Sustainable Investment
Aviva has been at the forefront of sustainable investment for many years; from being the first carbon-neutral international insurer in 2006, to being a recipient of the 'UN Momentum for Change Climate Solutions Award' in 2017 in recognition of our commitment to reducing our environmental impact and helping provide inspiration on climate change to others for more than a decade. We have been at the vanguard of helping to lead work on market changing initiatives, including being among the founding signatories of the UN Principles for Responsible Investment and being among the first asset managers to publish a Corporate Governance Voting Policy. In 2021, we unveiled our ambition to be a net zero carbon business by 2040 - this was a first for a major insurance company. While we are working towards our Net Zero by 2040 ambition, we acknowledge that we have relationships with businesses and existing assets that may be associated with significant emissions. More information can be found here.
Aviva Investors & the Sustainable Stewardship Funds
Aviva Investors is Aviva's dedicated asset manager, and sustainable investment has been central to their values and investment philosophy for nearly 50 years. Aviva Investors took on the management of the Sustainable Stewardship Funds (known as the Stewardship Funds at the time) in April 2018. The philosophy behind the Funds has always been, and remains, to guide capital allocation responsibly, and therefore to exclude or to include a company in the Funds based on what the company does and how it does it.
Significant resources at Aviva Investors feed into the management of ESG integration and engagement across the business. A team of more than 50 ESG analysts, including a dedicated Sustainable Investment function, work closely with all fund managers and analysts across the asset manager's public and private market investment teams, including those who manage the Sustainable Stewardship Funds.
Sustainable Stewardship: Alignment with the UN's Sustainable Development Goals
As mentioned, the philosophy behind the Sustainable Stewardship Funds has always been, and remains, to guide capital allocation responsibly, and therefore to exclude or to include a company in the Funds based on what the company does and how it does it. This philosophy has been reviewed regularly since launch to ensure it remains suitable for the changing investment landscape. On the most recent review, the decision was taken to use the UN's Sustainable Development Goals, also known as the SDGs, as the framework for the investments in the Funds. You can find out more about the UN's SDGs here. We hope that this demonstrates that the Funds not only exclude harmful businesses and industries, but also invest in businesses that are making a positive contribution to a sustainable future. The exclusion screens are then applied to the Funds. Please see the Funds' Philosophy document in the key document section below for details of the exclusion screens.
Engagement and voting remain a major part of the Sustainable Stewardship philosophy. The team engages regularly with businesses from different industries around the world on issues, such as climate change and diversity and inclusion, and also plastic pollution, to help foster positive change. See the annual Stewardship report in the Key documents section below for examples of engagement and voting statistics.
What is ESG?
ESG means "environmental, social and governance" and represents extra-financial factors that can be used by investment teams to help us better understand the material risks and opportunities of the assets we invest in. ESG research can provide valuable information and insight by analysing potentially unacknowledged yet material risks, that may impact the performance and reputation of our investments.
- Environmental factors can include a company's energy usage, waste, pollution and natural resource conservation.
- Social factors would often include the company's relationships with and auditing of its suppliers, how it looks after its staff in terms of human rights; including health & safety and training and issues surrounding diversity and inclusion.
- Governance factors involve how a company is run, such as how transparent and accurate a company is being regarding its accounting, how it deals with conflicts of interest, the suitability and competency of its board members and any issues with bribery and corruption.
The factors can vary depending on the sector, geography and company in question. A technology company, a mining company and a bank, for example, will face different key ESG risks and opportunities.
| Environmental | Social | Governance |
| How the company impacts the environment and its plans to tackle climate change | How the company interacts with society | How the company is run |
| Climate change Natural resources Pollution and waste Energy use | Working conditions Health and safety Employee relations and diversity Data protection | Executive pay Bribery and corruption Board diversity Risk management |
What is sustainable investing all about?
Sustainable investing has become mainstream for many investors around the world. It's something that many investors now consider before they invest, but why?
- Climate change and emissions are now firmly on the global agenda of both governments and companies with a greater emphasis on long-term sustainability.
- Regulation has propelled ESG Factors into the mainstream, as directives governing pension schemes and individual investors require further ESG considerations.
- A greater focus on company governance and “doing the right thing” has also put further pressure on individual companies to be more transparent around equal rights for their employees.
Sustainable Stewardship Funds
About the Sustainable Stewardship Funds
Launched in 1984, and managed by Aviva Investors, the Sustainable Stewardship Funds have a proud heritage as one of the UK’s first ranges of ethical funds, whilst incorporating ESG factors. The range currently incorporates five funds – Managed, UK Equity, UK Equity Income, International Equity and Bond. Each fund has a clear investment policy which determines the types of companies they have exposure to.
Philosophy
The Sustainable Stewardship Funds philosophy
The Sustainable Stewardship Funds have a proud heritage as one of the UK's first ethical fund ranges, while also incorporating environmental, social and governance (ESG) considerations. The aims of the Sustainable Stewardship Funds have remained broadly consistent since the beginning:
- To exclude companies that do not meet the ethical standards of the funds or harm society or the environment
- To support companies that make a positive contribution to society
- To encourage better business practices through shared ownership and dialogue.
The funds have been renamed to Sustainable Stewardship to reflect our decision to align the funds with the UN's Sustainable Development Goals (SDGs). While the funds continue to exclude businesses deemed harmful to society, we believe the alignment of the funds with the UN's SDGs will help to demonstrate the funds' investment in companies that are contributing positively to the world and its future.
Investment approach
The Sustainable Stewardship Funds' investment approach
Criteria
Companies and their shareholders can and do make a positive contribution to society. However, companies can also cause ethical, social and environmental issues by, for example; making harmful products; acting without regard to customers, employee and the communities in which they operate; polluting the environment; or failing to have acceptable governance practices.
The Sustainable Stewardship Funds have a consistent investment process. This is made up of three layers as shown below:
1. Investment selection. Allocate to companies where there is strong evidence that the company has an overall positive alignment to the Sustainable Development Goals.
2. Stewardship - Engagement with investee companies on thematic issues, such as climate change, to encourage sustainable behaviours.
3. Measurement - Monitor and report on alignment of the Sustainable Stewardship Funds to the SDGs, to ensure positive sustainable outcomes for investors in the funds.
The Sustainable Stewardship Funds are managed by Aviva Investors, Aviva's global asset manager. By building responsibility into all their investment processes, Aviva Investors aims to improve risk management and investment performance, while at the same time help to create more sustainable investment solutions and outcomes fit for the future.
