ESG (environmental, social and governance) considerations play a central role in Harbour’s investment philosophy. Harbour is a market leader for integrating ESG research into our investment process, and we have been signatories to the UN Principles of Responsible Investment since August 2010.

 

ESG considerations are important for two reasons:

  • As a responsible corporate citizen, with a fiduciary duty to our clients, we have an obligation to consider all types of risk.
  • As active investors, we believe that ESG risks and opportunities are often not fully reflected in the market price for securities. We are able to use this knowledge to invest to achieve better outcomes for our clients.

 

ESG Processes

Equity Process
We use quantitative screens in our equity investment process to rank investment opportunities. Harbour’s ESG score is included in all Harbour funds active quantitative screens. All other things being equal, a higher ESG score results in a better overall security ranking, but securities are not excluded solely based on ESG scores. High-risk ESG issues within companies, or issues of concern, are discussed between analysts and portfolio managers during the selection process. Management teams from companies with poor ESG scores are engaged with where appropriate, to encourage the improvement of corporate behaviour.

Companies are assessed by Harbour analysts on their competence in identifying and mitigating ESG risks and opportunities. Each company in our investment universe is allocated a Harbour ESG score based on their ESG competency. ESG scores are generated via one of two processes:

  • For New Zealand Securities, Harbour’s analyst for the company in question completes our proprietary Corporate Behaviour Survey (CBS). This score is sense-checked against an external ESG research provider’s ESG recommendation if available, and a final score is produced.
  • For Australian Securities, an external ESG research provider’s recommendation is translated into an ESG score.

 

Fixed Interest Process
ESG concerns are integrated into our fixed interest process in a number of ways. Issuers are assessed by Harbour analysts on their competence in identifying and mitigating ESG risks and opportunities. ESG research is generated via one of three processes:

  • For New Zealand securities, the Harbour equities team complete the Harbour proprietary Corporate Behaviour Survey (CBS) on individual companies. This score is sense-checked against an external ESG research provider’s ESG recommendation if available. The fixed interest team utilises this research if it is available.
  • For Australian securities, we use an external ESG research provider’s recommendations. The current external provider is MSCI.
  • For unlisted bond issuers, the Harbour Fixed Interest team conducts research into ESG issues and organisational practices.

Harbour’s fixed interest team uses this research to engage with companies to encourage improvement and to identify companies whose behaviour may lead to untenable risks. The team tends to place more weight on a company’s behaviour and conduct, rather than integrating moral judgements on industries (unless the industry in which a company operates exposes it to risks that can only be controlled by the company to a small degree).

 

You can find Harbour's ESG Policy here

Harbour has been a UNPRI signatory since 2010. Click here to visit their website    PRI logo