Responsible investing policy

Context and commitment

The purpose of this policy is to explain the approach of Barclays Investment Solutions Limited (BISL)¹ to Responsible Investing across Discretionary Portfolio Management (DPM) and managed funds.

BISL offer a range of investment options, with core services including DPM and managed funds. BISL has several ranges of managed fund solutions, including multi-asset funds and single-asset class funds.

BISL has been appointed as the delegated investment manager by Barclays Asset Management Limited (BAML) for its UK domiciled funds and by external management companies for selected Luxembourg and Irish domiciled funds. BISL is responsible for making all day-to-day investment decisions on behalf of each fund range wherever it is domiciled. As a long-term investor, BISL seeks to generate competitive returns for our clients as well as the creation of long-term value for all stakeholders.

For us, Responsible Investing means integrating material Environmental, Social and Governance (ESG) considerations (among others) into our investment decisions and fulfilling our stewardship responsibilities through engagement and voting. This is a contributing element in meeting our fiduciary duties towards our clients.

As a long-term investor, we believe material ESG considerations can impact portfolio returns, and so are one of the important relevant considerations in managing risk effectively and delivering successful investing outcomes for our clients.

These beliefs align with the Barclays’ values of Respect, Integrity, Service, Excellence and Stewardship which apply across the Barclays Group, including BISL. In addition, BISL is a signatory to the Principles for Responsible Investing (PRI) and to the UK Stewardship Code.

Overall approach to Responsible Investing

We seek to deliver competitive investment returns for our clients, and we believe Responsible Investing supports this aim.

We believe ESG considerations could impact the financial or operational performance of a business such that we think they may impact long-term investment returns. In considering these ESG factors, and consequently a broader set of data, we believe that this approach enables investors to make a more informed judgement about the financial performance and longer-term viability of an investment. Therefore, as part of our investment process, we seek to incorporate foreseeable risks that arise from ESG factors.

A majority of the assets we manage on behalf of our clients are invested indirectly, through third-party fund managers.

Guidelines and approach

Our approach to Responsible Investing includes the following:

ESG integration

Across our fund’s offerings, ESG integration forms part of our investment decision-making process. The key parts of our investment process are Asset Allocation (Strategic and Tactical) and Manager and Fund Selection which consist primarily of third-party fund managers. Within Manager and Fund Selection we select and invest in the managers based on our confidence in their ability to deliver their investment objectives. To achieve this objective, we assess each strategy on a qualitative basis across five key pillars including the Parent company, the People managing the assets, the investment Philosophy employed, the robustness of the Process and the Performance achieved. Where appropriate, the qualitative assessments are supported by quantitative analysis.

The Investment Due Diligence process incorporates a qualitative assessment of the ESG characteristics of a given fund. The assessment allows us to identify and analyse a fund’s ESG credentials as well as provide opportunities for engagement with third party investment managers to encourage best practice from a stewardship and engagement point of view. From the information collated, our team documents how responsible investing has been integrated in the strategy. The approach aligns itself with our wider 5P framework (Parent, People, Philosophy, Process and Performance).

We will typically reassess third-party funds and strategies through the monitoring and review process. As part of this process, we document any significant changes to the level of ESG integration for the strategy. Where relevant, we also review key ESG risks that have been identified as well as any controversies.²

To support our ESG integration, we use external research sources to provide ESG data and insight and external data provider(s) to supplement our internal analysis by our investment teams. We believe these insights, and in particular quantitative data, should be used alongside, rather than a replacement for the analysis of our investment professionals.

As part of our direct equity holdings held within BISL DPM which are not invested in our third-party managed offerings, the DPM investment team uses proprietary ESG dashboards that incorporate ESG metrics from third-party providers. These dashboards have been developed by our investment team to guide their qualitative analysis on material ESG issues for consideration in their investment decision-making and monitoring process. Our portfolio managers monitor ESG considerations on an ongoing basis and may take several actions in order to improve their understanding of information and/or attempt to drive improvement if any issues are identified.

Stewardship

We recognise that in BISL, our role as a responsible investor is to aim to integrate material ESG considerations into our investment decisions and stewardship responsibilities, by positively influencing companies’ long-term management of material ESG risks through engagement and voting. This is consistent with our business objectives and aims to deliver competitive investment returns for our clients and to create long-term value for stakeholders. Stewardship through engagement and voting is an important part of our approach to responsible investing.

We view engagement and voting as an important mechanism through which to act as a lever to encourage change in investee companies on material ESG issues where appropriate. We believe companies that can better manage material ESG issues could be less prone to severe incidents such as fraud, litigation or reputational risks.

BISL undertakes engagement and voting in partnership with our stewardship services provider, EOS at Federated Hermes Limited (EOS), in respect of certain holdings relating to specific services.³ We believe that via our partnership with EOS, we can have more influence to engage with investee companies on long-term risks and opportunities.

As described, voting forms an important part of BISL's overall stewardship strategy and we use our rights as shareholders to seek to drive desired change on ESG and other considerations – consistent with our aim to deliver competitive investment returns for our clients and to create long-term value for stakeholders.

Based on various metrics, BISL funds⁴ filter EOS's voting recommendations in relation to company holdings and, if deemed necessary, our BISL Fund selection team may deviate from EOS's recommendation. Where capital is commingled – such as where we are one of many investors in a third-party fund – we encourage those investment managers to vote.

Within BISL DPM, for our direct equity holdings, we use our rights as shareholders to seek to drive our desired changes. Following receipt of EOS’s voting recommendations, our Equity portfolio managers meet to discuss this information for a select number of voting issues in advance of making the voting decision on behalf of our clients. Our Equity portfolio managers are ultimately responsible for making voting decisions.

All voting activities sit alongside engagement practices, reflecting the BISL approach of promoting constructive dialogue with investee companies by building long-term relationships to seek to influence ESG and other practices that may impact our clients' investments. This is mostly undertaken by EOS, which engages on behalf of clients, including Barclays, with a wide range of stakeholders – including companies, government authorities, trade bodies, investors and NGOs – to seek to identify and respond to both company specific and market-wide and systemic risks.

BISL make engagement and voting activities publicly available to all stakeholders on the Barclays website. We believe such transparency is an integral part of good governance.

Screening and exclusions

For our direct holdings in all our funds, we exclude companies that are seen to be involved in the manufacture of controversial weapons across all our products.

Barclays has no appetite for certain activities, including (but not limited to) providing any Financial Proposition⁵ to companies known to trade in, or manufacture cluster munitions, chemical and biological weapons, landmines, or any equipment designed to be used as an instrument of repression or torture; and directly financing⁶ the manufacture of, or trade in, nuclear weapons.

These restrictions form part of the Barclays Defence and Security Statement.

We also have exclusionary screens for nine out of fourteen GlobalAccess single-asset funds within the Barclays Multi Manager Fund range, domiciled in Ireland, that meet the provisions set out under Article 8 of The Sustainable Finance Disclosure Regulation (SFDR).

In addition to the exclusion of companies we view as being involved in the manufacture of controversial weapons, for our direct holdings in these nine GlobalAccess funds, we exclude companies that generate greater than 10% of revenues from the following industries:

• Fossil fuels: thermal coal generation, extraction or sale; Arctic oil and gas production; fracking or oil sands production
• Production of nuclear weapons or components exclusively manufactured for use in nuclear weapons
• Tobacco production, distribution, and/or retailing
• Gambling operations, gambling products or providing key products to gambling operations
• Adult entertainment production, distribution, and/or retailing.

For this, we rely on third party data to screen issuers. We apply the screen on a retrospective basis and formally on a quarterly basis. The investment team may override outcomes of these exclusionary screens on the basis of their judgement and analysis of the investment case. For existing investee companies that may not meet the criteria in the screen, we follow an engagement and escalation framework that reflects the BISL approach of promoting constructive dialogue with investee companies.

In addition, the relevant sub investment managers in these nine funds are required to consider good governance standards of companies in the selection of securities for investment. Only companies that meet good governance standards are eligible for investment by these nine funds. Further to this, on a quarterly basis, we use a third-party data provider to screen the portfolios against the United Nations Global Compact Principles. We review any companies that fail to comply with these Principles with the sub investment managers as part of our ongoing investment due diligence process.

Similarly, our Charity Fund and its portfolios also aim not to have any direct exposure to companies that generate more than 3% of their turnover from pornography and 10% of their turnover from the production of tobacco, the manufacture or sale of arms, or gambling. We use a third-party screening tool to incorporate the screens into our Portfolio Management System, which ensures that we avoid exposure to these industries, along with the exclusion of controversial weapons as outlined above.

For BISL DPM, the team has a set of exclusions that do not allow investment into businesses they view as being involved in the manufacture of controversial weapons. The team also incorporate material ESG considerations as part of the investment process to help mitigate risks that could materially impact long-term investment returns.

Collaborative Initiatives

We are part of several initiatives that promote strong Responsible Investing practices. Through these initiatives, we actively work with and share our experience and knowledge with peers (whilst respecting anti-trust and other applicable regulatory requirements) to better understand important Responsible Investing issues and their implications for our investment processes.

BISL is also a signatory to the PRI, a globally recognised standard supporting responsible investing. The PRI works to support its international network of investor signatories in incorporating ESG factors and stewardship into their investment practices.

Through our partnership with EOS, we are an active participant in certain industry bodies and initiatives around the world, such as the Investor Alliance for Human Rights, institutional Investors Group on Climate Change (IIGCC), Climate Action 100+, CDP and the International Corporate Governance Network (ICGN), to name a few. Engagements through such initiatives are mechanisms that may act as a lever to encourage change in investee companies on material ESG considerations where appropriate.

Governance, management, resources, reporting

In order to provide oversight of our Responsible Investing objectives, Barclays Private Bank and Wealth Management (PBWM) has a Responsible Investing and Sustainability Governance Forum which is a quarterly forum, chaired by the Head of Responsible Investing.

Amongst many other things, the PBWM Responsible Investing and Sustainability Governance Forum provides oversight, review, and guidance (where necessary) on the integration of the ESG considerations within our investment processes as well as enabling dialogue and debate about key ESG topics and issues which form the basis of the Private Bank and Wealth Management approach to Responsible Investing. Responsibility for implementation of relevant Responsible Investing integration and activity sits with the investment teams.

As part of being a signatory to the PRI, we submit an annual assessment report in accordance with their guidelines. Our annual Transparency Reports are available on the PRI website.

Conflicts of interest

Barclays recognises that identifying and managing potential and actual conflicts of interest is fundamental to the conduct of its business, its relationships with customers, and the markets in which it operates.

There are four key pillars in the Barclays approach to conflicts of interest, which are as follows:

• Identify actual or potential conflicts of interest
• Prevent conflicts of interest wherever possible, or have controls/procedures to manage and mitigate them
• Maintain records of identified conflicts of interest and steps taken to prevent or manage them
• Monitor and review identified conflicts of interest.

The Barclays conflicts of interest framework requires in-scope businesses, inclusive of PBWM, to have procedures and processes in place, designed to provide a consistent approach for the management of business and personal conflicts of interest. This includes ongoing identification and assessment of conflicts of interest, annual conflicts of interest assessment, as well as related governance and training requirements.

Additionally, the Barclays Way, our Code of Conduct, sets the standards of behaviour that all employees should follow, and also requires that employees avoid undeclared actual or potential conflicts of interest, or behaviour that may be perceived as a conflict of interest. Where such conflicts cannot be avoided, there is a requirement to be transparent about their existence and the steps taken to manage them proactively.

Supporting Material

This website is not designed to be taken as preferred view from Barclays Investment Solutions Limited (BISL), expert advice, investment advice or a recommendation and any reference to specific companies is therefore not an opinion as to their present or future value or broader ESG credentials. Reliance upon any of the information on this website is at the sole discretion of the reader. Some of the views and issues discussed on this website may derive from third-party research or data which is relied upon and may not have been validated. Such research and data are made available as additional information for the reader where appropriate.

There is currently no globally accepted framework or definition (legal, regulatory or otherwise) of, nor market consensus as to what constitutes, an ‘ESG’, ‘green’, ‘sustainable’, ‘climate-friendly’ or an equivalent company, investment, strategy or consideration or what precise attributes are required to be eligible to be categorised by such terms. This means there are different ways to evaluate a company or an investment and so different values may be placed on certain ESG credentials as well as adverse ESG-related impacts of companies and ESG controversies where these are considered.

The evolving nature of ESG considerations, models and methodologies means it can be challenging to definitively and universally classify a company or investment under an ESG label and there may be areas where such companies and investments could improve or where adverse ESG-related impacts or ESG controversies exist. The evolving nature of sustainable finance related regulations and the development of jurisdiction-specific regulatory criteria also means that there is likely to be a degree of divergence as to the interpretation of such terms in the market. We expect industry guidance, market practice, and regulations in this field to continue to evolve. We and other market participants continue to navigate inconsistencies and conflicts in the manner in which climate policy is implemented in the regions where the Barclays Group operates, including as a result of the adoption of anti-ESG rules.

Any references to ‘sustainable’, ‘sustainable investment’, ‘sustainable data’, ‘ESG’, ‘ESG data’ , ‘climate data’ or other similar terms or related exclusions in this article are not to any jurisdiction-specific regulatory definition or other interpretation of these terms unless specified otherwise.

Any third party manager’s assessment of a company, based on the company’s level of involvement in a particular industry or their own ESG criteria, may differ from that of other funds or an investor’s assessment of such company. As a result, the companies deemed eligible by the third party manager may not reflect the beliefs and values of any particular investor and may fall below certain ESG-related standards or result in negative ESG impacts.

The evaluation of companies in respect of their ESG credentials and characteristics is dependent on the timely and accurate reporting of climate, sustainability and/or ESG data by the companies. Successful application of the fund’s strategy will depend on the third party manager's proper identification and analysis of ESG data. Importantly, climate, sustainability and/or ESG data may not be audited or otherwise reviewed by an independent third party and we do not guarantee the information is accurate, complete, and up-to-date.

The climate, sustainability and/or ESG data, models and methodologies used, and the judgements, estimates or assumptions made, are rapidly evolving, including scientific evidence relating to climate change and scenarios outlining pathways to net zero, and this may directly or indirectly affect the metrics and data contained herein. While we seek to identify and select third party fund managers based on ESG considerations, we can accept no responsibility for the execution of a third party manager’s ESG or sustainability strategy or for the sustainability profile of the third party manager’s funds.

Our investment selection process and approach to stewardship is regularly reviewed and updated in light of our existing commitments and ambitions, the rapidly changing external environment (including changing laws and regulations) and are informed by engagement with key stakeholders and our fiduciary duties to our clients. As such, our investment decisions are not solely limited to ESG/sustainability related factors or our membership of any voluntary codes or groups.