Consistent with our team-based approach to all investment processes, we also apply a
team-based approach when implementing responsible investment for our investment strategies.
Responsible investment activities comprise a significant amount of effort and
are performed by members of our Strategy Investment Research, Investment Analytics & Data,
Investment Stewardship and Portfolio Management teams. We have a Head of Responsible
Investment that helps coordinate ESG activities across these various groups. The Head of
Responsible Investment reports to our Global Head of Portfolio Management, with a dotted
line to one of our Co-CEOs.
Investment philosophy and principles
Our investment philosophy is based on the belief that in liquid capital markets, prices
reflect all publicly available information. This includes, but is not limited to,
information about a portfolio company’s strategy, financial and non-financial performance,
risk, capital structure, social and environmental impact, and corporate governance. As such,
we believe that prices of securities reflect the aggregate risk and return expectations of
investors, and competition among market participants drives prices toward fair value.
Even though we believe that market prices do reflect a company’s ESG practices, we also
believe that ESG criteria can still be used to manage risk and/or improve investment returns
for our clients. In particular, we believe that:
- Portfolios should integrate ESG considerations to manage risks. In addition, where
clients desire investment solutions that also target measurable ESG outcomes,
investment managers should carefully integrate ESG so that the loss of
diversification due to ESG considerations does not materially impact expected
- Stewardship activities may improve realized returns through higher future cash flows
to shareholders or a lower discount rate applied by the market.
- ESG encompasses a broad range of issues. We seek to understand the research and
available data on these issues to assess which ones are relevant to consider in our
- ESG risks and their potential impact on the future cash flow of companies are
reflected in current market prices. We know of no compelling evidence that suggests
companies with better ESG profiles offer higher expected returns than companies with
worse ESG profiles, after controlling for known drivers of return. This does not,
however, preclude us from using ESG data to add value for our clients.
ESG investment processes and strategies
We reflect the above beliefs about ESG by integrating ESG considerations broadly across our
investment strategies as well as by offering dedicated equity and fixed income strategies
that seek to accomplish specific ESG-related outcomes.
Our investment processes integrate ESG considerations for risk management purposes. We start
by designing our portfolios using the following investment principles:
- target drivers of return supported by robust research;
- diversify across issuers, sectors and countries where applicable;
- consider information on prices every day; and
- systematically implement portfolios by thoughtfully balancing expected returns,
costs and risks.
While the above approach uses diversification to reduce idiosyncratic risks, including
ESG-related risks, we also apply an additional layer of ESG-specific risk management. For
instance, we may exclude closely-held companies from our universe of eligible securities,
since companies with large strategic shareholders may not represent the interests of a broad
set of shareholders. We may also choose not to purchase companies where, based on public
information, we believe there is a heightened concern of fraudulent or other behavior or
situations that may make company financial statements no longer reliable. We also conduct
daily news checks to identify portfolio companies involved with controversies, including
with respect to environmental or social issues, that may have a significant impact on
company financials. These companies may be placed on temporary halt from further purchases
and/or referred to our Stewardship team for engagement. We believe these additional
processes provide another element of risk management that incorporates ESG considerations.
Our role as investment advisors for clients does not end once we invest in a security.
Rather, our Investment Stewardship team advocates for best-in-class governance practices,
including oversight of material ESG-related risks, as we believe that improved governance
practices may result in higher realized returns through higher future cash flows to
shareholders or a lower discount rate applied by the market. Our stewardship efforts include
engagement, proxy voting, and participation in industry events and organizations. See our
Investment Stewardship Statement and Annual Stewardship Report for more information on our
active ownership activities.
Targeted ESG strategies
We offer targeted sustainability and social strategies that use ESG integration and also add
a greater level of focus on ESG criteria by pursuing specific ESG outcomes. These strategies
use innovative processes to incorporate ESG considerations into broadly diversified,
value-added systematic investment solutions. This is demonstrated by our track record
managing sustainable and socially-screened strategies, now covering over a decade since the
launch of our first socially-screened strategy in 2008.
Our sustainability strategies seek to lower exposure to companies that may have a
detrimental impact on the environment while continuing to seek higher expected returns by
focusing on known drivers of expected returns. We learn from leading climate researchers on
which issues are most relevant to environmental impact or which impose significant external
costs to be borne by future generations. Currently, most of these issues are related to
greenhouse gas (GHG) emissions, which is why our sustainability strategies focus heavily on
reducing exposure to companies with significant GHG emissions or which have fossil fuel
reserves that enable future GHG emissions. Using data collected by RSF and research
from independent third-party vendors on company business practices, companies are
systematically evaluated with regard to sustainability. Investment in those companies is
emphasized, reduced, or excluded based on how they fare on key sustainability metrics,
including the primary sustainability impact considerations of high greenhouse gas emissions
or reserves that may produce those emissions. RSF’s approach to sustainability can
offer investors the ability to pursue their sustainability and investment goals
Our social strategies seek to incorporate specific social considerations by identifying and
screening companies to reflect the values of clients that invest in those strategies.
RSF may utilize research from independent third-party vendors, depending on the
requirements of each portfolio, to systematically exclude restricted securities.
We regularly evaluate the potential launch of additional sustainability or social strategies
that may help meet client needs. In 2020, we launched three new sustainability portfolios.
Please see the offering documents for our sustainability and social strategies for more
details on their ESG-related goals.
Contribution to the industry
In conjunction with our investment work on behalf of clients, we also seek to improve how
the investment industry functions. These efforts include, but are not limited to, working
with regulators to improve market mechanisms, supporting transparency and protecting the
interests of our clients throughout the investment process. We have provided input to
regulators on many occasions in an effort to help improve market mechanisms. For instance,
we provided feedback to the U.S. Securities and Exchange Commission (“Commission”) on a
pilot program for wider bid-ask spreads for small-cap issuers, strongly advocating against
the proposed practice. After the pilot program, the Commission discontinued the proposed
changes, recognizing that lower bid-ask spreads were ultimately beneficial to investors.
More recently, we advocated strongly against proposed changes that would have delayed
reporting of certain larger bond trades we believe these changes would
hurt investors by decreasing market transparency. We participated in calls with the ICI
(Investment Company Institute) as well as in a meeting with the Commission to voice our
opposition. While the issue is not yet officially settled, it was reported that the proposal
was put on hold. We believe we were able to make a difference by representing the interests
of bond investors on this matter. We also wrote the Commission to oppose proposed
regulations that would undermine the delivery of accurate, transparent and independent proxy
voting advice without undue delay or cost to market participants. The Commission ultimately
carved back from its original proposals, which we believe would otherwise have had a
negative effect on the ability of investors to receive independent and timely information
from proxy research.
We have also dedicated significant time and resources to participating in the efforts of the
Investment Company Institute, the largest global organization representing investment
companies. Senior officers at RSF have served on the Board of Governors of the ICI
as well as participated in the ICI’s ESG working groups to help improve regulation on ESG
disclosure, both in the U.S. and abroad.
In addition, we have regularly increased transparency through our own stewardship
activities. We provide regular reporting on our proxy voting activities and began producing
an Annual Stewardship Report in 2019. We also monitor portfolio companies and, where
appropriate, support efforts to increase their disclosure on how they oversee material
risks, including those related to environmental or social matters.
Corporate Social Responsibility
We also take corporate social responsibility into account for our own activities as a
business. This applies to stakeholders such as our clients, employees, facilities,
operations, and the local communities and overall industry that we operate in.
RSF’s success is predicated on providing excellent services and investment solutions
to our clients. We invest significantly in our clients’ experience and have regularly been
recognized for providing outstanding client service. There is a reason this is our first
guiding principle and we believe it has been the key to our success as a firm.
Another of our guiding principles is to create opportunities for our people to contribute
both to our success and to their own. RSF continues to invest heavily in its
employees, from recruiting to training and development and retention.
In particular, we are committed to creating and fostering an environment that attracts,
develops, and retains the most talented, qualified employees from different backgrounds --
from both inside and outside the financial services industry. We take active measures to
continually expand the depth and breadth of our professional talent pool. For example, in
2019, approximately 25% of our campus outreach events targeted diverse audiences.
- 44% of global hires were female for calendar year 2019
- In 2019, females represent 27% of our executive population, 36% of our total
population, and 40% of employees with < 5 years tenure.
In addition to targeted outreach, RSF also aims to provide an inclusive experience
for those candidates who seek out the firm themselves. We use gender-neutral language and
focus on specific qualifications in job descriptions to help ensure applicants from diverse
backgrounds are not dissuaded from applying. In 2019, We began using software to
analyze job descriptions to ensure neutral and inclusive language. Online training for
interviewers and hiring managers also includes anti-bias training and interview best
practices for consistent and equitable evaluation across all candidates. We conduct ongoing
reviews of new technologies and platforms that help reach diverse audiences, such as
focusing on women returning to the workforce or other under represented populations.
Additionally, we remain focused on fostering a meritocratic, inclusive environment that
further helps us attract and ultimately retain top talent from all backgrounds. In September
2019, RSF created a Diversity and Inclusion Executive Council under the sponsorship
of our Co-CEOs. The Council is comprised of senior-level executives across RSF’s
global organization and is chaired by our Deputy Head of Global Human Resources. The Council
is charged with assessing the firm’s needs, examining best practices, and helping form a
strategy that aims to identify means of increasing awareness and ensuring an inclusive work
environment. Our gender statistics (as of December 31, 2019):
Another initiative we have undertaken to invest in our employees is establishing
RSF Forum, a formal education curriculum to further the education of our
employees and prepare them for continued future success within our organization. The
RSF Forum curriculum includes courses in investments, sales, and management and
leadership and firm culture and history and includes almost 100 hours of education provided
by senior leaders and external consultants.
Facilities and operations
e seek to understand the impact of
our business operations on the environment and develop offices, plans and processes that
minimize those impacts. A majority of RSF’s employees are based in our corporate
headquarters in Austin and our office in Charlotte. These two offices are the only sites
owned by RSF and have each received awards for sustainability excellence.
RSF’s Delware headquarters received a three-star rating by Austin Energy Green
Building and our Charlotte office was certified LEED Gold.
As part of our continuing efforts to improve our sustainability practices, we have been
reviewing our own carbon footprint and exploring ways to reduce our footprint. We also
became public supporters of the Taskforce for Climate-Related Financial Disclosures (TCFD)
in March 2020.
Local Community and Industry Involvement
As part of our commitment to the communities that we serve and in which we operate, we
actively seek opportunities to make a positive difference by working with local
organizations as well as industry-wide organizations.
In 2019, our employees participated in numerous local community events with such
organizations as the Salvation Army, food banks (including Second Harvest and Central
Texas), Junior Achievement and the Red Cross. In total, Our employees volunteered
over 1,400 hours to these events, helping to improve their local communities.
Outside of local organizations, we also continued to expand our support for, and
participation in several industry programs that focus on underrepresented talent. This may
be through specific universities, such as Cornell’s Women in Investing Conference or Chicago
Booth Women in Investment Management. Or, it may be through an organization such as the
Robert S. Toigo Foundation, which focuses on career advancement and increased leadership of
underrepresented talent in the financial services industry. we has been working
with the Toigo Foundation since 2013. In addition to annually participating in Toigo’s
spring Catapult event, RSF has also hosted Toigo’s Fall Apex, their marquee annual
leadership conference, in 2014, 2016, 2019 and is in discussions about hosting in 2021.
RSF also established a Women in Wealth Community in 2015, which continues to grow in
membership, reach and impact. The Community’s purpose is to help financial advisors better
address the needs of women clients and incorporates women-centered workshops, key industry
events, customized strategy and communication sessions and educational collateral. The
Community had approximately 500 participants across the US as of December 31, 2019 and in
calendar year 2019, the Community hosted over 30 workshops, webinars, strategy sessions,
discussion groups and other industry events.