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    For Insight, responsible investment is about value

    We believe all risks, including environmental, social and governance (ESG) risks, can affect the value of an investment.

    Our proprietary models continually evolve to help address the gaps in third-party ESG data. They guide our engagement with companies and governments to better understand the ESG risks they face and how those risks are managed.

    We take a proactive role in ensuring the long-term sustainability and resilience of markets. We have helped to drive change on significant regulatory and market issues to protect our clients’ long-term interests, as well as those of wider society.

    To help clients stay abreast of relevant developments, we publish regular market insights, views from industry experts and reports detailing our efforts and the difference they make.

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    Investing responsibly means managing risk. Understanding all the underlying material risks helps us decide whether an investment is fair value.

    We systematically consider ESG issues within our research process – and if we identify material ESG risks, we engage to better understand the issues.

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    Abdallah Nauphal, CEO
    Responsible Horizons 2020 report

    Our annual report aims to highlight how we are investing responsibly on your behalf.

    1

    Considering how to approach responsible investment?

    We outline six principles that guide us as we seek to help our clients achieve their objectives.

    2

    Seeking evidence of the difference a responsible investment approach can make?

    We offer examples from our own portfolio managers across fixed income, liability-driven investment and other areas.

    3

    After a positive long-term impact on society or the environment?

    We analyse the impact bond market and show how some investors put their impact objectives into practice.

    A committed responsible investor

    2006

    Founding signatory to PRI1

    A+

    PRI ratings for strategy, governance, and fixed income investment1

    82%

    Number of 2019 engagements with debt issuers covering ESG matters2

    850,000+

    The number of subsidiaries covered by Insight’s ESG ratings2

    A responsible investment leader

      • Insight was a founding signatory to the UN-supported Principles for Responsible Investment (PRI), the world’s leading advocate for a responsible approach to investment that incorporates ESG factors in long-term investors’ decision-making.
      • Insight introduced proprietary ESG ratings for corporates to address the gaps in third-party data, especially for smaller, high-yield and emerging market debt issuers
      • We introduced the Insight Climate Risk Index, which we believe to be the investment industry’s first comprehensive ranking of how fixed income corporate credit issuers manage their climate change-related risks and opportunities. The Index covers c.1,900 corporate issuers.
      • Growth in the impact bond market led us to develop a proprietary impact bond analysis framework, to help our analysts discern whether an impact bond meets our expectations for sustainability characteristics.
      • In response to client demand, we introduced our first pooled fund with sustainability and ESG objectives, building on our years of expertise analysing and engaging with corporates on sustainability issues.
      • We introduced our country sustainability risk index, which generates ESG ratings for 186 countries. This aims to help us better understand the ESG risks at the country level across our portfolios.
      • Insight enhanced our proprietary ESG ratings, introducing customised metrics to make the data as pertinent as possible to our analysis and offering high coverage of global benchmarks: over 850,000 subsidiaries for 6,500 different parent entities have an Insight ESG rating
      • The PRI awarded Insight A+ ratings for strategy and governance, sovereign and corporate fixed income investment. It also awarded A ratings for our approaches to collateralised loan obligations, asset-backed securities and loans.
      • We substantially expanded our responsible investment policy, to spell out in detail the six principles that guide our business and investment approach. The new policy includes a Corporate Conduct Statement, outlining the conduct we expect from the corporates in which we invest.
    Taking the initiative

    Information on ESG factors and related risks is offered by a wide range of institutions and providers but there are significant gaps. We seek to deepen our understanding of such issues through our own analysis, engagement and using proprietary ESG tools.

    There is variation in ESG data from different providers. For many smaller issuers, particularly emerging market or high-yield companies, the availability of relevant non-financial data lags information from larger issuers.

    For these reasons, we developed Insight ESG ratings, with customised metrics to make the data as pertinent as possible to our analysis.

    Our proprietary corporate Insight ESG score follows a risk-centric approach, updated in 2019, with high coverage of global benchmarks: over 850,000 subsidiaries for 6,500 different parent entities have an Insight ESG rating.

    To read more on our ratings and how we use them, please click here.

    In 2017, we introduced our climate risk index for corporate debt. It ranks c.1,900 issuers according to how they manage climate change-related risks.

    We believe it to be the investment industry’s first comprehensive ranking of how fixed income corporate credit issuers manage their climate change-related risks and opportunities, and how they are positioning themselves for the transition to a low-carbon economy. The index is designed to be used to assess risks and opportunities related to climate change.

    Please see our white paper on the index for more details, including:

    • how Insight uses the index
    • the methodology underlying it, and
    • details of key findings.
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    We believe investing effectively in sovereign debt requires analysis of ESG matters.

    In 2018, we introduced a proprietary country sustainability risk index, which generates ESG ratings for 186 countries. This aims to help us better understand the ESG risks at the country level across our portfolios.

    The index is used in four principal ways:

    • To expand the scope of our existing risk models: When making investment decisions regarding sovereign debt, and other related debt such as issues from state-owned enterprises where the sovereign is effectively the backing entity, identifying changes in economic conditions and the risk profile of the relevant country are key. ESG indicators can provide another angle on economic and other matters.

    • To guide the management of client-specific portfolios with ESG guidelines: We manage strategies for clients specifying that the overall ESG rating of portfolio holdings must exceed (be better than) that of the relevant benchmark. The index enables us to exclude or focus on issuers according to their ESG performance.

    • To support reporting to clients on ESG-specific factors: The index ratings enable us to demonstrate how sovereign debt portfolios perform from an ESG perspective, either on an absolute basis or relative to a benchmark.

    • To indicate issues for dialogue: Dialogue with sovereign issuers can be challenging and politically sensitive, but there can be opportunities to open discussions with officials from relevant agencies. Our index presents a tool by which we might identify and prioritise matters to address with sovereign issuers. This is particularly relevant for emerging/developing markets.

    The global spread of the novel coronavirus, COVID-19, in early 2020 led to extensive measures to contain the outbreak. This in turn prompted a wide range of responses.

    Notably, the UN-supported Principles for Responsible Investment (PRI) – to which Insight was a founding signatory in 2006 – published actions for responsible investors in response to the COVID-19 pandemic, stating that "an immediate, robust response to the COVID-19 crisis is needed across the global economy".

    Insight's Global Chief Investment Officer, Adrian Grey, wrote a letter to key stakeholders in the economy, outlining our expectations and actions – including our response to the PRI's suggestions. Insight also made donations to support workers on the front line in the pandemic.

    To read the statement please click here.

    Engaging on the issues that matter

    Insight proactively engages on industry and regulatory issues that have implications for our clients and the wider market. These include the transition from LIBOR, central clearing for European pension schemes, and RPI reform.

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    Insight is playing an active role in the interest-rate benchmark reform process, which will have implications for financial markets worldwide.

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    Insight is proactively engaging on key issues on behalf of pension schemes across Europe, responsible for the current and future income of millions of European pensioners.

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    Insight is driving the national conversation on proposed reforms to the UK's Retail Price Index (RPI) – which could have negative implications for millions of pensioners.

    Responsible investment in practice
    Our portfolio managers and credit analysts actively take material ESG risks into consideration in their research and decisions.

    Case studies across different asset classes are available in our annual report, available here.

    Investment grade High yield Emerging market debt
    Lucy Speake Ulrich Gerhard Colm McDonagh

    Lucy Speake, Head of European Credit and Deputy Head of Fixed Income

    "Our credit analysts are expected to consider ESG research in their analysis across every issuer in our investment universe."

    Ulrich Gerhard, Senior Portfolio Manager

    "Analysis and engagement over ESG issues are crucial in high yield – using direct engagement to support our research."

    Colm McDonagh, Head of Emerging Market Fixed Income

    "We have worked directly with sovereign issuers to inform their green bond issuance."

    Our responsible investment policies

    Close

    In 2020, we expanded and broadened our responsible investment policy to better reflect our approach and set out our core beliefs.

    In our revised policy, we:

    • Summarise our beliefs about responsible investment
    • Specify six ways in which we seek to deliver on these beliefs
    • Include our Corporate Conduct Statement, which outlines how we expect companies in which we invest to behave.

    To read Insight Investment’s responsible investment policy, please click here.

    Insight does not invest in companies involved with the production, sale or maintenance of cluster munitions or landmines.

    There are two major international conventions that address cluster munitions and landmines specifically:

    • The Convention on Cluster Munitions (2008): This Convention restricts the manufacture, use, and stockpiling of cluster munitions and the components of these weapons
    • The Convention on the Prohibition of the Use, Stockpiling, Production and Transfer of Anti-Personnel Mines and on Their Destruction (1997): This Convention, often referred to as the Anti-Personnel Landmines Convention, aims to eliminate antipersonnel landmines around the world

    In line with these international conventions and following their ratification into domestic law by a number of countries, Insight has adopted a global policy which commits it to avoiding direct investments in companies that:

    • Design, produce, sell or maintain cluster munitions and/or landmines
    • Undertake research and development to develop cluster munitions and/or landmines
    • Breach the requirements of the Convention on Cluster Munitions or the Anti-Personnel Landmines Convention

    This policy:

    • Applies across all asset classes
    • Excludes affiliated companies: that is, companies with affiliations or commercial relationships with screened companies will not be excluded from investments
    • Does not apply to passive holdings in index-tracking instruments

    With respect to share ownership, in the majority of the current equity investment strategies insight does not have material investments in physical holdings. Where insight does hold physical equity positions we routinely vote on behalf of our clients with regard to the uk companies in which they have a shareholding.

    Insight retains the services of a third party for proxy voting services and votes at all meetings where it is deemed appropriate and responsible to do so. The third party provider offers research expertise and voting tools through sophisticated proprietary IT systems allowing Insight to take and demonstrate responsibility for voting decisions. Independent governance analysis is drawn from thousands of market, national, and international legal and best practice provisions from jurisdictions around the world.

    Independent and impartial research provides advance notice of voting events and rules based analysis to ensure contentious issues are identified. The third party provider analyses any resolution against Insight-specific voting policy templates which will determine the direction of the vote. Where contentious issues are identified these are escalated to Insight for further review and direction. Insight will undertake a review of the voting policy templates on an annual basis.

    Making a positive impact
    You may be seeking a positive impact with your investments. We can work with you to build a portfolio that incorporates such objectives. For example, we can apply a range of overlays for corporate debt portfolios as highlighted below.
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