Hermes Investment Management aim to deliver excellent returns responsibly. The company has created a pledge to always put clients first, and act responsibly and transparently. Taken initially by every member of the Hermes Executive and Management Committees, the pledge is being rolled out to all Hermes staff and has already been signed by over 75% of staff.
Three tips from Hermes
- Consider society as a whole. The decisions that we make do not just influence those that are directly involved, we inadvertently shape societies and cultures with the actions we take. Acting responsibly is something that everyone should embrace to create a better society for all.
- Think longer term. In the past, short-term thinking has had a catastrophic effect on long-term outcomes. Considering the wider long-term benefits rather than the short-term profit of our actions, will not only reap future financial rewards, but will create an environment and society that is sustainable for future generations.
- Engage rather than divest. Companies can only improve and become more responsible if we work in partnership with them. We actively seek to help companies enforce change into their operations across environmental, social and governance issues, with the aim of adding value to their business.
Hermes aim to serve both their clients and the wider community, focussing on:
1. Demonstrating that better governed firms deliver stronger long-term returns for investors.
2. Integrating greater environmental, social and governance stewardship across their investments.
3. Initiating and leading debate to the contribution of the investment management industry to society.
Research as a foundation for change
The company conducted research to understand how environmental, social, and governance factors can enhance returns, and found that well-governed companies have typically outperformed their poorly-governed counterparts by an average of 0.3% per month.
In 2015, Hermes conducted its second annual Responsible Capitalism survey, in which over 100 institutional investors took part, providing a pioneering insight into how CSR has been embraced by the industry. The survey resulted in a four-part paper of its findings, exploring responsible capitalism and society, diversity, sustainability and stewardship.
Establishing shared principles
Hermes was founding signatories of the United Nations-supported Principles of Responsible Investing (PRI), and chair of the drafting committee. The PRI is now recognised as the leading set of guidelines for global investors to implement responsible investment practices.
Hermes' approach to responsible investment has been expressed through a number of internal policy guidelines and principles, including the Hermes Responsible Ownership Principles, which seek to create a common understanding between boards, managers and owners of the proper goals of a public company. These were updated in 2010 to include lessons from the financial crisis.
Complementing these global principles, the company has also developed specific corporate governance guidelines for 15 major countries, taking into account the country’s specific regulatory and legal context, as well as corporate governance best practice.
Developing responsible leaders
The company recently introduced a new management development programme aimed at future leaders of the business. This scheme not only encourages more collaborative working across the organisation, as managers participating on the programme are given the opportunity to develop together, but also teaches participants how to run a sustainable business and make critical decisions that are in the best interest of society as a whole. In order for senior managers to score highly on the behavioural element of their annual appraisal, they must understand and openly promote Hermes’ vision for social responsibility.
Engaging the local community
The company has established a community engagement group, Hermes Active Community Engagement, which organises community projects for employee involvement, with the intention of creating a positive social impact in the company's local area of East London. For example, Hermes has been an active partner in the Apax-Mosaic Enterprise Challenge: a mentoring programme for secondary school students, encouraging the development of their entrepreneurial skills and teaching them about becoming future business leaders.
Reporting on social impact
Hermes' public annual report and accounts includes details and statistics on responsibility and environmental, social, and governance impact. The company now reports on corporate social responsibility activity, such as its carbon footprint, alongside engagement activities and financial reporting.
The investment industry has a reputation for focusing on short-term performance with little consideration of the wider impact on investors, beneficiaries and society at large. Hermes believes that social responsibility is embedded in the company's corporate DNA, and it aims to put its ethos into action to serve both its clients and the wider community.
What Hermes Investment Management's Chief Executive Officer said:
“We are entrusted with ordinary people’s savings and invest these so that they may have a dignified retirement. We understand that this means using their capital to achieve a holistic return which is more than pure financial return.
"Therefore, we have a moral responsibility to use their capital to help shape a society that they would be happy to retire in.
"We also believe we have a deep responsibility to the community we work in, in Tower Hamlets. We do so out of a feeling of fellowship and see the work we do there, not as charity but as a communal obligation.” - Saker Nusseibeh, Chief Executive Officer, Hermes Investment Management