a wider effort to understand the sustainability of an investee company’s business model, and we will engage as appropriate to help reinforce or improve this sustainability.
Once invested, the fund managers and the G&S Team work together to identify material ESG risk factors at investee companies and ensure that these issues are monitored appropriately. Monitoring is conducted using fundamental company research and direct engagement with company boards and management teams, as well as third party research and data. Changes in our views on ESG risks are appropriately incorporated in investment decisions.
We will seek to influence management of ESG risks where we feel these are not being appropriately addressed. Where necessary, we will escalate engagement via voting against management at shareholder meetings.
In early 2021, we took a significant step by joining the Net Zero Asset Managers Initiative. As members, we commit to support the goal of net zero greenhouse gas emissions by 2050 or sooner, in line with global efforts to limit warming to 1.5°C. We also commit to support investing aligned with net zero emissions by 2050 or sooner, prioritising the achievement of real economy emissions reductions within the sectors and companies in which we invest. We will disclose further information on metrics and targets governing our net zero commitment for our funds later in 2021.
How is this research carried out? Positive/negative screening? Qualitative?
With the exception of Jupiter’s dedicated sustainability fund range and our firmwide prohibition on investing in companies involved in cluster munitions, our funds do not operate an ex-ante exclusion policy towards any sectors or companies. However, as stated above the fund managers carefully consider ESG risk factors pertaining to a company prior to making an investment decision.
Where potential risks are identified, we will consider whether the company has the capacity for ‘self-help’ in relation to improving its ESG profile, or if the issues are fundamental to the business. ESG factors are not viewed in isolation, rather the fund manager concentrates on trying to understand how these factors impact potential medium- and long term investment performance, with reference to a company’s valuation, and identify which, in our view, are relevant and material to investment decisions.
Ultimately, our active investment approach means that we only invest in shares or debt issued by companies when we believe it in our clients’ best interests to do so. These are companies in which we perceive a long-term value opportunity and our analysis appropriately incorporates material risk factors including environmental, social and governance ‘ESG’ issues. In essence, our aim is to deliver long-term returns for our clients within agreed investment parameters and careful stewardship is key to achieving this goal on their behalf.
In relation to governance, we tend to focus on how effectively and efficiently a business is run with the aim of helping to preserve and enhance value in the long run. Environmental and social matters are typically assessed as part of a wider effort to understand the sustainability of an investee company’s business model, and we will engage as appropriate to help reinforce or potentially improve this sustainability.
How do you measure your success regarding ESG? Performance against benchmarks (which ones)? Reports?
Demonstrating the efficacy of approach is challenging due to the inherent difficulties of isolating the proportion of investment returns attributable to ESG factors. While we believe that ESG factors can have a material impact on security prices over time, we do not systematically measure the contribution of our ESG analysis per se to investment performance. The heterogenous nature of ESG factors and the challenge of making comparisons across different sectors, geographies and asset classes further complicate the measurement of their impact.
On a corporate basis a key metric we look at is our PRI assessment. Our PRI assessment has been strong at a group level and has shown significant improvement in recent years across the asset classes in which we invest, we consider that these improvements reflect the investments we have made in ESG resource and data as well as the enhanced integration of ESG both in terms of our internal governance but also within our individual investment strategies. As a result, we now equal or exceed the peer group median across each assessment category.
Stewardship is incorporated within the annual objectives of our investment personnel. The CIO’s team oversee these objectives and monitors, reviews and assists our investment personnel in meeting them. This assessment is a factor in the rating that determines variable remuneration of our fund managers.
To provide transparency around ESG-related matters, we publish our Stewardship Policy on our website and also publish our annual Stewardship Report so investors and clients can see our activity. In addition, our Global Sustainable Equities strategy publishes an annual Impact Report detailing the impact that its portfolio holdings have on society and the environment.
Is your business a signatory to PRI? Why, why not?
Jupiter became a signatory to the United Nations Principles for Responsible Investment (UNPRI) in October 2008 as a reflection of our belief that responsible investment practices are not only the right thing to do, but will ultimately benefit our clients in the form of superior long term investment performance. Effective stewardship allows us to make better informed investment decisions through the monitoring of assets, engagement with companies, ESG integration and partnerships with peers, industry bodies, and civil society groups.
Are you disclosing climate change policies in line with the Task Force on Climate-Related Financial Disclosures (TFCD)? Please briefly outline your policies.
Yes, we support the recommendations of the Task Force on Climate Related Financial Disclosures (‘TCFD’) and firmly believe that our policies at a corporate level should be aligned with our asset management activities. We have been engaged supporters of TCFD since 2017.
So far TCFD protocols have been met through engagement with investee companies and collaborative engagement when considering risks at portfolio level. In terms of internal governance, stewardship activity and management reporting around climate risk is conducted via the Stewardship Committee and the CSR Committee, both of which have Executive Committee and JFM plc board members present.
In 2021 the next steps are to develop our corporate risk framework to understand exposure to climate-related risks and opportunities and to develop our scenario analysis capabilities. The Governance & Sustainability and Data Science Teams are in the process of choosing a climate data provider to achieve these goals.
Jupiter has an ongoing target to reduce overall Scope 1 and 2 emissions year-on-year by more than 1%. In 2020, we made a 26% reduction. As noted above, In early 2021, we took a significant step by joining the Net Zero Asset Managers Initiative. We have committed to reduce carbon emissions of our investments and operations to net zero by 2050. We will disclose further information on metrics and targets governing our net zero commitment for our funds later in 2021.
Has your business signed up or committed to any other campaigns relating to ESG?
The following is just a few of the commitments relating to ESG that Jupiter has made over the years:
- A member of UK SIF, an association for sustainable and responsible financial services, giving access to industry regulators.
- A member of the Investor Forum, which facilitates collective engagement by UK institutional asset managers.
- A founder signatory to the Carbon Disclosure Project (CDP). We contribute to the CDP database, and use it in the preparation of climate impact reports for clients.
- A member of the Institutional Investors Group on Climate Change (IIGCC), which is a forum for European asset managers to discuss and engage with investee companies on climate related issues.
- We are a member of the UN Global Compact, which calls for companies to align strategies and operations with universal principles of human rights, labour, environment and anti-corruption.
- We are part of the Good Work Coalition, a ShareAction-backed investor network on workforce issues, including the Living Wage, diversity and inclusion and insecure working practices.
- We are a member of the FAIRR Initiative, a collaborative investor network that raises awareness of the material ESG risks and opportunities caused by intensive animal production.
- We are part of Climate Action 100, a global initiative launched in 2017 to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change.
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This communication is for informational purposes only and is not investment advice. Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested.
The views expressed are those of the author at the time of writing, are not necessarily those of Jupiter as a whole and may be subject to change. This is particularly true during periods of rapidly changing market circumstances. Every effort is made to ensure the accuracy of any information provided but no assurances or warranties are given.
Issued in the UK by Jupiter Asset Management Limited, registered address: The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ is authorised and regulated by the Financial Conduct Authority. Issued in the EU by Jupiter Asset Management International S.A. (JAMI, the Management Company), registered address: 5, Rue Heienhaff, Senningerberg L-1736, Luxembourg which is authorised and regulated by the Commission de Surveillance du Secteur Financier.
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*In Hong Kong, investment professionals refer to Professional Investors as defined under the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong).and in Singapore, Institutional Investors as defined under Section 304 of the Securities and Futures Act, Chapter 289 of Singapore. 27423