Responsible Investment Policy

EQ’s Responsible Investment Policy provides the baseline of the firms approach to responsible investment. This is adopted by the EQ Board and is formally reviewed and updated annually. 

As institutional investors, our fiduciary duty requires us to act in the best long-term interests of our beneficiaries. Central to this role is our belief that environmental, social, and corporate governance (ESG) factors can influence investment portfolio performance, with the degree of impact varying across companies, sectors, regions, asset classes, and over time. 

We also recognise that these principles can help align investors with wider societal objectives and, where consistent with our fiduciary responsibilities, commit to the following: 

• Principle 1: We will incorporate ESG factors into investment analysis and decision-making processes. 
• Principle 2: We will be active owners and incorporate ESG factors into our ownership policies and practices.
• Principle 3: We will seek appropriate disclosure on ESG factors by the entities in which we invest. 
• Principle 4: We will promote acceptance and implementation of the Principles within the investment industry.
• Principle 5: We will work together to enhance our effectiveness in implementing the principles.
• Principle 6: We will report on our activities and progress towards implementing the principles.

In signing the principles, we as investors publicly commit to adopt and implement them, where consistent with our fiduciary responsibilities. We also commit to evaluate the effectiveness and improve the content of the principles over time.

We believe this will improve our ability to meet commitments to beneficiaries as well as better align our investment activities with the broader interests of society. We encourage other investors to adopt the principles. 

EQ defines responsible investing as the integration of ESG factors – environmental, social, and corporate governance, into investment management and stewardship practices. We believe these factors are integral to evaluating investment risk and opportunity, and to fulfilling our fiduciary duty to clients.

This policy covers our baseline approach to ESG integration and stewardship. In addition, different client sustainability preferences can be catered for and demand additional objectives, due diligence and monitoring.  

 EQ specialises in providing suitable sustainable portfolio solutions across the spectrum of capital and are determined to provide these in an accessible manner (low starting capital, retail friendly).  

The ESG integration, negative and positive screening and stewardship approaches embedded and expected within EQ’s sustainable portfolios go beyond the details provided in this responsible investment policy. 

• Systematic ESG integration and stewardship can enhance long term investment returns and mitigate risks.
• Climate change is a material investment risk and opportunity.
• EQ holds a responsibility to provide sustainable investing solutions to suit a range of client preferences.

To reflect these beliefs, we have developed assessment frameworks which feed into EQ’s external manager selection and monitoring. 

External funds are evaluated in the context of each specific investment style, strategy, and asset class.  

Actively managed funds: expectations and selection criteria 

EQ selects active funds for specific purposes: to diversify away from market exposure, outperform the market, or mitigate risks inherent in broader market benchmarks.

To support these objectives, EQ has established three core expectations of active fund managers, as outlined below.

1) Systematic ESG integration into the investment process 

EQ believes that integrating Environmental, Social and Governance (ESG) data into investment decision making benefits investor returns by illustrating financially material risks and opportunities. This view is amply supported by the academic and practitioner literature2 and by our own experience in managing portfolios over the past decade and more.  

EQ expects to see evidence that the following best practices are implemented by all selected actively managed investment funds (and thus score a minimum of 3 in our 1-5 scale): 

• Managers go beyond ESG integration for risk mitigation by also aiming to capture ESG opportunities. 

• Managers understand the dynamic nature of E, S, and G criteria, and reflect concepts of materiality in their processes. 

• Managers invest in internal resource & expertise and have sufficient ESG oversight. 

• Managers systematically integrate ESG information and information on relevant systemic sustainability themes into investment decision-making: including investment selection, portfolio construction, and sell-discipline. 

2) Carbon risk and climate risk integration 

EQ considers carbon risk, physical climate impacts and the transition risk posed by a decarbonising economy as material investment risks.  

We expect active fund managers to manage material climate related risks and opportunities and integrate these into investment decision-making and stewardship. 

3) Ambitious strategy stewardship 

EQ believes that using shareholder rights is a core part of fiduciary duty. Thus, EQ evaluates and scores all fund managers on the quality and intentionality of their engagement and voting process, requiring a minimum of 3 in our 1-5 scale.  

 EQ expects all asset managers to use voting rights (where applicable) and engage with company management directly and indirectly to: 

• Gather information on ESG issues, and 

• Strategically drive positive change on identified ESG weaknesses and opportunities, where these are material. 

• Use different stewardship tools to drive effective change and reflect any outcomes in investment decisions and convictions. 

Applicable asset classes and scope of these active fund expectations

These standards apply to the following primary asset classes, managed by active external fund managers, where ESG is material and integration approaches are well developed: listed equity, listed corporate bonds, ABS, infrastructure, real estate. Sovereign bonds are covered by an extension of these expectations. 

In absolute return and alternatives strategies where, best practices are still developing, we aim to select those that are at the forefront, and if the investment universe is limited, engage with these managers to help shape and lift standards.   

Passively managed funds: expectations and selection criteria 

We select passively managed funds for one key purpose: provide certain clients with low-cost exposure to global or regional market returns. Within this context, ESG risk management will be approached through responsible stewardship.  

Ambitious corporate stewardship 

EQ believes that using shareholder rights is a core part of fiduciary duty. While passive funds naturally do not come with the same engagement intensity, we instead look at the overall stewardship strategy, process and evidence of the relevant asset manager. 

To meet our expectations, we need to see evidence that voting policies & evidence address ESG risks and opportunities, and cross-company engagement is ambitious and meaningfully addressing systemic sustainability risks, including climate change.  

ESG and sustainability characteristics are fully integrated into EQ’s fund research process. For more information on EQ’s investment process please contact us. 

ESG and engagement/stewardship scoring 

Current and potential investments with third party managers are evaluated by our internal fund analysts, including the approach of such managers to ESG analysis and engagement. The team use a proprietary questionnaire and interview managers to then summarise their evaluation in a score separately for E, S, and G integration and stewardship intentionality, each on a 1-5 scale.  

Firm-wide and specific strategy level achievements are distinguished. This evaluation is completed by EQ’s sector specific fund analysts, supported by EQ’s sustainability team and is fully integrated into the fund selection process as described above.  

ESG integration is one of the many factors that is considered by our fund analysts and influences third party manager conviction. However, any new fund is needed to meet the standards described above to pass the fund selection committee. Further requirements exist for strategies with specific sustainability objectives. 

EQ’s sustainable portfolio range; specific exclusions 

Where appropriate to the objectives, current and potential investments with third party managers are evaluated by our internal fund analysts on their adherence to our portfolio-specific exclusions. These exclusions cover different categories: controversial business behaviour, real-world negative impacts, financially material risk exposures. We then use external independent data to test and monitor these exclusions at the underlying holdings level and have an escalation process in place to act on any flags. 

EQ’s sustainable portfolio range; positive impact and systemic sustainability outcomes 

Where appropriate to the objectives, EQ carries out an in-depth assessment of the philosophy, policies, resources and processes in place to manage and maximise positive real world sustainability outcomes intentionally. This includes objectives that target ESG leaders, climate leaders or impact solutions. 

For relevant funds and portfolios with sustainable objectives, EQ carries out an independent review of the sustainability profile (ESG, UN Sustainable Development Goal alignment, impact theme alignment, carbon and climate risk, etc) of underlying fund holdings, which includes positive and negative alignment.  

This assessment allows fund analysts and portfolio managers to identify, track and set future targets for the sustainability outcomes of EQ’s investments. This also feeds into our stewardship process, where we engage on identified weaknesses through our monitoring. 

Climate change/ net-zero 

Recognising its financial materiality, EQ expects active asset managers to incorporate climate change contribution and transition risks in their investment decision-making and stewardship. We test this in due diligence and monitoring. We also assess underlying holdings independently to test the implementation of such processes. For example, EQ aims to assess the climate change contribution of all funds via carbon foot printing (Scope 1, 2 and 3), and science-based target alignment. 

Furthermore, we analyse the investment in climate solutions (or green bond financing thereof) where appropriate for the funds and portfolios’ objective.  

 

For details on our active ownership approach in line with our fiduciary duty to clients, please refer to our Stewardship Code.  

We also expect active ownership from selected managers, hence the standards expected and described above in Ambitious strategy stewardship, and Ambitious corporate stewardship.

Managing conflicts of interest related to responsible investment 

To manage conflicts of interest arising from differing client sustainability preferences, we have designed a range of portfolios with varying sustainability objectives. Where needed, we also offer bespoke portfolios that can be further tailored to individual client requirements, helping to avoid potential conflicts. 

Conflicts of interest may also arise in the context of our stewardship activities. We seek to mitigate these by grounding EQ’s engagement themes in well-established, long-term systemic sustainability risks that are financially material across most clients’ investment horizons. We further address potential conflicts by publishing our stewardship strategy publicly, together with details of any collaborative initiatives in which EQ participates. 

We further manage conflicts of interest in responsible investing through our commitment to transparency and disclosure. By providing clear information on portfolios’ sustainability credentials, their outcomes, and associated stewardship activity, we help ensure that all clients can access the most suitable investment option. 

More generally, in managing conflicts of interest, our staff are trained to act honestly, fairly, and professionally in accordance with the best interests of our clients, including when they: 

• Gather all relevant and material information from our client; and an appropriate range of product and service providers;  

• Carry out an analysis, and form a view about what course of action to recommend to our clients;  

• Recommend (and only recommend) investments and services that are suitable and appropriate for the client;  

• Carefully, thoughtfully and fully record all necessary information and actions. 

Training takes place when an individual joins the firm; if this policy changes; or if anything happens, which suggests that further training is necessary, appropriate or desirable.

Organisational governance 

Responsibility for the annual review of and regular adherence to this policy, and approval of changes, lies with EQ’s Board, and with the Joint CEOs.   

At an operational level, sustainability objectives and commitments are overseen by the most senior members of our investment team, sitting on the Sustainability Oversight Committee (SOC). Please see below the responsible investment processes implemented and governed by our various other committees (alongside their other objectives). 

Committee	Objective	Outcomes
Fund selection committee   (FSC)	Review fund recommendation research reports produced by fund research team, covering investment idea/ rationale, market opportunity, quantitative analysis of manager returns and qualitative analysis of strategy & process, organisational stability and team  Use as a forum for continuous monitoring of fund performance	EQ Buy List: a list of recommended funds that meet our qualitative and quantitative criteria and relevant sustainability criteria Fund suitability recommendations for different mandates  Sizing recommendations if appropriate· Investment Trust update on discounts & Buy / Sell
Asset allocation committee meeting (SAAC)	Review macro-economic & portfolio strategy research  Debate conclusions of this research and its implications on tactical and strategic asset allocation  Build internal consensus on tactical tilts around strategic benchmarks	Set judgement scores for each relevant asset category, which controls min & max tactical asset allocation boundaries   Set scenario analysis scores for each and assess implication on style & sector exposures
Portfolio management committee  (PRMC)	Backward looking:   Review historic performance attribution Peer challenge and 360-degree reviews to ensure all managers’ positioning is pointing in the same direction  Review portfolio positioning and performance to ensure all portfolios have been aligned to the SAAC and FSC recommendations  Forward looking:    Implement recommendations of SAAC and FSC in portfolios  Sign off MPS and Bespoke model positioning  Ongoing:    Review Core / Satellite targets & current positioning  Review Active share targets & current positioning  Identify new research areas, idea sharing	Guidance for investment managers on portfolio construction, sustainability integration and risk management  Feedback to SAAC and FSC for future research initiatives
Investment oversight committee  (IOC)	Review the adherence to financial and non-financial objectives and parameters  Financial performance adherence: Edgecombe risk profiler adherence, review historic risk to ensure portfolios are within risk tolerances and in line with client mandates    Sustainability KPI adherence: Minimum investment criteria adherence: Negative product involvement, ESG ratings    Asset allocation tolerance adherence: Fund Selection BUY list adherence Variance report Bespoke Segregated mandate review	Meet fiduciary duties   Stakeholder interaction   Ensure all clients have similar experiences for the same mandates   Ensure all regulatory requirements are met
Sustainability Oversight Committee(SOC)	Review sustainability processes, including ESG integration, sustainability and impact analysis  Ongoing review of mandates to ensure no “mandate drift”  Oversee adherence to sustainability objectives  Ensure adherence to regulatory developments	Uphold EQ’s responsible investment policy & stewardship code  Ensure specific sustainability objectives are adhered to  Ensure we remain at the forefront of sustainable investing

EQ recognises that it, along with the broader asset management industry, is on a journey, and that we must continually strive to improve our responsible investment practices and objectives in line with evolving best practice.