By Tom Butcher
Director of ESG
Van Eck Associates Corporation
Sustainable investing is an approach to investing that, alongside financial results, may also seek to drive positive environmental, social or governance (ESG) outcomes. It incorporates ESG factors and risk considerations when making investment decisions while often also aligning investment opportunities with investors’ values.
Environmental criteria include energy use and impact on climate change, greenhouse gas emissions, waste, pollution, natural resource conservation and animal treatment.
Social criteria consider a company’s relationships with its stakeholders and include working conditions, impact on local communities, health and safety and employee relations and diversity, equity and inclusion.
Governance, amongst other things, includes the proper use of accurate and transparent accounting methods, fair voting, the avoidance of conflicts of interest and not engaging in illegal behavior.
VanEck recognizes the importance of these factors in both its investment philosophy and processes. The firm believes that appropriate management of a portfolio company’s sustainability-related risks and opportunities should not only translate into that company’s differentiated operational strength, financial performance and prospects, but may also have an impact on valuation.
For these reasons, we recognize that it is in the interest of our clients to include such considerations, when possible, when making investment decisions. We also recognize that companies exhibiting strong practices around sustainability may turn out to be both more competitive and successful over the medium to long term.
Our Commitment to Responsible Investment
VanEck is a signatory to the Principles for Responsible Investment (PRI), an investor initiative in partnership with UNEP Finance Initiative and UN Global Compact. As a signatory we formally agree to incorporate sustainability factors and analysis into our investment processes.
Governance—“active engagement” in particular—has always been a major consideration in our research and investment processes and our efforts to fine tune the questions we ask in each industry continue to evolve. We believe that an important part of our responsibility to clients goes beyond encouraging change that can enhance, protect and provide opportunities for shareholders to meet their investment objectives. It entails, in addition, seeking to mitigate associated risks, including those related to sustainability.
Sustainable Investing at VanEck
Active Strategies: Governance is especially important for our active emerging markets equity strategy. Companies can have higher concentrations of inside ownership and more flexible rules. With our active gold mining strategy, we rigorously monitor companies’ adherence to industry best practices and now have much more meaningful and constructive interactions with company boards on these topics compared to 10 years ago. Our recently launched active environmental sustainability equity strategy takes a holistic approach to sustainability, addressing critical land and water factors, as well as greenhouse gas emissions, through global exposure to a broad range of companies purposely focused on these issues.
Passive Strategies: We were one of the first ETF issuers to offer environmentally sustainable exposures and we continue to research how those and sustainability-related strategies can add value to client portfolios. VanEck offers a number of ETFs, both equity and fixed income, either with sustainability-related themes or approaches that employ specific screening criteria and/or indices.
Sustainable Investing Going Forward
VanEck recognizes that intentions, thinking and evidence in this space continue to develop. We remain committed to identifying those factors that can enhance, protect and provide investment opportunities for shareholders.
We continue to believe that this work ultimately helps us to meet our fiduciary duty to clients; our clients achieve their objectives; and further foster improved corporate behavior.
Originally published by VanEck on January 13, 2022.
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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.
Sustainable Investing Considerations: Sustainable investing strategies aim to consider and in some instances integrate the analysis of environmental, social and governance (ESG) factors into the investment process and portfolio. Strategies across geographies and styles approach ESG analysis and incorporate the findings in a variety of ways. Incorporating ESG factors or Sustainable Investing considerations may inhibit the portfolio manager’s ability to participate in certain investment opportunities that otherwise would be consistent with its investment objective and other principal investment strategies.
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.
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.