Annual Impact Report
In October, we published the fifth version of the annual impact report for the EQ Positive Impact Portfolios [1] which I really encourage you to read if you have not already done so.
As impact investors, we are committed to measure and report transparently on the social and environmental performance and progress of our underlying investments. We use the UN Sustainable Development Goals (“UN Goals”) as our guiding framework to think about impact. For the first time, our most recent impact report introduced the theory of change, linking companies’ activities and their outputs to a set of outcomes and progress towards the UN Goals.
With climate change potentially being the biggest threat modern humans have ever faced [2], we have made science-based emissions reduction targets a key pillar of our engagement work and push asset managers and underlying companies to disclose and put in place credible climate transition plans.
UN Goals Alignment – EQ Positive Impact Portfolios
Since the launch of the first impact report in 2017, we have been a pioneer in demonstrating our portfolios’ alignment to the UN Goals and help investors understand whether the invested companies are providing solutions to those goals through their products or services, or whether they are preventing progress on these Goals, through activities like tobacco manufacturing, fossil fuel production or gambling.
4 years ago, 76% of the EQ Positive Impact Balanced Portfolio was aligned to the UN Goals, 23% with unrelated products to the UN Goals (neutral) and 0.4% seen as going against the UN Goals through 4 holding that sold alcoholic beverages. Over the past 4 years, we have worked really hard and pushed the fund managers we worked with to keep raising their ambition of, and bar for inclusion in, their sustainable or impact funds. We have also evolved the rigidity and stringency of our UN SDG mapping rules.
We have increased the number of themes in our negative mapping, for example by adding flags for unhealthy food and beverages, airlines or polluting car manufacturers. Today, I am really pleased to say that 82% of the EQ Positive Impact Balanced Portfolio is aligned to the UN Goals and those four alcohol stocks previously held have been divested. Lastly, we are currently working on some really exciting new sustainable investment strategies, which will help to increase the alignment even further in 2022.
UN Goals Alignment – EQ Future Leaders Portfolios
In regards to the EQ Future Leaders Portfolios, we have a similar ambition to improve the alignment to the UN Goals while investing in index tracking funds. At launch in February 2020, the EQ Future Leaders Balanced Portfolio was 53% aligned to the UN Goals, 39% was neutral and 7% was going against the UN Goals.
Over the past 2 years, we have worked very hard with our asset managers, introduced exciting sustainable thematic trackers and increased the alignment to the UN Goals to 60% which represents a 7% increase. We have also significantly reduced the exposure to companies going against the UN Goals from 7% to 3% and screened out fossil fuel production companies from the portfolios.
We are currently working on exciting projects to further improve the sustainability credentials of the portfolios.
As you know, EQ’s sustainability ambition goes beyond the portfolios we manage on your behalf and our latest recertification as a B-Corp [3] is a strong testimony of sustainability being ingrained in our culture and governance across the firm.
In the name of all employees at EQ Investors, I would like to thank you all for your ongoing support, it is really appreciated and pushing us to keep on innovating.