How responsible are your investments?
Our independent consultants, Fundhouse, use a proprietary process to annually score our funds on an environmental, social and governance (ESG) basis. We believe that these scores give a fair and balanced representation of the depth and quality of responsible activity that is taking place within each of our funds.
Firstly, they survey each of our investment managers to understand the ESG characteristics of their investment approach. This includes measuring to what extent they consider ESG factors when making investment decisions, any ethical exclusions that might be applied within the portfolio, and the degree to which the manager has pedigree in responsible investing.
Secondly, they survey our investment managers’ firms to understand how deep responsible investing goes within their organisations. This includes aspects such as the extent to which they plan to reduce greenhouse gas emissions, whether governance structures are in place to ensure good ESG behaviours, whether the firm engages with supranational bodies and governments to bring about change, and the promises and progress that the firm has made towards responsible goals. They also test the proportion of each firm’s capital that is run to investment mandates that have specific ESG goals.
Thirdly, using input from a specialist third-party data provider, we measure the investments inside our funds for ESG characteristics.
Every year, Fundhouse seeks to raise the bar with their ESG scoring, to keep up with improving ESG best practices and regulatory advances.
Finally, these inputs are then blended together to create a final score, which we show in the table on the next page, and we rank each fund from an ESG perspective as follows:
Please note that these scores refer only to ESG considerations and are not designed to indicate whether or not a fund is an attractive investment. ESG factors are more applicable to some regions and asset classes than others, and a fund rated lower on the ESG scale may excel in other parts of its process and/or be investing in an asset class or region where ESG considerations are simply less relevant.
Some funds in the UK investment market have a mandate to invest with ‘positive impact’ or may have many restrictions placed on their portfolios (perhaps to the detriment of returns). Those funds would be likely to rank higher in this framework. The Omnis funds do not have such mandates, but we believe that our funds score as expected, or better, for funds of their type and for the approaches that our investment managers take to ESG implementation
Please note that we have been unable to rate some Omnis funds because we were not able to meaningfully assess their holdings for ESG characteristics for one of several reasons: either they contained a high proportion of government bonds (assessing government bonds for ESG is difficult and highly subjective), or they invest in other funds, which we are not currently able to accurately assess.
These funds are:
Omnis UK Gilt
Omnis Multi Manager Cautious
Omnis Multi Manager Balanced
Omnis Multi Manager Adventurous
Omnis Multi Manager Distribution
Since our last annual review, published in May 2022, what responsible improvements have been made to the Omnis fund range?
Better scores. Five of our funds have improved their scores from ‘good’ to ‘excellent’, and none have fallen in score. We have seen a steady increase in our funds’ scores every year.
The Omnis Managed Fund range was previously unrated due to their fund of funds structure. However, thanks to the improved transparency of the fund range, they have been rated this year.
Better engagement with portfolio companies. We find that our managers are speaking with investee companies more on ESG issues, such as carbon reduction and labour welfare. For example, the Omnis European Equity Opportunities Fund has seen an improvement in its score this year because the manager, Barings, has conducted ESG engagement with more of its portfolio companies than it did last year. You can read more about how the managers engaged with firms in our ESG Showcase section.
Note: Some funds have limited engagement capabilities due to the asset class, such as fixed income funds or multi asset funds.
Figure 1: Proportion of Omnis funds engaging with their portfolio's underlying companies through proxy votes (%)
Source: Fundhouse.
Figure 2: Number of investment firms in the Omnis range following normative codes and/or initiatives
More commitment. Compared to last year, our investment management partners have signed up to more normative codes and initiatives that have a sustainable goal. All our managers are signatories of the UK stewardship code and the UN PRI. An increasing number of managers have joined the UN Global Compact1 and the Institutional Investors Group on Climate Change initiative.2
1 The United Nations Global Compact is a non-binding United Nations pact to get businesses and firms worldwide to adopt sustainable and socially responsible policies, and to report on their implementation.
2 The Institutional Investors Group on Climate Change (IIGCC) is the European membership body for investor collaboration on climate change and the voice of investors taking action for a prosperous, low carbon future. IIGCC has more than 350 members, mainly pension funds and asset managers, across 23 countries, with over €51 trillion in assets under management.
Carbon objectives. We find that the majority of Omnis’ investment management partners now have a net zero carbon objective, with a few already having achieved that status.
Figure 3: Proportion of investment firms with various carbon neutral goals (%)
