What is HL doing to invest responsibly?

We see ESG as an additional form of due diligence which allows investors to assess and understand the impact their investments have on both the environment and society, and how well they're governed. That's why we integrate ESG into all our funds.

All fund groups we invest with must comply with our ESG policy, which specifies that the fund groups we invest with must:

• Have set, or be in the process of setting, Net Zero targets for their Scope 1 & 2 emissions.
• Be a signatory to the UN-backed Principles for Responsible Investment.

We also integrate ESG into our selection process. Before selecting a fund or fund manager, we carry out detailed research to determine if the fund manager is both aware of the risks posed by ESG issues and is managing these risks effectively.

We also expect the fund managers we invest with to practice good stewardship by using their votes and engaging with the companies they invest in to highlight areas of improvement to management, where it is in the interests of long-term investors.

We invest in a combination of segregated mandates and third-party funds. Segregated mandates give us greater control over how their managers run your money. We therefore prevent them from investing in areas where we feel the ESG risks are unacceptably high. This includes:

• Companies that generate 20% or more of their revenues from oil sands extraction or thermal coal power generation and extraction (although we will consider thermal coal power generators where they have a clear plan to phase out thermal coal).
• Companies involved in creating controversial weapons (antipersonnel landmines, cluster munitions, biological and chemical weapons).
• Persistent violators of the United Nations Global Compact principles (a UN pact on human rights, labour, anti-corruption and the environment).

Where we invest in third-party funds, we have no direct control over the investments that the fund manager makes. In cases where third party fund managers invest in companies that violate the aforementioned exclusions, we engage with those managers to understand the reasons they invest in these companies, and any engagement that's taken place. We want to find out why they feel the extra ESG risks that come with these companies are worth taking. We report the results of our engagement to investors through our annual Stewardship and Engagement Report.

Here's a closer look at the key things our fund managers do to invest your money responsibly across the HL Portfolio Building Blocks fund range.