Since its beginnings, TOBAM has decided that sustainable development would be explicitly core to its values. Our clients have a long-term approach to investing and our sustainable way addresses these concerns. TOBAM has a long-standing commitment to uphold environmental, social and governance issues (ESG). These principles are integral in the rules structuring our activities. We aim to act in a socially responsible manner via our business, our social relations and our long term vision of sustainable growth. Furthermore, TOBAM and its stakeholders endeavour to actively promote ESG standards and implementation both at the client level and the industry level. TOBAM’s sustainable way relies on two pillars: the Sustainable Responsible Investment approach and our internal corporate engagement and actions.
How did you draw TOBAM’s Sustainable Way?
Early on, since the launch of TOBAM when we decided to apply the Norges Bank recommendations and exclusions list to our equity portfolios. This early initiative reflects the way we conduct our business. In our opinion, there is no sense in doing anything other than sustainable investing. Why would you even start something that is not sustainable? The second step was to sign the United Nations Principles for Responsible Investment in early 2010. Sustainability means generating responsible real returns (growth) achieved by innovative investing over the long term. “Responsible” means embedding respectful and sustainable principles in every stage of the investment process, from clients and the asset manager’s day to day work, to the resources used and the wider environment.
Among the providers of ESG research and exclusion lists, why did you decide to implement the Norges Bank’s?
The question was raised early in the foundation of TOBAM. Our investment process allowed us to take into account ESG criteria. We believed that removing firms that clearly had endangering behaviour and which were carriers of unacceptable risks of severe environmental, social or governance (corruption) damages from our investment universe, was in line with our commitment to our clients. The benefits of working with the exclusion list published by Norges bank was first, working with a globally-recognized investment institution, which aligned its exclusion list with the PRI without seeking to impart a moral judgment. Secondly, Norges Bank’s ESG research clearly has an activist dimension, and I believe that generating this type of dialogue with companies encourages broader adoption of the principles reflected in the PRI and Global Compact.
What is different about TOBAM’s approach to sustainability and responsibility?
The most important point is that each employee of TOBAM is a shareholder of the company, and this is crucial to us in the way we conduct our business. We act in the best interests of our clients and shareholders, which implicitly makes us long-term investors. The second measure that I consider key is the implementation since 2011 of a carbon offset program. We realized that our day to day activity implied a lot of travelling was necessary, which had a significant environmental impact. We set up a yearly measure of our carbon emissions (travels, employees’ transportations, water & energy consumptions …) and decided to compensate at 150%. TOBAM assumes a small part of this responsibility and strives to make a contribution, albeit a small one, to a global effort.
What was the rationale behind your support to Amnesty International?
Our engagement with Amnesty International is representative of the way we consider our long-term investor’s responsibilities. In line with the spirit of the carbon offset program, soon after we launched the Anti-Benchmark® Emerging Markets Equities strategy in June 2011, we decided that we needed to offset our “human rights” impact. Investing in Emerging Markets obviously favours the local economies and population, but it also implicitly supports governments that are not always blameless when it comes to human rights. We decided to support an organization whose sole objective is to promote human rights in the world. Freedom of opinion, speech, association, and entrepreneurship is mandatory to economic development. Our engagement with Amnesty International is core to our approach, and we believe that promoting Human Rights is very much in our client’s interests.
TOBAM offers a quantitative management approach which integrates socially responsible investment criteria via an exclusion list.
Applied to equity and fixed income strategies, respectively since 2007 and 2015, we are looking at Maximum Diversification® indices since 2011, this negative screening is based on the exclusion list published by the Norges Bank, a renowned investment institution and founding member of the PRI , as some other leading institutions.
This exclusion list involves controversial products ( Tobacco, Coal, Weapons ) and other controversial behaviors ( Human rights, Environment and International Laws, severe damages or breaches ).
We are committed to third parties, the industry and the investment companies as another crucial step towards the promotion and development of responsible investment.
Since the adoption of Norges Bank’s exclusion list in 2007, TOBAM has implemented a number of initiatives to further supplement its sustainable investment approach. TOBAM’s research department dedicates a significant amount of its time and resources to study the ways in which sustainable investment and ESG topics can be integrated into portfolios without disrupting TOBAM’s Maximum Diversification® philosophy.
TOBAM’s research team carried out extensive research on the reduction of the carbon footprint of our portfolios via the implementation of a carbon footprint constraint compared to the market cap weighted benchmark of the investment universe.
Based on our findings, we demonstrated that a systematic reduction of 20% of all of TOBAM’s portfolios carbon footprint versus their respective benchmark has no significant impact on the portfolio’s risk/return profile, nor on its diversification benefits.
This relative carbon footprint reduction constraint was implemented in the portfolio optimization process, for all Anti-Benchmark® equity portfolios since June 2018, to all Maximum Diversification® Indices since September 2018 and to fixed income portfolios since June 2019.
Proxy Voting is key component of our business, TOBAM uses its ownership position in companies to further its commitment to socially responsible investing on behalf of clients, and to improve corporate governance by exercising proxy voting rights. Proxy voting is conducted in the sole interest of clients. TOBAM implements an SRI proxy voting policy across investment strategies. Proxy voting is carried out by ISS, a leading provider of corporate governance solutions. Please see below our voting policy. If requested by clients in separately managed accounts, TOBAM can apply a client’s specific voting policy.
TOBAM’s investment process provides a large flexibility to offer bespoke solutions to our clients:
TOBAM has a long standing commitment to Corporate Social Responsibility. It defines corporate engagement as using its shareholder position on behalf of our client shareholders to influence company decision making and further the integration of ESG principles and good corporate governance in the companies in which it invests:
By adhering to the principles for socially responsible investment set out by the United Nations, TOBAM pledge to take environmental, social and governance (ESG) issues into account, thus recognizing the ultimate importance of these issues.
This engagement strengthens our company’s involvement in UN-related organizations in order to encourage global companies to monitor and disclose their carbon and water emissions.TOBAM has implemented carbon compensation measures to compensate 150% of carbon emissions.
The UK Stewardship Code is overseen and published by the Financial Reporting Council, the independent regulator overseeing financial reporting, accounting and auditing and corporate governance.
TOBAM also proactively integrates ESG initiatives within its own business and has published a comprehensive description of all current ESG efforts. We are committed to aligning our company operations and goals with the ten universally accepted principles set forth in the UN Global Compact, specifically in the areas of human rights, labor, the environment and anti-corruption. TOBAM aims to continue to broaden the scope of its activities in this area.
Sustainability as pillar of TOBAM’s corporate policies At the corporate level, TOBAM applies a sustainable approach with all stakeholders: Clients, Employees, Shareholders and the Environment at large.
Example of actions at the corporate level Since 2010, TOBAM has set-up a compensation program of 150% of the carbon footprint of the company. Since 2011, TOBAM sponsors Amnesty International: donation of a share of profits generated from the Anti-Benchmark Emerging Markets Equity Fund.
We consider that fundamental human rights are an absolute prerequisite to creativity, innovation and, ultimately, to long-term economic growth. Based on this acknowledgement, we decided to build up a donation program focusing on this theme when we launched our Anti-Benchmark Emerging Markets strategy in 2011, which led us to consider the human rights track record of certain governments in emerging countries. Concretely, this contribution takes the form of significant annual financial sponsorship of NGOs to promote human rights. Every year since 2011, we have dedicated a share of TOBAM’s Anti-Benchmark Emerging Markets Equity Fund’s revenues to such donations.
TOBAM supports Amnesty International since the launch of the Anti-Benchmark Emerging Markets Equity strategy in 2011. Amnesty International is a global movement of more than 7 million people worldwide. Amnesty International’s mission is to conduct research and take action to prevent and end grave abuses – civil, political, social, cultural and economic. From freedom of expression and association to physical and mental integrity, from protection of discrimination to the right to housing – these rights are indivisible. Amnesty International is funded by its membership and public donations. No funds are sought or accepted by governments for investigating and campaigning against human rights abuses. www.amnesty.org
Annual Report 2015
The growing success of the Anti-Benchmark Emerging Markets Equity strategy in May 2015 to include a second partner, Human Rights Watch, in TOBAM’s efforts to offset its human rights. Human Rights Watch is known for the high quality of its research; for its strategic, targeted, high-level advocacy; for the independence of their work, and for the impact they have on the lives of millions of people. The strength of Human Rights Watch is their influential membership, the “fatstops” advocacy-their ability to access world leaders and effect change policy. TOBAM’s initiative with Human Rights Watch, a range of issues: the use of explosive weapons, landmines, monitoring of the humanitarian situation, illegal detentions and torture, freedom of speech, and disappearances in Crimea. www.hrw.org