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Hastings believes that ESG considerations can be long-term drivers of investment return, and a focus on ESG through the insurance subsidiary’s investment portfolio aligns with Hastings’ cultural framework, the 4Cs (Colleagues, Customers, Company, Community).
The investment portfolio of Hastings comprises a core portfolio of high-quality sterling-denominated bonds, with additional strategic allocations that provide a diversified return from equity and currency markets. The key aims for Hastings’ investment strategy are strength and predictability. The company achieves these aims while also driving change for good through its investment decisions.
Hastings provides ESG guidelines that investment managers incorporate into their investment rules, thereby ensuring that target ESG scores are maintained, and that there are no investments in excluded or sensitive sectors. The target ESG scores are set internally following consultation with investment managers and a review of the benchmark score. Hastings is committed to maintaining an average ESG score of “A” on its fixed income portfolio, based on MSCI scoring.
Hastings reports quarterly to the insurance subsidiary’s Investment Committee. The reporting includes ESG scoring and confirmation of exposure to excluded or sensitive sectors, facilitating a review of the guidelines, and allowing changes to controversial positions. The Investment Committee may report to the subsidiary’s Board of Directors when breaches arise or when recommending changes to the framework.
ESG criteria are incorporated into the investment portfolio without negatively impacting returns, diversification, or the overall quality of the portfolio. Hastings’ investment managers integrate ESG criteria into their investment process, in which they seek to identify factors that they believe are key to determining whether a company would outperform or underperform the market. They deploy capital in a manner that integrates ESG criteria, while preserving and growing financial assets.
At Hastings, negative screening focuses on three sectors: tobacco, controversial weapons, and coal. These sectors have been excluded following internal considerations, stakeholder demands, industry review, and consultation with investment managers.
Norms-based screening is also undertaken, and there is quarterly reporting to the Investment Committee on companies that do not meet the principles of the UN Global Compact.
As Hastings does not have any direct equity investments, it does not partake in voting activities. By excluding certain sectors and by only purchasing fixed income investments from companies highly rated based on ESG criteria, it can influence corporate behavior and drive positive change.
Hastings has strategic equity and currency exposure through a number of external funds that are managed by external investment managers. Hastings requires all investment managers to be signatories to the UN PRI.
More information in Sampo Group’s Corporate Responsibility report, p. 130.