We are advocates of responsible investing and believe that it should generate better outcomes for our investors over the longer term.
Investing in well-managed companies that have a considered impact on society and the environment makes good financial sense – this is the foundation of the rationale for ESG (Environmental, Social, Governance) investing.
In addition to any positive environmental and social benefits, these types of businesses are likely to be better managed, more capable of effective capital allocation, and less likely to face regulatory pressures. These factors should ultimately be reflected in a company’s share price and investors’ returns.
For example, if a company suffers reputational damage because it poorly manages greenhouse gas emissions, is discovered to be treating its workers poorly, or is accused of corruption, then its share price may suffer. Meanwhile, companies that use energy efficiently, invest in training their employees, and reward their executives for doing the right thing, may be more likely to outperform their competitors and return more value to shareholders. Over the long term, they may also be better prepared to meet future strategic challenges and take advantage of new business opportunities.
For these reasons, we set responsible standards for our investment funds:
Insisting on responsible stewardship. We ask our investment managers to adopt policies to actively exercise asset voting powers over the companies in which they invest, to drive positive change.
Tested for today and tomorrow. Many investment products in the marketplace make claims around their responsible characteristics or ESG values, but they may not stand up to scrutiny. With that in mind, we are proud to say that our independent consultants Fundhouse conduct thorough annual testing of our fund range – the results of their latest review can be seen in the section ‘HOW RESPONSIBLE ARE YOUR INVESTMENTS?’. This review ensures that the funds meet our responsibility expectations today and are improving in order to reach even higher standards in the future. We also work closely with our investment managers to ensure that they are ready to comply with any forthcoming responsible investment regulation.
Selecting investment managers that share our values. In order to align managers with better outcomes for our clients, we insist that our investment managers are signatories* to the UN Principles of Responsible Investing and the UK Stewardship Code.
Signatories to the United Nations-backed Principles for Responsible Investment (UN PRI) must adapt their investment processes to include ESG issues, and act as more responsible stewards of capital. Signatories acknowledge that acting in the best long-term interests of their investors must involve incorporating ESG issues into investment processes.
The UK Stewardship Code requires signatories to report on how they apply stewardship principles to their investments, which includes how they engage with the companies they invest and also improves transparency around corporate governance.
*Or can evidence that they are working towards signatory status and publicly adhere to all the policies set out by these schemes in the meantime
We want to select best-of-breed investment managers and approaches that are the right fit for the funds we offer to investors, focussed on our primary goal of generating good long-term financial outcomes. So, aside from the standards that we describe above, we refrain from applying too many other ESG restrictions to our funds. Whilst some of our appointed investment managers will choose to exclude companies from certain industries, for example, this is not something we currently mandate them to do. Nor do we ask our investment managers to engage in ‘impact’ investing (where generating a positive impact on the environment or society might come at the expense of financial returns) or to target more granular ethical outcomes (as an investor in an Omnis fund your ethical priorities may differ from other investors in our funds).
The UK Financial Conduct Authority is in the process of finalising rules around how investment products and services, which claim to have sustainable credentials or aims, should be named and labelled. This legislation is known as the Sustainability Disclosure Requirements (SDR).
Omnis has been working closely with our independent consultants Fundhouse to ensure that our investment managers, almost all of whom offer their own ranges of investment funds, are ready to consider the new regulations once issued.
Through discussion with The Openwork Partnership, Omnis believes that the adoption of sustainable characteristics and targeted outcomes is appropriate in respect of our funds, we will consider the necessary steps to seek regulatory and investor approval of this.
Although the final FCA Rules will not be clear for some time, Omnis is currently hopeful that the adoption of some level of sustainable characteristics should be possible in respect of most of its funds in due course.