Partners Capital Environmental and Social Impact Statement
This codifies Partners Capital's core purpose and the impact that we strive to have on the environment and society, both through the way in which we manage our own business and through our investment program.
Our clients each have their own purpose and an array of social or environmental causes that they support. Accordingly, Partners Capital cannot recommend a specific responsible investment policy that would be common to all clients. Whilst our investment program will always be governed by our own core beliefs, we commit to assist clients in the ongoing development of their bespoke responsible investment policies which reflect their values and build portfolios which adhere to those policies.
Partners Capital’s Founding Purpose. In 2001, the firm was founded in reaction to observations about the conflicts of interest which plagued the financial services industry. Further, the industry’s customers were not provided the transparency with which to ascertain the true value received, as measured by outperformance of risk adjusted replicable benchmarks, for the fees paid. We aim to be an industry standard bearer for independence, the eradication of conflicts of interest and performance attribution transparency.
Partners Capital’s Impact. We believe that there are three avenues through which we impact the world:
- Financial outperformance that we deliver for our client base
- The construction of our investment portfolios and relationships with asset managers
- The management of our firm and the daily actions of our employees
1. Financial outperformance for our client base
Charitable foundations and endowments account for a large proportion of our client base. These include hospital charities, charities focused on the arts, cancer research foundations and endowments which support educational institutions. Many of our individual clients are large contributors to charitable causes. Our aim is to grow our clients’ assets over the long term, which in turn, supports growing contributions to their missions which in aggregate are a significant force for good in the world.
2. Construction of investment portfolios and relationships with asset managers
As a company, we hold core beliefs about how investing our portfolios in a responsible manner can have an impact on the environment and society. These beliefs are closely aligned with the United Nations Principles for Responsible Investing to which we are a signatory. Our beliefs include the following:
- We believe that businesses that have positive impact on the environment and society, and govern themselves in the most responsible way, are more likely to outperform those that have a less positive or negative impact on the world.
- We believe that we can have impact, beyond the outperformance we deliver to clients, primarily by:
- Selecting managers who invest responsibly and engaging with them in an attempt to facilitate further improvement.
- Allocating to sectors of the economy and specific investments that are expected to have the most positive environmental and social impact in the future.
- Collaborating with other like-minded investors.
- We believe that effective measurement of environmental and social impact could catalyse a greater adoption of responsible investment practices by the institutional asset management industry. To this end, we continuously research ESG and impact measures, with a focus on those which have the potential to motivate the most powerful behavior of companies. We report to clients various measurements of the degree to which their portfolios adhere to responsible investment policies.
- We are in agreement with the scientific community that human activity, most notably the burning of fossil fuels for the production of energy, has caused the atmospheric changes which have led to increased temperatures and the associated effects such as rising sea levels. We believe that accounting for the potential impacts of climate change is an imperative for any long-term investment strategy.
- Businesses can have a profound positive impact on the quality of human life. We believe that we can have impact through engagement with our existing managers and allocations to strategies addressing specific social issues.
In practice, these core beliefs have informed our asset manager due diligence and portfolio construction process which is guided by the following principles:
- Exclusionary Screening: Partners Capital maintains a presumption against divesting assets for reasons unrelated to their expected risk adjusted return. This is due to a combination of a belief that engagement is more likely to yield positive results than exclusion and a practical reality of our investment strategy which is dominated by investment via third party managed funds. Nonetheless, we have chosen to exclude companies operating in the Tobacco, Coal, controversial weapons and “payday” lending sectors from our directly held equity portfolios. We will also generally invest in any share class of an asset manager that adheres to these exclusions over a share class which does not, assuming that doing so does not impose a meaningful cost. Such exclusions are reviewed periodically and updated by the Partners Capital Responsible Investment Committee.
- ESG Integration: For every new asset manager investment approval, we determine the degree to which the manager integrates ESG factors into their decision-making process through our proprietary ESG Integration Survey and Ranking tools which give rise to a single aggregate score per manager. The survey is informed by the due diligence questionnaire produced by the United Nations Principles of Responsible Investing. We adapt our approach to assessing ESG integration depending on the nature of the underlying investment. Most notably, the threshold level of ESG integration for those managers investing in sectors with heightened ESG risks (e.g., the energy sector or certain geographic markets), is significantly higher than that for a manager investing in a sector with lower inherent ESG risk.
- Engagement: during our regular monitoring of the investment managers in which we have invested, we highlight the importance of the incorporation of ESG considerations into their investment decision making process and set the expectation that the manager’s process (and hence, our ranking) should improve over time. We commit to assisting our managers in improving their ESG integration through sharing industry best practice. Influencing the behaviour of our asset managers, who manage multiples of the total capital that we have invested in their funds, has the potential for Partners Capital to have a highly leveraged impact on the world.
- Reporting: we believe that effective measurement of ESG factors and the impact, both positive and negative, of investment portfolios has the potential to catalyse significant change in the behavior of both asset managers and business owners and management. Accordingly, we aim to be at the forefront of emerging trends and best practice with regard to ESG measurement. We have developed a responsible investment dashboard which is reported to clients on their adherence to their responsible investment policies. We strive to improve the quality of that reporting over time.
We recognize that responsible investing is a rapidly evolving field. Accordingly, we would expect our policies to evolve along with industry best practice including our views on exclusions, our assessment of the ESG integration of underlying asset managers, our effectiveness in engaging with those asset managers and our ESG reporting standards. This effort will be led by our Responsible Investment Committee who have the dual role of leading our responsible investment activities and assessing the suitability of asset classes, asset managers or companies where an ethical or reputational issue has arisen during our due diligence.
3. The management of our firm and the daily actions of our employees
Beyond the impact we can have through the execution of our clients’ responsible investment policies and the impact we can have through our asset manager relationships, we believe that the management of our business and the daily actions of our employees can also have significant impact on the environment and society. There are two main areas of focus: 1) awareness of our environmental impact; and 2) diversity and inclusion.
Awareness of our environmental impact
Partners Capital has committed to measure our carbon footprint with initiatives undertaken to reduce this over time through initiatives including:
- Travel policies which encourages minimum air travel and domestic ground transport by cycling, walking and other low carbon travel (subways). Travel will also be minimized through extensive use of videoconferencing
- Energy efficiency within our offices
- Commitment to recycling within our offices
- E-distribution of presentation materials and use of tablets in the office to avoid wastepaper
Partners Capital has an annual charitable giving program. The charities to which the organization donates each year are selected following consultation with the employees.
Information as of 31 August, 2020