Alliance Trust | ESG

Responsible investing means behaving as long-term owners, not just temporary traders of stocks. Shares give us rights and responsibilities to ensure that shareholders' capital is being invested in a way which does not exploit society or the environment. Companies that fail to take account of their effect on the societies in which they are embedded will ultimately lose their licence to operate, either by government legislation or the withdrawal of customer support.

The Board sees the consideration of Environmental, Social and Governance (ESG) matters as integral to the investment decisions made on behalf of the Company by its investment manager, Willis Towers Watson (WTW), and the fund managers who WTW has selected to pick stocks for the Company's multi-manager global equity portfolio.

Incorporating these factors has the dual benefits of reducing inherent risk and enhancing the sustainability of returns. While the Company would much rather encourage positive change through its stewardship and engagement activities, the Board will consider excluding certain types of stocks from its portfolio. The current exclusions include companies with significant exposure to thermal coal and tar sands, illegal armaments, and other investment companies. Exclusions are kept under review by the Board, which may decide to impose further restrictions if it believes that positive change cannot be brought about by engagement alone. 

The Company implements its approach to responsible investing through its investment manager, WTW, which is itself a leading authority in the investment industry on sustainable investing. WTW has its own not-for-profit think tank, the Thinking Ahead Institute, is a member of Climate Wise, the Transition Pathway Initiative and is one of the founding members of the Diversity Project. WTW has also joined the Net Zero Asset Managers Initiative. There are three main pillars to WTW's approach to ESG for the Company:

• Manager selection: WTW requires our Stock Pickers to have a demonstrable process in place that identifies and assesses material ESG factors. WTW aims to appoint Stock Pickers for the Company who actively engage with the companies in which they invest and have an effective voting policy. When necessary, WTW guides the Stock Pickers towards best practices which are rapidly evolving.
• Manager Assessment: WTW explores how our Stock Pickers identify, assess and act on the ESG risks inherent in their stock selections for the Company, using internal and external ESG information in order to analyse, monitor and challenge their approach. When constructing the Company’s portfolio, WTW review it through a sustainability lens which aims to measure the portfolio’s resilience to ESG risks. For example, WTW monitors the carbon intensity of the Company’s portfolio against recognised benchmarks, with a view to being carbon neutral by 2050 or sooner in line with the Paris Accords.
• Engagement: In addition to encouraging the Stock Pickers to engage with the companies that they select for the Alliance Trust portfolio, WTW has appointed EOS at Federated Hermes (EOS), a leading stewardship provider with a focus on achieving positive change and helping investors meet their fiduciary responsibilities. EOS share their expertise and provide voting recommendations to our Stock Pickers. They also engage with the companies within the portfolio. EOS's influence and scale, representing $1.3tr of assets under advice, provides significant leverage during their engagement activities.