How We Approach ESG Investing
June 09, 2021
As we at VanEck continue to follow our guiding principle of providing investors access to opportunities that will strengthen their portfolios, demonstrating that we do so both responsibly and with due consideration given to environmental, social and governance factors (ESG) has become increasingly important.
We believe these factors are integral components of its investment philosophy and processes. Therefore, as part of our continuing commitment to responsible investment, we incorporate them into not only our investment analysis, but also our engagement policies. (See VanEck’s Responsible Investment Policy.)
Global Memberships: The PRI and EMIA
To demonstrate our commitment to responsible investment, VanEck became a signatory to the Principles for Responsible Investment (PRI) in March 2017. Membership of the PRI’s extensive global network of investment managers, asset owners and others also allows us not only to draw upon, but also to share in, the experiences and knowledge of other members who have been associated with PRI and its activities for considerably longer than we have.
VanEck may have been around since 1955, and always been cognizant of the importance of good governance from the time of its founding, but we consider that also understanding better both the current thinking around, and developments in thinking around, environmental and social issues remains vital.
Equally, through our involvement in the Emerging Markets Investors Alliance (EMIA), we hope to help enable institutional emerging market investors to support transparency, good governance, promote sustainable development and improve investment performance in the governments and companies in which they invest.
Integrating ESG into Our Investments
As a global firm with separate investment teams in different countries around the world, our approach to responsible investment depends upon not only asset class, region and market, but also client needs, together with both local market practices and regulations. As a result, implementation of VanEck’s responsible investment principles varies across investment teams and is predicated upon not only the ability of each team to integrate ESG into its processes and investment approach, but also both the markets in which such team operates and its clients’ needs.
We also believe that an important part of our responsibility to clients lies not only in encouraging change that can enhance, protect and provide opportunities for shareholders to meet their investment objectives, but also in seeking to mitigate associated risks, including those related to ESG.
Engagement Is Essential to ESG Investing
Active engagement remains an essential element of both VanEck’s investment philosophy and our processes. As part of VanEck’s bottom-up investment process, our active investment teams seek to meet, when possible, with company management, and representatives of debt issuers, prior to investing. Once we invest in a company, we seek to continue to have regular dialogue with company management and may, where relevant, raise ESG issues pertinent to that company and industry.
VanEck uses a number of criteria to identify and/or prioritize its engagements with companies regarding their ESG practices. Two of the more important criteria are: 1) the disclosure of, and transparency around, particular ESG-related factors and data; and 2) their materiality. An example of the criteria evaluated are those specific themes that represent either the highest value at risk or highest potential impact.
Of considerable importance, too, are breaches of international norms. Other criteria reviewed include: companies’ responses to impacts that have already occurred; follow-up from a voting decision; and the geography and/or market in which a company operates.
VanEck may, in addition, discuss, for example, a board’s focus on ESG or, more specifically, a company’s environmental record, safety record, community engagement, energy and resource efficiency or labor relations. When we raise ESG-related issues during these meetings, we do so, among others reasons, in order not only to have a better understanding of goals and risks, but also to understand better, and advocate adherence to, best practices. VanEck likewise tends to engage on such issues when asked to by companies themselves.
Importantly, our investment teams also engage with clients on their concerns, including ESG. Beyond the analysis of ESG factors described above, VanEck offers clients with separately managed accounts the flexibility to implement their own additional and specific investment requirements.
ESG Factors in Proxy Voting
As one key way of realizing our duty as a responsible active investor, we seek to consider ESG factors when voting securities owned by the clients for which we have been delegated voting authority.
To assist in our responsibility for voting proxies and the overall voting process, VanEck retains the services of an independent third-party proxy voting specialist, Glass Lewis, and has adopted Glass Lewis’ Proxy Voting Guidelines. The services provided by Glass Lewis include in-depth research, global issuer analysis and voting recommendations, as well as vote execution, reporting and recordkeeping.
As part of VanEck’s continuing commitment to responsible investing, we consider ESG factors to be integral components of both our investment philosophy and processes. We also understand the importance of active engagement with the companies in which we invest regarding conversations around ESG issues.
We are very aware that intentions, thinking and evidence in the ESG space continue to develop. We remain committed to identifying those factors that can enhance, protect and provide investment opportunities for shareholders. We believe that this work ultimately helps: 1) VanEck to meet its fiduciary duty to clients; 2) our clients to achieve their objectives; and, 3) further foster improved corporate behavior.
Please note that VanEck may offer investments products that invest in the asset class(es) or industries included in this blog.
This is not an offer to buy or sell, or a solicitation of any offer to buy or sell any of the securities mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.
ESG investing is qualitative and subjective by nature, and there is no guarantee that the factors utilized by VanEck or any judgment exercised by VanEck will reflect the opinions of any particular investor. Information regarding responsible practices is obtained through voluntary or third-party reporting, which may not be accurate or complete, and VanEck is dependent on such information to evaluate a company’s commitment to, or implementation of, responsible practices. Socially responsible norms differ by region. There is no assurance that the socially responsible investing strategy and techniques employed will be successful.
ESG integration is the practice of incorporating material environmental, social and governance (ESG) information or insights alongside traditional measures into the investment decision process to improve long term financial outcomes of portfolios. Unless otherwise stated within the Fund’s investment objective, inclusion of this statement does not imply that the Fund has an ESG-aligned investment objective, but rather describes how ESG information is integrated into the overall investment process.
All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future results.
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