Our RI focus generally centers on how well the companies our investment teams invest in are managing their own CSR and ESG risks and opportunities.
Our Investment Franchises are at various stages of ESG integration. Each has an independent approach to their investment processes. Victory Capital provides them the tools and resources they need to achieve this.
Their accomplishments are noteworthy and include but are not limited to the following:
- Quantitative approaches employing multilayered risk management processes including responsible and sustainable investing
- Proprietary ESG rating scales to inform investment decisions
- Scoring the universe of investable candidates on key return drivers, including a strong or positively trending ESG profile
- Analyzing material ESG considerations of investable candidates
- Monitoring and analyzing ESG considerations as part of the comprehensive investment process and seeking to own investments with responsible leadership teams
- Evaluating and monitoring ESG considerations and ESG scores on an ongoing basis
- Explicitly addressing ESG risks/opportunities within an investment thesis
Our aim is that ESG will be an increasingly important consideration in each Investment Franchise’s processes.
From an overall firm perspective, Victory Capital views RI in terms of specific ESG objectives, or intentions. We separate these intentions into the following three distinct, but potentially complementary, categories.
Victory Capital may implement one of more of these RI intentions via various approaches.
We promote the United Nations Supported Principles for Responsible Investment:
- Incorporate ESG issues into investment analysis and decision-making processes
- As active owners we incorporate ESG issues into our ownership policies and practices
- Seek appropriate disclosure on ESG issues by the entities in which we invest
- Promote acceptance and implementation of the Principles within the investment industry
- Work together to enhance our effectiveness in implementing the Principles
- Report on our activities and progress toward implementing the Principles
Victory Capital currently approaches RI in a hybrid model. Our Director of Responsible Investing provides centralized support and works closely with a designated ESG/ RI Champion or analyst at each of our Investment Franchises.
While each Investment Franchise may have a unique approach to integrating ESG factors into their investment processes, our overall goal is continuous improvement. Our iterative process of integrating ESG factors is accomplished by:
- Assessing the effectiveness and efficiency of their current ESG/RI procedures
- Continually being aware of current research, new developments, and best practices
- Identifying changes needed to close gaps between current and target future states
- Evaluating implications for investment decision-making processes and ensuring any requisite training needs are accomplished
- Implementing desired changes, monitor progress, and assess whether risks are being mitigated or returns enhanced
In our Solutions Business, we are increasingly integrating ESG factors into portfolio analysis and are purposefully including certain ESG intentions into the stated objectives of various investment strategies.
We are proud of the progress we made in 2020 toward our goal of expanding the integration of ESG principles into our investment products. In October, we introduced the USAA Sustainable World Fund, the first of our mutual funds to be labeled “sustainable” by prospectus. The fund is managed by investment teams from Victory Capital's Investment Franchises and Solutions Business, each of which has a dedicated approach to integrating ESG principles into their respective investment processes.
In November, we announced plans to acquire THB Asset Management. THB was founded in 1982 and was an early adopter of socially responsible investment practices. It has a 25-year history of managing socially responsible investment portfolios. So, full ESG integration is a natural extension of the team’s approach. The acquisition was completed in March 2021 and THB is now our tenth Investment Franchise.
Also in 2020, we became an enterprise-wide signatory to the UNPRI, and we joined the UNPRI Working Group: Human Rights Coalition.1 These are among many efforts that helped Victory Capital’s MSCI ESG Rating improve from BB to BBB in 2020.
To broaden our impact as a responsible investor, we also endeavor to influence the actions being taken at the companies in which we invest.
Sustainable Investing is an active approach to investment decision-making that takes relevant ESG issues into account.
Sophus Capital is a Victory Capital Investment Franchise. The Sophus team believes that ESG issues are inevitably embedded in any firm’s business model and are therefore no different than the many other issues taken into consideration in fundamental investment research.
The case studies below illustrate that philosophy.