Responsible investing policy

Context and commitment

The purpose of this policy is to explain the approach of Barclays Investment Solutions Limited (BISL) to Responsible Investing (as explained further below). BISL has been appointed as the delegated investment manager by Barclays Asset Management Limited (BAML) for UK domiciled funds and by external management companies for the 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 Environmental, Social and Governance (ESG), considerations (among others) into our investment decisions and fulfilling our stewardship responsibilities through engagement and voting. As a long-term investor, we believe ESG considerations can impact portfolio returns, and so are 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 risk-adjusted 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

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 – primarily of third-party managers – supported by Portfolio Construction. 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 Parent, People, Philosophy, Process and Performance. Where appropriate, the qualitative assessments are supported by quantitative analysis.

We also conduct a qualitative assessment of the responsible investing characteristics of a fund through an ESG assessment. We inform our third-party external managers of our focus on and commitment to the PRI principles.

The Investment Due Diligence process incorporates a qualitative assessment of the ESG characteristics of a given fund. The initial assessment aims to assess the extent to which the third-party fund incorporates ESG factors across the five pillars listed above. This can include amongst other factors, a review of the third-party manager’s ESG policies and governance when they consider onboarding potential managers and identifying how effectively they integrate ESG factors into their investment decisions.

Every manager’s offering is given a single standalone qualitative score based on an assessment of integration across the five pillars. A manger can be scored ‘A’, 'B' or ‘C’ where 'A' is the highest and 'C' is the lowest. The qualitative score is made relative to direct peers.

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. This includes company and industry reports and thematic research on specific ESG considerations, as well as data and exclusionary screens. We believe these insights, and in particular quantitative data, should be used alongside, rather than a replacement for the analysis of our investment professionals.

We reassess third-party funds basis on a continual basis through the monitoring and review process. As part of this process, we will document any significant changes to the level of ESG integration for the strategy. Where relevant, we may also review key ESG risks that have been identified as well as any controversies. Every manager’s offering is given a single standalone qualitative score based on an assessment of integration across the five pillars. A manager can be scored ‘A’, 'B' or ‘C’ where 'A' is the highest and 'C' is the lowest. The qualitative score is made relative to direct peers.

Voting

Across our investment management activity, we generally exercise our voting rights on directly held equity positions. We employ EOS at Federated Hermes to provide voting recommendations to us, which helps to inform our voting decisions.

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.

Screening and exclusions policy

For our direct holdings in our GlobalAccess funds, we exclude companies we view as being involved in the manufacture of controversial weapons across all our products. Barclays has no appetite for providing any Financial Proposition¹ to companies known to trade in, or manufacture, nuclear, chemical, biological or other weapons of mass destruction.

Barclays also has no appetite for providing any Financial Proposition to companies known to trade in, or manufacture, landmines, cluster bombs or any equipment designed to be used as an instrument of torture. 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 Sustainable Finance Disclosure Regulation.

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

Fossil fuels: thermal coal generation, extraction or sale; Artic 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 MSCI 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.

Our Charity Fund and its portfolios also aim not to have any direct exposure to companies that generate more than 10% of their turnover from tobacco, adult entertainment, gambling or the manufacture or sale of arms. 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, including controversial weapons as outlined above.

Collaboration

We believe in the value of collaboration and join initiatives that align with – and help to guide – our approach to Responsible Investing. Through these initiatives, we actively work with and share our experience and knowledge with peers (whilst respecting antitrust and other regulatory requirements) to better understand important Responsible Investing issues and their implications for our investment processes.

BISL is 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 into their investment and active ownership decisions.

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 PRI Principles within our investment processes. 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 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.