ClariVest's Approach to Responsible Investing
In 2005, the United Nations sponsored an effort to develop and implement a set of Principles for Responsible Investment (PRI) that explicitly recognizes the power of capital markets to influence behavior around the world. In 2015, after spending a year evaluating the PRI and ESG, ClariVest concluded that there is a place for PRI within the ClariVest (CV) investment philosophy, and became signatories to the United Nations PRI. To access our Policy for Responsible Investments, please click here.
ISS-Ethix provides ClariVest with identification, analysis, and classification of the following ESG issues across a global universe of approximately 10,000 stocks:
1.) Norm-Based Analysis - adherence to global norms on environmental protection, human rights, labor standards, and anti-corruption; and
2.) Controversial Weapons Analysis - weapons deemed either A.) illegal, as defined by international legal instruments, or B.) particularly controversial due to their indiscriminate effects and the disproportionate harm they cause.
CV pushes ESG related information from ISS-Ethix to our investment professionals, via our proprietary intranet-based tools, throughout the initial screening and investment case development stages of the process.
CV PMs subjectively evaluate the decision to invest in a company with ESG issues from a risk and reward aspect:
Risk - CV PMs must consider the risk to the stock-specific investment thesis, as well as to the systematic risk ramifications of investing (or not investing) in the stock.
Reward - the professional centers their evaluation on the potential impact of the ESG related issue on near to mid-term expectations about the future of the firm being evaluated.
Pre-trade compliance checks and daily portfolio monitoring (for ESG status changes that may occur) provide additional, ongoing accountability for integration of ESG into the investment process.
ISS-Ethix provides objectivity, due process, and diligence to maximize engagement. We believe that engagement within a large pool of like-minded investors can wield significantly more influence than ClariVest might be able to achieve alone. This allows CV to play an activist role with regard to ESG related issues, while fulfilling our fiduciary duty. In the end, engagement is more productive than simply instituting a policy of excluding companies with ESG related issues.
For more in-depth analysis and illustration of ClariVest's policies and procedures developed out of signing the UN PRI agreement, please refer to the "ClariVest Position Paper - ESG Integration and the UN PRI" here.