Responsible Investment Policy
GSB Capital is a client-focused, evidence-based investment manager. We strive to position our clients as strongly as possible by providing outstanding investment advice and comprehensive financial planning that delivers exceptional levels of service enabling clients to achieve their finance-based goals.
GSB Capital provides financial advice, wealth planning, investment solutions and financing assistance to clients located globally. We aim to have a positive impact on the lives of our clients and the world around us, and this is achieved through taking a responsible approach to investing and properly assessing the impacts of our decisions on our stakeholders.
GSB is aiming to become a PRI signatory to underline our commitment to embedding ESG principles at the core of everything we do. GSB was founded with the intention to set a new standard for ethical practices and we believe that becoming a PRI signatory will further our progress toward our goals by helping guide us to establishing robust processes, for ensuring our investments are aligned with our beliefs.
ESG has always been a core consideration of GSB across all of our activities however becoming a PRI signatory will allow us to improve and formalise the processes we use to ensure the highest levels of compliance and engagement.
This responsible investment policy will be approved by our investment committee to ensure it is consistent with our brand ethos and philosophy. Once approved, the policy will be reviewed on an annual basis to ensure best practice is upheld and changes in the industry are reflected in our responsible investment policy.
GSB defines responsible investment using the Mercer definition, which is as follows:
“We define responsible investment (RI) as an investment approach that includes environmental, social and corporate governance (ESG) factors and broader systemic issues — for example, climate change and sustainable development — along with active ownership (stewardship).”
Furthermore, GSB has adopted the responsible investment definitions outlined by the Investment Association in its framework.
The components and definitions are listed below:
Stewardship is the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society.
The systematic and explicit inclusion of material ESG factors into investment analysis and investment decisions.
Excluding entire sectors, activities, companies or countries from a fund or portfolio based on ESG criteria, moral or ethical views, or religious beliefs.
Investment approaches that select and include investments on the basis of fulfilling certain sustainability criteria and/or delivering on specific and measurable sustainability outcomes. Investments are chosen on the basis of their economic activities (what they produce/what services they deliver) and on their business conduct (how they deliver their products and services).
The investment association endorses the Global Impact Investing Network (GIIN) definition of Impact Investments:
“Investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return.”
This document refers to GSB’s investment process and how Environmental, Social and Governance (ESG) factors are included and utilised within this process to ensure our investments are aligned with our philosophy as a firm. ESG issues are incorporated into all of our investments regardless of asset class.
From the inception of the company, ESG has been a core foundation for every part of our process as a business, especially in our investment processes. GSB recognises its fiduciary duty to act in the best economic interests of our clients while also making responsible investment considerations a key focus. When investing capital on behalf of our clients GSB has a duty to consider all types of risk including non-financial risk and we believe that including ESG factors in our investment processes improves our risk assessment capabilities.
Listed below are factors taken into consideration by GSB during our investment processes. This list is not necessarily exhaustive however, it contains all of the key considerations we make when assessing a potential investment’s ESG alignment.
ESG Negative Screening
GSB Capital’s investment committee has approved the implementation of negative screening into our investment decision process. This will limit GSB’s exposure to controversial activities in line with the exclusions policy we have adopted above. Our negative screening extends to activities that oppose GSB Capital’s responsible investment objectives.
Given that GSB Capital invests in funds whose aim is to track or replicate indices, we may not have the ability to exercise full discretion in the choice of investment. GSB Capital takes an evidence-based passive approach to investing and thus a large portion of our AUM is invested in passively managed index-trackers offered by asset managers who are also PRI signatories.
Regarding funds with more explicit investment objectives beyond passively tracking an index, GSB Capital will screen for investments in activities we deem to be unsustainable and opposed to our responsible investment criteria. While we do not currently have thresholds in place for allowable levels of exposure, we regularly review our investment exposure to potentially problematic issues to ensure it aligns with our principles while still giving clients comprehensive market-wide passive investment solutions.
Where applicable after consulting with clients, GSB Capital will take tactical exposure to companies and funds offering exposure to activities associated with sustainability and with a positive impact on the ESG factors we have stated below. This aligns with GSB Capital’s philosophy as a business of delivering clients financial returns while positively impacting the world. We believe there is a strong overlap between attractive investment opportunities and investment opportunities impacting the world positively due to the increasing demand from consumers for goods and services with a measurably positive impact on society.
ESG Data and Resources
GSB Capital utilises TruValue Labs ESG Ratings to help form an assessment of the ESG-related risks of investments. TruValue Labs is a tool developed by FactSet with the aim of amplifying the research, analysis and monitoring capabilities of investment professionals for factors related to creating a more responsible and sustainable world through the assessment of ESG factors.
GSB Capital’s ability to incorporate ESG factors into every investment is complicated by our use of funds in the vast majority of our portfolios. ESG-related data, metrics and ESG scores are typically not available on a fund level and instead are usually only produced for companies. To counter-act this we analyse data on the asset manager, fund manager and information on the mandate and holdings of the fund to form our own assessment of the ESG credentials of the fund, although this will produce a less comprehensive result compared to what we can analyse for a company due to the amount of companies that can be held in a fund.
ESG Due Diligence
Following guidelines from experts GSB Capital has a number of factors it will assess a potential investment on. These factors capture the most relevant and material ESG factors for the companies and funds GSB Capital is considering investment in.
Through considering all of these factors, we believe that we are able to accurately assess the ESG alignment of a potential investment.
As a PRI signatory, GSB will incorporate the United Nations-backed Principles for Responsible Investment (PRI). These principles are as follows:
Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes.
Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices.
Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.
Principle 4: We will promote acceptance and implementation of the Principles within the investment industry.
Principle 5: We will work together to enhance our effectiveness in implementing the Principles.
Principle 6: We will each report on our activities and progress toward implementing the Principles.
To find out more about the PRI, please visit their website at http://www.unpri.org.
Responsible Investment Guidelines
To implement our guidelines and policies the investment committee will meet monthly to discuss the products and services we are offering and ensure they are compliant with the commitments we have made.
GSB utilises positive screening when assessing the ESG capabilities of an investment. While negative screening would enable GSB to filter out non-ESG complaint investments our preferred approach is to find investments with a clear ESG focus at the core of what they do as this synergises best with GSB’s approach to investment.
The ESG pedigree of an investment is assessed from an objective standpoint using externally calculated ESG scores that aim to quantify how ESG-aligned an investment is. However, GSB will also perform its own due diligence on this front to create a clear picture of whether the investment is aligned with our guidelines and principles.
However, this approach shifts when it comes to investments in alternatives. When considering investments in alternatives, GSB will utilise negative screening to eliminate investments that explicitly violate the guidelines and principles we have adopted. This screening is performed during the 3-stage due diligence process. However, despite adopting negative screening GSB will still take into account the overall ESG focus of a potential alternative investment with a preference towards investments deemed ethical as long as the risk-adjusted performance is at the level that GSB would expect on behalf of our clients.
Furthermore, for asset classes such as Real Estate, there is much less of an ESG focus and negative screening would be utilised to avoid unethical investments. This is however not anticipated to be an issue as GSB focuses on Real Estate investments through trusted & ethically run funds or partnerships operating in developed markets with strict regulations in place.
GSB maintains relationships with a number of several prestigious banking partners and external managers located around the world. These external managers are extensively vetted and assessed to ensure that they align with GSB’s ethos and philosophy. GSB expects the external manager it uses to have a responsible investment policy in place and to offer products and services which align with our principles and are ESG compliant. GSB would have the final decision on any allocations made to the aforementioned external managers and thus we can ensure that client funds are invested in a manner that is consistent with our beliefs and policies.
Engagement and Active Ownership Procedures/Approaches
GSB is not actively involved in the management of the companies or investments we make, and thus we do not need a formalised approach to active management at the current juncture. If this changes in the future, we will amend our Responsible Investment Policy.
GSB’s stewardship activities are primarily conducted through proxy voting from asset managers on our behalf. As GSB Capital invests a significant portion of its assets into funds, we are not able to exercise voting rights in individual firms held within the funds, and this power rests with the asset managers we work with.
The asset managers GSB works with are evaluated to ensure they align with our principles as a company. Furthermore, GSB prioritises working with asset managers who are also PRI signatories.
We expect the asset managers we work with to exercise our right to vote at shareholder meetings on our behalf as investors in their funds.
In investments such as investments in alternative assets where GSB Capital has invested the client’s money directly and without an intermediary in place, we will engage with the management team and vote when applicable to ensure our influence is used to successfully engage and improve companies, specifically their approach to ESG issues.
Annually we will assess the level of compliance we maintained with the guidelines and principles outlined in this document and look for changes that can be made to improve our investment policy. Additionally, we will conduct research and analyse what improvements can be made to improve our processes to ensure higher levels of compliance in the future.