Our ESG policy differentiates between our product strategy and how we apply ESG principles to the running of our business.
QMA Wadhwani LLP (QMAW)’s primary investment goal is to add long-term value for investors. We offer systematic multi- asset strategies to achieve this. We currently utilise exchange-traded futures, FX spot and forward contracts, and have a small exposure to equity sector ETFs. At present, we do not trade individual securities.
We recognise that different investors have specific ESG needs. We are happy to partner with our clients to implement their ESG views where possible, e.g., through the application of client-directed restrictions. Screening and/or thematic requirements for ESG investing are potentially available for any of our strategies. We can also employ thoughtfully designed systematic techniques to allow for client-directed overlays to our strategies, through which clients may express their views on ESG. If, in the future, we were to trade individual securities, we could also employ ESG tilts or screening in those portfolios to conform with client objectives.
We believe that the ESG landscape is extremely fluid. As the financial implications of sustainability issues come into sharper focus, the relationship between ESG and investment returns may very well change, and it is something that our research and investment process is cognizant of.
QMAW is strongly committed to understanding both ESG’s present and future investment implications, as well as our clients’ specific ESG goals and priorities.
ESG Research and Investment Approach
Any approach by QMAW to integrating ESG into our investment portfolios is intended to address the challenges facing the responsible investor, without compromising long-term risk mitigation or expected returns. Our investment process focuses on macroeconomic considerations and, as stated above, utilises instruments related to these drivers, such as fixed income, equity index and commodity futures, as well as currency spot and forwards. Our typical holding period for these instruments is relatively short: approximately 20-25 days, on average. The firm does not currently focus on individual issues of debt or equity securities.
Our current approach with regard to ESG implementation in macro portfolios follows a two-pronged approach:
- Develop and adhere to an exclusion list covering specific ESG issues, particularly equity sectors that may include controversial arms and munitions, tobacco, coal and nuclear weapons
- Work with existing ESG organizations to enhance ESG reporting
We recognise that investors today have a wide variety of goals and priorities for their ESG-related investments. In our view, it is the responsibility of the manager to seek to optimise returns in accordance with client objectives, while catering to each client’s individual ESG preferences.
We are currently thinking through the possibility that ESG considerations have significant macroeconomic implications. Thereby, they have an impact on, for example, allocations between countries.
Engagement and Business Practices
Over and above our approach to products, as set out above, we are focused on promoting ESG investment principles within the investment industry, in particular on improving the quality, quantity and consistency of the data disclosed.
As a responsible investor and fiduciary, QMAW supports our parent company’s collective engagement with ESG-related organizations and data providers. QMAW is a member of the Investor Network on Climate Risk (INCR)/Ceres through the memberships held by PGIM, the global investment management business of Prudential Financial, Inc. (PFI)*, as well as through those held directly by PFI, our ultimate parent.
As a firm, QMAW operates day-to-day with both green and eco-friendly practices to the fore. We are fully mindful of diversity issues, pay discrimination, ethics training and other socially-directed employment policies, all part of how we do business at QMAW on a daily basis. QMAW has an ESG Council that meets regularly and is fully-engaged at looking at new ESG considerations and regulations, which we believe is especially important in these turbulent times.
Our ESG investment policy is consistent with the values we ascribe to in our own firm, where operating to high ethical standards, robust risk management and a diverse and stable team-based culture have long been vital to our success.
These policies complement the longstanding history of our ultimate parent, PFI, as a social purpose company and its ongoing commitment to building long-term value through sustainability. PFI today is building a $1 billion impact investing portfolio, working assiduously to make a positive impact on the world around us.