Sustainability within multi asset strategies

Wealth DFM: Do you invest in funds or do the funds just invest directly?

MM: The majority are direct holdings. We typically invest in single equities, corporate bonds, sovereign bonds, bonds issued by supra-national bodies like development banks. This enables us to have very clear visibility of what we are investing in and some very clear standards in terms of, for example, exclusions.

There are a number of exclusions that we follow. We won’t invest in companies that are, for example, in breach of the United Nations Global Compact Principles. We wouldn’t invest in companies that operate in certain sectors or services, and we require a certain level of standard from a governance and ESG perspective.

Going direct gives us the opportunity to be very granular on this. It also gives us the opportunity to vote at every AGM of the companies that we own in the portfolio. So we can really be active investors and when we feel there is a need for engaging with those companies, we can go directly to them.

There’s also been a benefit from a cost perspective, of course, because going direct is more cost efficient than owning a collective instrument like a fund or an ETF.

However the key reason why we do it is really about giving us the granularity, the ability to get direct exposure to certain themes, certain areas of the market, while having a full visibility of what it is that we’re investing in.

Wealth DFM: And finally, sustainable investing is clearly something which you feel very strongly about. What excites you most about it?

MM: It’s very interesting how the focus on ESG and sustainability has grown in the last three years, since we first launched our first sustainable multi asset strategy. It has been quite surprising to some extent to see the relevance and importance with which this topic has been taken up by the market.

I think there has been an initial approach that has been very much about trying to highlight what the risks are about ESG, what the risks are about not investing sustainably. To me, what is particularly appealing today is to consider what are the opportunities?

If we look more broadly at why are we talking about these issues, why are they relevant today, I think it’s clear that we can see a very important transformation that’s been taking place at the macro level. We can look at how countries are behaving, how our regulation is changing and even the most recent fiscal and monetary policies are pointing in the direction of transformation and becoming more sustainable.

So with this in mind, I think what will be very exciting from an investment standpoint going forward is really trying to capture some of the opportunities that this transformation will bring. Not all of them will be obvious. I don’t think that by having a quick selection of high quality ESG companies, you’re guaranteed to win.

I think it is much more about trying to understand some of the broader themes that are happening around us and in what part of the market. Also what companies that we’re looking at can benefit the most from this and can move faster and change better to be able to become more efficient and therefore deliver better returns for the clients as well. It’s a very interesting challenge, and one which I believe has some excellent opportunities and prospects ahead.

The views expressed in this document should not be taken as a recommendation, advice or forecast.

When you’re deciding how to invest, it’s important to remember that the value of investments goes up and down. So how much your investments are worth will fluctuate over time, and you may get back less than the original amount you invested.

For financial advisers only. Not for onward distribution. No other persons should rely on any information contained within. This financial promotion is issued by M&G Securities Limited which is authorised and regulated by the Financial Conduct Authority in the UK and provides ISAs and other investment products. The company’s registered office is 10 Fenchurch Avenue, London EC3M 5AG. Registered in England and Wales. Registered Number 90776.

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