The Aurum group has a strong and committed approach to addressing environmental, social and governance issues (“ESG”), both in the way we run our business and in our approach to social responsibility.
ESG underpins the firm’s business philosophy which is built on five pillars that are essential elements to continued stability:
Performance – A proven investment philosophy achieving alpha-driven, uncorrelated, consistent returns over multiple market cycles.
High Impact Social Programmes - We are committed to contributing to a better world and to supporting a range of social and environmental projects. We also encourage charitable engagement amongst all our employees.
Culture and Stability - Continuity of people, process and philosophy ensures preservation of culture, cohesion, and stability at Aurum.
Governance - Maintaining high ethical standards and integrity safeguards sound and reliable corporate governance.
Risk - A strong culture of risk management. Aurum utilises proprietary systems to help facilitate thorough initial and ongoing due diligence, enabling us to manage portfolios whilst mitigating business risk.
Aurum believes that environmental and social issues are important to any person or entity that breathes, eats, drinks water or utilises resources. There is a misperception that human beings, businesses and economic systems are separate from the environment and social issues. Incorporating these issues is vital to running any business.
The underlying funds held by the Aurum portfolios invest in a wide range of asset classes, some for only very short time periods. In aggregate, the holdings of each Aurum portfolio are exposed to thousands of different stocks, currencies, government bonds, and commodities. The difficulty of assessing ESG compliance varies according to asset class - consider currency or volatility-focused strategies, for example. Continuous measurements of the underlying funds' investments will hopefully be possible in the future, but currently no clear ESG metrics or systems exist to access all the exposures in a timely fashion.
ESG issues are incorporated into the investment decision-making process when AFML considers prospective investments and when performing monitoring of existing investments. The core focus of this assessment is on corporate governance. AFML requires manager personnel and fund directors to have adequate skills and background knowledge. Amongst other things, internal processes, control measures, risk tools, incentive systems and policies on proxy voting and conflicts of interests are reviewed. Aurum Research Limited’s ODD team will veto an investment recommendation if a manager fails to meet AFML’s expectations. Additionally, close relationships with managers facilitate a constructive dialogue around the topic of ESG.
While AFML does not have an official exclusion policy with its underlying managers to the extent such a policy avoids investment in certain companies, AFML does monitor the largest investments in each fund's book. ARL’s CIO has previously vetoed investment recommendations in funds that had significant exposure to securities that were considered morally and ethically questionable.
Generating long-term sustainable returns is dependent on environmental, social and economic factors and is at the core of our business philosophy. We understand that a business that is not in harmony with the ecosystem within which it functions is doomed to fail. Accordingly, Aurum embraces the notion of interconnectivity and recognises that being part of an ecosystem comes with a wider social and environmental responsibility. We are very aware of the issues and misconceptions surrounding socially responsible investment (“SRI”). SRI, however, is in its infancy and we believe it will evolve and respond to these issues. We are actively monitoring this asset class and are looking to engage with providers to further broaden our understanding of their impact.
In the meantime, if an asset manager or investor is unable to implement SRI, or if SRI is not in their mandate, they can still make a difference by choosing to invest philanthropically in regeneration, conservation and positive impact programmes.
We believe that, for businesses operating today, this should be a normal expense i.e. the standard way of doing things. Businesses should give something back and try to regenerate the planet in some way. We believe the United Nations 17 Sustainable Development Goals are an important step in raising awareness and encouraging action to ensure a sustainable planet and future for those generations that will inherit it. We have, where possible, aligned our activity to meet these goals.
Aurum Impact Investment Solution
Aurum's impact investment solution, which launched in 2002, aims to deliver returns that go beyond financial returns. The fund provides investors with an opportunity to both make investment returns and make a difference.
The advisory fee generated from the fund supports a number of charities, principally Synchronicity Earth, a registered charity that supports the conservation of biodiversity, ecosystems and species at risk around the world.
In 2015 the Synchronicity Earth Regeneration Portfolio was created in collaboration with Aurum. It is an initiative to create strategic funding partnerships between corporates and environmental non-government organisations (“NGOs”) in order to regenerate natural habitats. The portfolios provide a scalable solution that can be adopted by anyone looking to engage in environmental philanthropy.
The first strategic funding partnership that Aurum supported, and continues to support, was Hutan, a Sabah-based NGO that was established in 1998 to restore highly degraded and fragmented forest patches in Malaysian Borneo.
Driving Industry Change
The hedge fund industry deals with complexity and risk every day. Fundamental to its success are analysis of data and the need to understand the impact of trends and systemic change. By extending this approach to environmental impact, the industry is ideally placed to both understand the problems and be part of the solution.
Aurum has a goal to mobilise the hedge fund industry to have a net positive environmental impact.
To achieve this Aurum aims to promote articles written about the Regeneration Portfolio using social media and industry publications, and engage with participants in the hedge fund industry to support participation in regeneration portfolios.
Created in 1948, IUCN (International Union for Conservation of Nature) has evolved into the world’s largest and most diverse environmental network. It harnesses the experience, resources and reach of its 1,300 Member organisations and the input of some 13,000 experts. IUCN is the global authority on the status of the natural world and the measures needed to safeguard it. IUCN provides public, private and non-governmental organisations with the knowledge and tools that enable human progress, economic development and nature conservation to take place together. The IUCN has the ability to convene diverse stakeholders and provide the latest science, objective recommendations and on-the-ground expertise, driving its mission of informing and empowering conservation efforts worldwide. It also serves as an official agency monitoring progress towards biodiversity-related targets.
Aurum has been providing funding to assist in covering the core costs of the IUCN since 2012.
Adam Sweidan, CIO of Aurum Research Limited, is Patron of Nature for the IUCN.
It is vital to protect our oceans now in order to ensure their long-term environmental health, and provide sustainable resources for future generations
With this in mind, Aurum has sought opportunities to engage with and support initiatives focusing on this important area.
Founded in 2001, One to One Children’s Fund has established a significant reputation in the spheres of HIV and post-conflict trauma, by developing innovative and sustainable models to fill core gaps in care for vulnerable children. It aims to rebuild and transform lives by first identifying the greatest risks facing children and adolescents and then working with partners to pilot and deliver cost-effective interventions in healthcare, psychosocial services and education. Children and adolescents affected by HIV and AIDS, disability, disease and trauma are empowered to help them realise their full potential and lead healthy, fulfilling lives. Aurum has supported One to One Children’s Fund since its inception.
Aurum Research Limited’s CEO personally supports SACCA and devotes time to encouraging potential donors.
SACCA is a local NGO registered in Rwanda which works to protect and rehabilitate children who have been living on the street, as well as preventing them from reaching the streets in the first place.
SACCA’s work has four elements:
- Provision of ongoing support to children within rehabilitation centres
- A reintegration programme
- An independent living programme
- Community based Prevention of Separation project
Aurum encourages group employees to support charities that are important to them and to use their skills and efforts to make a difference.
United Nations Principles for Responsible Investment (“PRI”)
Aurum became a signatory to the United Nations Principles for Responsible Investment in 2014. The PRI works to understand the investment implications of ESG factors and to support its signatories in incorporating these factors into their investment and ownership decisions. It acts in the long-term interests of its signatories, of the financial markets and economies in which they operate and ultimately of the environment and society as a whole. An alignment of Aurum’s interests with its clients' interests is at the heart of any investment decision. Aurum believes that considering various aspects of ESG is an essential component to good investment decision-making.
Operational Due Diligence (ODD)
Aurum’s ODD process is designed to highlight issues that could exclude a fund based on ESG criteria.
ESG issues are incorporated into the investment decision-making process when Aurum considers prospective investments and when monitoring existing investments. The core focus of this assessment is on corporate governance. Aurum requires manager personnel and fund directors to have adequate skills and background knowledge. Amongst other things, internal processes, control measures, risk tools, incentive systems and policies on proxy voting and conflicts of interests are reviewed. Additionally, close relationships with managers facilitate constructive dialogue around the topic of ESG.