10.23.2017

Hermes Wins $400m High Yield ESG Mandate

Hermes Investment Management, the £30.1 billion manager, has been appointed to manage a $400 million Global High Yield credit investment mandate by Första AP-Fonden (AP1), one of five buffer funds in the Swedish national income pension scheme.

The mandate was driven by a desire to improve the geographical diversification of high yield exposure, with the SEK 323 billion Fund2 recognising the benefits in selecting a manager with a truly global approach to high yield.

The aims of the mandate are aligned with Hermes’ commitment to delivering long-term strong and holistic returns for investors, thus creating value for all stakeholders in the financial system. The credit team places high importance on combining investing with engagement in order to improve outcomes for investors, the company and its employees, all stakeholders and the environment.

Assessing ESG risk to credit valuations, returns and society is a fundamental part of Hermes Credit’s investment process when analysing issuers. They are able to draw upon multiple sources of information, including Hermes’ proprietary ESG Dashboard reports on listed companies and the insights gained by the corporate engagement specialists in Hermes EOS. An A+ PRI rating and Hermes’ participation with the UN Global Compact is testament to its skills and passion in this field.

Majdi Chammas, Head of External Management and Tina Rönnholm, Portfolio Manager responsible for external High Yield investments at AP1, said: “We are delighted to announce the appointment of Hermes Investment Management as one of our High Yield managers, following a comprehensive, global tender process. We share the same belief around our duty of delivering strong returns to our stakeholders, including considering the impact on society as a whole. The team is very advanced in the way they integrate ESG issues in their core investment process. Their innovative approach of pricing ESG risks in terms of spread in their fundamental credit analysis is leading in the industry.”

Fraser Lundie and Mitch Reznick, Co-Heads of Credit, Hermes Investment Management, said: “AP1 are one of the most innovative and forward-thinking pension funds. Our Credit offering sits at the confluence of industry-leading credit management and a pioneering approach to ESG integration, which includes the pricing of ESG risks as well as analysis. Clearly they, like us, believe that creditors have as much interest as shareholders in seeing companies’ ESG practices improve and that active engagement can facilitate those improvements.”

Source: Hermes Investment Management

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