Active management providing long-term fund performance for our clients underpins what we do at Polar Capital

To achieve this, our investment teams benefit from a devolved structure, where each investment team has autonomy over its own investment strategy, and where there is no one-size-fits-all investment approach. As such, analysis and interpretation of environmental, social and governance (ESG) issues is specific to each investment team.

Consideration of ESG issues is not new. They have been part of the research and evaluation process used by Polar Capital’s fund managers for many years and incorporated in their assessment of the risks and opportunities facing companies in which they may invest.

ESG factors can affect an investment team’s view of a company’s growth rate assumptions, competitive position and the discount rate used in financial models. We do not view ESG questions as non-financial. These issues have the potential to affect the long-term financial profile of companies in the same way as more obvious financial considerations such as sales, margins and asset returns.

As an example of the approach to ESG within Polar Capital, the Emerging Markets & Asia team, whose flagship emerging market equity strategy was launched in June 2018, incorporates an additional layer of ESG analysis as part of its investment process, with the aim of quantifying ESG impact versus the Fund’s benchmark. While the Fund was launched at Polar Capital in 2018, the investment process has been honed over many years. In fact, lead manager Jorry Noeddekaer has invested with an ESG perspective for nearly 20 years. The team manages four funds which are classified as promoting environmental or social characteristics under SFDR.

In November 2020, the Group established two new Management Committees, the Sustainability Committee and the Diversity and Inclusion Committee, that report directly to the Group Executive Committee, a sub-committee of the Polar Capital Holdings plc Board of Directors

The Sustainability Committee is chaired by the newly appointed Head of Sustainability and comprised of members of staff from across the business including the CEO, CIO and CRO. The Committee has been established with the objective of co-ordinating the company’s sustainability initiatives at a corporate level, including implementation of key regulatory and industry advances. The Committee also promotes the sharing of best practice for ESG integration and knowledge insight across the business. The Committee will play an instrumental role as Polar Capital continues to strengthen its ESG position from both an investment and corporate standpoint.

Polar Capital established the role of Head of Sustainability for the Group in November 2020. The Head of Sustainability leads and co-ordinates Polar Capital’s sustainability initiatives at a corporate level and acts as a focal point for ESG activity in investment portfolios. The role will also oversee the further development of Polar Capital’s integration of ESG factors at fund level as well as enhancing their responsible investment and stewardship capabilities. The position reports directly to the CEO and CIO on corporate and investment activities respectively.

Polar Capital supports the UK Stewardship Code and aspires to the standards of best practice that it sets. The new format, based on activity and outcomes of stewardship practices, is an important step for the accountability and credibility of stewardship practices for the industry. We are pleased to have become a signatory of the Code in 2022 and our second Stewardship Report for March 2022 can be found here. 

Polar Capital’s ESG monitoring uses company scores provided by third-party research

Each company is rated on a scale from AAA to CCC, relative to other companies in the same industry. Polar Capital’s ESG oversight reports list the five weakest scores for every strategy in each of the environmental, social and governance categories.

This gives an overall asset-weighted score for each portfolio and its benchmark, the analysis of which is the starting point for discussion in oversight meetings.

Portfolio managers have access to the full specialist ESG research and, as is the case with conventional third-party investment research, they do not always agree with their ratings. Having access to the reports, however, does allow them to assess what the consensus is saying.

The appropriate course of action remains the portfolio manager’s prerogative.

Voting

Polar Capital uses Institutional Shareholder Services (ISS) to assist with proxy voting. This highlights all situations where the proxy adviser recommends voting against management, identifies contentious issues and produces research as part of recommendations. Where ISS recommends voting against management, these issues are reviewed by the investment teams and the portfolio managers then decide how they wish to vote. Proxy voting records are summarised here.

Further information on Polar Capital’s approach to shareholder engagement can be found in our SRD II Shareholder Engagement Policy here.

Exclusions

All Polar Capital funds adhere to formal exclusions on all companies that are linked to the production and/or marketing of controversial weapons (cluster munitions, antipersonnel mines, depleted uranium etc). Polar Capital also considers EU sanctions, the US OFAC list and UN-sanctioned entities.