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Nomura releases overview of ESG engagement

News Team, 23/05/2019

Nomura Asset Management UK (“Nomura”) has released its Responsible Investing report, detailing ESG engagement levels from companies during Q1 2019.

The report takes into account the impact of a corporation’s existence and the associated investment decisions of all stakeholders and the ethical impact of those decisions, rather than exclusively analysing the investment behaviour of Nomura’s own shareholders and bond investors.

Over the opening period of the year, Nomura reviewed 17 companies and assigned ESG ratings through its equity and fixed income teams. Only two of these companies were awarded the optimum rating of ‘N’ (No Issues), with three further institutions awarded the barely satisfactory ‘I’ grade (Issues but Improving’).

A further twelve were given the lower version of the ‘I’ rating (Issues, Not Improving). Alongside full reviews, another 19 companies were engaged with to discuss ESG related queries that arose over the period.  In total 28 companies were contacted by Nomura to discuss ESG concerns. Nine were focused on environmental impact, eight on social impact, eight on governance and three on remuneration, suggesting a spread of issues across the board. Europe had the most contacted companies with 14, while 13 were based in North America, and 1 within the emerging markets. Responses were received from 24 companies, providing Nomura with an 86 percent response ratio.

Nomura has been integrating ESG research into all individual equity investment committee reviews since 2013. Its engagement activity and ESG research have been published publicly online for nearly three years, since Q2 2016, in an effort to boost its transparency and increase the impact of the engagement.

It considers the Responsible Investing report part of its duty to engage with the businesses it owns or lends to in order to push for better practices and set targets for engagement.

Nomura utilises an ESG research programme, which analyses ESG risks within Nomura’s client portfolios and evaluates the impact that investee companies have on all stakeholders. When necessary, it will share its concerns with senior management, or goes directly to the board. The release of the report also gives Nomura future opportunities to utilise proxy voting as a means to express views on ESG issues too.

Alex Rowe, CFA Equity Research Analyst, Global Industrials & Utilities at Nomura, reiterated that the asset manager believed engaging with sustainability was key to developing better practices.

He said: “As responsible investors we take into account the broader impact of our investment decisions and it is our duty to engage with the businesses we own and even those we don’t, to push for better practices. Sustainability is no longer about doing less harm. It’s about doing more good.”

He added: “Nomura is committed to Responsible Investment and has a strong track record of acting in a manner that maximises both the experiences of our clients and the other stakeholders impacted by our investments.”

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