Our responsible investment framework

Defining and measuring how investment managers integrate responsible investment (RI) practices into their investment methodologies is complex. Many factors influence this assessment and individual managers place varying degrees of importance on each factor.

While it’s vital for managers to be able to measure and demonstrate the role of RI in their investment strategies, we believe it’s equally important that investors can accurately identify which strategies meet with their needs and align with their investment beliefs.

To better support our diverse client-base, we’ve built a framework which aims to provide clients with increased RI insights, empowering them to make more informed investment decisions. Our robust fund classification system helps investors understand the integration of a manager’s responsible investment themes into their processes and the associated impacts on the final portfolio outcome.

RI classifications – a tiered approach

There are five tiers within our RI framework. All funds holding a current Zenith investment grade rating receive an RI classification, noting that classifications are fund-specific.

Traditional approaches comprise active strategies with little to no regard for RI issues, and pure index strategies that don't factor RI screens or scoring when modifying exposures relative to their underlying index.

Products in the Aware category broadly consider both RI factors and issuer engagement, but typically do so in a less structured and informal way.

Integrated products utilise RI as a key component of their security selection and portfolio construction approach. In addition, detailed and transparent issuer engagement is also treated as a fundamental component of the investment management process.

The Thematic and Impact categories are extensions of the Integrated classification, with both required to display a robust assessment of RI issues and formal engagement to be considered for progression. Thematic products invest specifically in themes or assets related to sustainability such as renewable energy, sustainable agriculture or affordable housing. While having many commonalities with Thematic products, Impact products must also be aimed at generating a positive, measurable impact alongside a financial return with full transparency.

The classification framework is underpinned by a set of principles which are overseen by an internal Responsible Investment Committee. We also use our role working right across the industry with a wide range of stakeholders to inform this framework and ensure it remains robust and relevant.

Our RI Principles

1. Responsible investment promotes a sustainable economy, which is ultimately essential for investors and the integrity of capital markets.
2. Responsible investment factors impact financial returns and risks.
3. We seek to empower clients by providing tools and services for investors to select and monitor investment options.
4. We recognise the diverse objectives under which both investors and managers operate. Values, investment styles, asset markets and jurisdictions are not homogenous. Accordingly, our approach to Responsible Investment supports the full spectrum of investment methodologies available.
5. Where relevant, all investment professionals should consider material responsible investment factors when considering investment analytics and decision-making.
6. We will seek appropriate disclosure on Responsible Investment issues by the investment managers we review.
7. Investment products that claim to incorporate Responsible Investment elements should include adequate disclosures explaining the specific process being used, along with periodic verification that the stated processes are being followed.
8. Responsible investment factors and associated issues are dynamic. Best practice dictates that continual research and monitoring are a prerequisite to adequately manage RI issues over time.

Zenith’s responsible investment framework is governed by Zenith Group’s Responsible Investment Policy which is available here.

For more detailed information about our RI review process, classifications and implementation of the framework, please contact us via: [email protected]