We are a fiduciary with respect to our clients. The decisions we make on behalf of clients are made in their best interests, including any consideration of Environmental, Social and Governance (ESG) factors in our investment processes.
We are committed to transparency and honesty in our positioning. We invest within client-led guidelines, where applicable, and each Investment Franchise is afforded the flexibility to meet their unique clients’ needs.
We do not impose our views of the world on our clients, and, as such, you will not see Victory Capital committing to every ESG initiative.
However, we are cognizant that some clients may want to invest their money with specific views and values considered, whether it be by excluding certain industries, gaining exposure in companies that create impact or by targeting certain environmental goals within their portfolios. As such, we aim to offer a diverse range of solutions with the intention of satisfying an array of investor objectives.
Some clients desire separately managed portfolios that seek to deliver both strong risk-adjusted returns and meet sustainability objectives. Victory Capital manages separate accounts with client-driven restrictions on investments in certain securities or types of securities, such as companies operating in particular countries or industries. Our shared service model and centralized operations allow for us to easily integrate and accommodate client-driven ESG preferences.
Victory Capital labels Responsible Investing intentions into three distinct classifications:
- ESG Integration: The systematic and explicit inclusion of ESG factors as a supplement to the financial analysis traditionally performed by investment managers with the goal(s) of risk mitigation or alpha generation.
- Exclusions: Avoiding companies, sectors, or countries in an exclusionary manner based on ESG controversies or certain standards, values, or norms (e.g., Norms-Based Screening, Faith-Based Investing, etc.).
- Sustainable & Impact: Examples include positive screening (i.e., selecting companies in an inclusionary manner based upon certain ESG criteria); thematic (i.e., investing in companies whose activity is focused on some form of sustainable development, such as diversity and inclusion), and impact investing (i.e., investing with the disclosed intention to generate and measure social and/or environmental benefits, alongside a financial return).
The vast majority of Victory Capital’s AUM that is managed with Responsible Investing intentions is classified as ESG Integration.
We intend to update our labelling methodology in 2024 to align our classifications with the new harmonized ‘Definitions for Responsible Investment Approaches’ agreed by the CFA Institute, the Global Sustainable Investment Alliance (GSIA), and the UN Principles for Responsible Investment (PRI) in 2023.
Each Investment Franchise owns its unique investment process, which involves extensive proprietary research. Through this research each team looks at a wide range of factors, which may include ESG factors if they determine them to be material to the investment risks and opportunities.
Integrating ESG factors does not mean that ESG information is the sole or primary consideration for an investment decision. The relevance of ESG considerations to investment decisions varies across asset classes, strategies, and Investment Franchises.
For us, the consideration of material ESG factors is not political. Where applicable, the incorporation of these issues into decision-making process represents good corporate governance, alpha generation, and prudent risk management consistent with our fiduciary duty.
Victory Capital provides all Investment Franchises with access to numerous ESG data providers, tools, and training, which they can utilize at their own discretion. Analysts often use this external data to complement internal research when developing an overall ESG assessment of a company.
Victory Capital does not have any firm-wide exclusions in place concerning ESG criteria. Some of our strategies have specific ESG exclusions, and we have technology infrastructure to seamlessly implement client-led mandates, upon request.
Sustainable & Impact
Currently, all strategies that qualify as Sustainable and/or Impact labelled are managed by our THB or New Energy Capital Investment Franchises and by our Solutions business.
THB aims to deliver superior, long-term risk-adjusted returns to clients by assessing ESG related risks and opportunities within their investment portfolios. They track carbon intensity and estimate portfolio revenue exposure for both positive and negative ESG factors.
New Energy Capital is an alternative asset manager investing across the capital structures of clean energy infrastructure projects and companies.
Sustainable & Impact funds that reside within our Solutions platform are typically driven by the unique ESG preferences and perspectives of our clients.
As active investors, direct engagement with company management forms an important part of many of our Investment Franchises’ analysis. Collectively, our investment teams have thousands of meetings with company management every year.
Discussions with company management allow each team to learn about a company's perspectives and approaches, provide feedback, and raise any concerns that have been identified during the team’s investment research process.
Victory Capital seeks to actively exercise its proxy voting rights and responsibilities on behalf of clients and believes it is an essential part of maximizing shareholder value, ensuring good governance, and delivering investment performance aligned with our clients’ long-term economic interests.
Victory Capital has a Proxy Voting Committee (PVC), which is responsible for creating guidelines that oversee the voting process. The PVC is comprised of Victory Capital employees who represent vital areas within the company and can provide a range of diverse knowledge that enhances the Committee’s decision-making capabilities.
To assist the PVC with implementing its proxy voting strategy, Victory Capital retains the services of an independent proxy voting service, ISS. ISS’s responsibilities include monitoring company meeting agendas and items to be voted on, evaluating each vote in-line with Victory Capital’s Proxy Voting Policy, and providing research and voting recommendations based on the Policy. It also identifies resolutions that require specific shareholder judgement, which enables Victory Capital to review situations where additional consideration may be needed to determine the proxy vote decision.
Our Proxy Voting dashboard, which is available here, includes additional information.
UN Principles for Responsible Investment
The UN-supported Principles for Responsible Investment (PRI) is the world’s leading proponent of responsible investment. It works to understand the investment implications of ESG factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions.
Whilst we can trace Investment Franchise membership back to 2016, Victory Capital became an enterprise-wide signatory to the UN (PRI) in 2020. As a signatory, we commit to the following six principles:
We will incorporate ESG issues into investment analysis and decision-making processes.
- We will be active owners and incorporate ESG issues into our ownership policies and practices.
- We will seek appropriate disclosure on ESG issues by the entities in which we invest.
- We will promote acceptance and implementation of the Principles within the investment industry.
- We will work together to enhance our effectiveness in implementing the Principles.
- We will each report on our activities and progress towards implementing the Principles.
Victory Capital reported to the PRI for the first time in 2023. Victory Capital’s public Transparency report is available on the PRI data portal here.