We strive to be responsible stewards of our clients' assets within a framework of good governance and transparency.
Responsible investment (RI) sits at the heart of our corporate and client agenda – it is central to our values and culture and has long been integral to our investment research and decisions, as well as our approach to business more broadly.
The rationale for responsible investment is clear: companies with sustainable business models that look to the future have more potential to deliver value to all stakeholders, including shareholders.
We also recognise the responsibility we have as investors to play a positive role in contributing to a sustainable future. We have a strong track record in active ownership and our engagement ensures that the companies we invest in are held accountable.
We are a founding signatory of the United Nations’ Principles for Responsible Investment (PRI). The PRI frames our approach globally and we conform with its six core Principles. As a signatory we are assessed annually on how we incorporate ESG issues into investment practices across asset classes. In 2020 Columbia Threadneedle was awarded a clean sweep of A and A+ ratings, as set out in the table below. Our annual PRI submissions are publicly available. In addition, regional policies can be viewed on our website.
Columbia Threadneedle score
Strategy & Governance
Listed Equity – Incorporation
Listed Equity – Active Ownership
Fixed Income – Sovereign, Supranationals and Agencies
Fixed Income – Corporate Financial
Fixed income – Corporate Non-Financial
Note: Published in July 2020, these ratings represent Columbia Threadneedle’s EMEA Responsible Investment activities.
Following the acquisition of BMO’s European asset management business in November 2021, Columbia Threadneedle offers a market-leading RI capability based on creating value through research intensity, driving real-world change through active ownership, and partnering with clients to deliver innovative RI solutions.
We manage approximately £35.5bn ($48.8bn) globally1 in RI funds and strategies across asset classes, including £19bn ($26bn)2 across 35 Article 8 and 9 funds. We now also offer a £356bn ($414bn)3 Responsible Engagement Overlay (reo®) service, providing comprehensive active ownership expertise and systematic analysis of ESG risks in client portfolios.
Key industry associations
Founding member of the United Nations-backed Principles for Responsible Investment (PRI).
- Active participant in a range of key industry initiatives including Investment Association committees, ICMA’s Social Bond Principles, SASB working groups, PLSA Stewardship Advisory Group.
- Commercial partnerships with Big Issue Invest, INCO, Carbon Trust and Sustainalytics.
We believe that RI research is fundamental research. That is why our RI analysts are now embedded within our global central research team, playing a key role in the assessment of ESG issues and supporting the integration of RI across the business. Our RI analysts work across three principal workstreams: Thematic research, Stewardship and Voting, and Policy and Strategy. They provide unique insights into the risks and opportunities that can enhance investment performance, but which are not otherwise uncovered through traditional analysis. In addition to collaborating with portfolio managers and fundamental analysts across the organisation, they also monitor portfolios and investments and support engagement with issuers of the securities we invest in.
Our proprietary RI ratings provide the foundation to this analysis. This robust, data-driven and evidence-based framework allows our investment team to assess material exposures for over 8,000 companies worldwide. The ratings give insight into a company’s leadership, governance, culture and operational standards of practice, focusing on issues that are material to long-term performance. This sophisticated tool provides our analysts and portfolio managers with unique, actionable RI insights.
In addition, our RI analysts conduct independent thematic sustainability research which provides risk assessments and investment ideas across multiple sectors. In determining the quality of the ESG risk framework, they attach particular significance to the materiality map developed by the Sustainability Accounting Standards Board (SASB®), which identifies the most financially material ESG risk factors for 77 distinct industry types. In identifying active investment opportunities, they also focus on eight of the 17 UN Sustainable Development Goals (SDGs) that we deem the most material to investments.
By considering the additive insights of ESG factors provided by our analysts, our portfolio managers can better assess the sustainability of companies they (plan to) invest in, ensuring long-term value creation for our clients.
Stewardship and proxy voting
Our stewardship activities intensify our understanding of the risks and opportunities that bear on our ability to deliver sustainable long-term value for clients. We actively engage with companies and issuers to gain deeper research insights, build relationships and influence for change.
Our approach to engagement and voting is based on collaboration between our portfolio managers, analysts and RI team members. When deciding whether to engage, we consider various factors including:
- The material significance of an issue to the company.
- The risk to our clients.
- The size of our holding.
- Our opportunity to collaborate.
- Our ability to effect change.
As an active manager, we do not outsource voting to third parties. We vote in consideration of all relevant factors to support the best economic outcome in the long run, in accordance with our corporate governance and proxy voting principles and our proxy voting policy.
We view our voting as one of the most effective ways of signalling approval (or otherwise) of a company’s governance, management, board, and strategy and an important way to drive positive change. Our highly engaged and principled approach sees us regularly opposing items where proxy voting advisers are more lenient and supporting where they are more aggressive. We regularly withhold support from individual directors and cast dissenting votes based on pay-related concerns.
Each year we cast proxy votes on approximately 6,500 shareholder meetings across 70 countries. In 2020 we have taken a more systematic approach to voting on gender diversity at senior management as well as board level. We publish our voting decisions seven days after the relevant general meeting and provide fund-specific reports to our clients.
Columbia Threadneedle Proxy voting 2020
Source: Columbia Threadneedle Investments, ISS ProxyExchange, 31 December 2020.
Identifying sustainable opportunities
Our clients increasingly want to understand and measure how capital allocation decisions are supporting delivery of the United Nations’ Sustainable Development Goals (SDGs). The SDGs provide investors with a thematic framework around which public policy, reform and development priorities will be focused, catalysing demand for innovation and new or increased investment. They also help businesses align with global priorities.
Translating the SDGs to investment opportunities provides us, our clients, and the wider industry, with a compelling means to contribute to sustainable development whilst aiming to achieve positive financial returns.
We focus on eight of the 17 UN Sustainable Development Goals (SDGs) that we deem the most material to investments. Our thematic research explores investor topics such as energy transition, human capital development and carbon policy.
We look to identify and categorise companies based on commercialised outputs, products and services addressing major social and economic needs.
This approach helps capital to flow towards issuers delivering positive change and offers earnings growth and financial return – giving force to the notion of ‘doing well by going good’.
Columbia Threadneedle Investments sustainable themes
Note: Use of the SDG does not imply UN endorsement.
Managing real estate responsibly: our five-stage approach
- Property investment (asset acquisition)
Our fund managers carry out forensic due diligence and comprehensively survey all properties considered for acquisition. They look at factors including energy performance/MEES (minimum energy efficiency standards), environmental risks/impact (including flood risk), and areas for potential improvement in terms of sustainability performance.
- Strategic asset management
Our asset managers develop unique strategies to add value to every building we manage. They consider areas including environmental, energy and water efficiency, waste management and sustainability best practices. They also look at ways to promote health and well-being and community engagement. Finally, our asset managers seek opportunities to promote information sharing and co-operation with tenants, to enable sustainability strategies to be jointly implemented by the occupier and the management team.
- Refurbishment and building improvement
Refurbishments carried out by our asset managers offer the greatest potential to improve the environmental and social impact of our buildings. Our Refurbishment Guide promotes high sustainability standards, and construction projects incorporate a set of minimum requirements relating to: environmental management; building quality and flexibility; health and well-being; energy efficiency; transport; water; building materials; waste management; and ecology and pollution.
- Property management
We are active managers who seek to continually improve the day-to-day environmental impact of our buildings while maintaining high levels of occupier satisfaction and engagement. This is achieved by dedicated Oversight Managers who collaborate with third-party managing agents to deliver objectives aligned to clearly defined targets set out in our Sustainability Road Map (see next page). Oversight Managers are also responsible for monitoring health and safety on all our properties, ensuring oversight through monthly reporting, meetings, and independent annual audits.
- Risk and governance
Our Real Estate team benefits from rigorous risk and governance controls. We have an integrated Real Estate Governance team providing ‘first line’ risk and governance oversight. The team also has a liaison function with Group Investment and Operations Risk and Compliance (‘second line’ functions), and with Audit (‘third line’) as required. Our investment and management process controls are also independently audited on an annual basis as part of our company’s ISAE reporting obligations.
4 Sustainable real estate investment: Implementing the Paris Climate agreement – an action framework, PRI, 2016
5 Source: https://gresb.com.
Net zero in UK real estate
To do this, we have made the commitment to achieve net zero carbon across our UK real estate portfolio by 2050 or sooner. This commitment goes beyond our landlord operations, covering whole building emissions, including our occupiers’. Each fund will set interim targets to measure and drive our progression towards the ultimate 2050 target.
Given the nature of real estate and its diverse stakeholders, we know we cannot achieve this alone. We have created a framework under which we are engaging with our investors, occupiers, property managers, environmental advisers and our supply chain to create sustainable long-term value.
Working together we have the skills and effective partnerships to set clear targets, plans and procedures. This collaborative approach underpins our primary objective to deliver strong investment returns for our clients by enhancing the underlying real estate assets, thereby reducing energy consumption, carbon emissions and running costs.