ESG Report

Environmental, Social and Governance 2018

Overview

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.

Environmental

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. 

Outcome

  • Aurum contributes to Synchronicity Earth’s operating expenses, which creates stability for the charity and ensures that other donations can be directed to activity that will have an impact.

Impact

  • Aurum’s impact investment solution has generated approximately $8.5 million for over 70 organisations in nearly 40 countries.

Sustainable Development Goals:

   

 

 

Regeneration Portfolios

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.

Outcome

  • Covered the costs of two full time staff and vital equipment for Hutan. Contributed to Hutan’s reforestation efforts at three sites.

Impact

In 2018:

  • AFML’s funding covered the costs of essential equipment and planting of 2,200 native tree seedlings, with two to three years of ongoing maintenance until the seedlings can be left to fend for themselves.
  • The funding also paid for installation and monitoring of three hornbill nest boxes. Some key species of tree germinate more successfully once they have passed through the digestive system of hornbills and this new strategy will re-introduce the natural seed distribution process for these species into the new areas of forest.
  • Hutan offers local women the opportunity to join the reforestation team for paid ‘internships’. Some of these women may become part of the team.
  • Local communities, particularly women, are empowered to actively manage their natural environment and resources.

Sustainable Development Goals:

   

 

 

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.

Outcome

In 2018:

  • Aurum wrote an article discussing how the hedge fund industry could be a positive force for environmental change, which was published in HFM Week.
  • Representatives of Aurum held meetings with individual hedge fund managers to promote the Regeneration Portfolio.
  • Along with representatives from Synchronicity Earth, Aurum presented at the Albourne annual conference on how hedge funds can help to diffuse the environmental time bomb.

Impact

In 2018:

  • A Chicago-based hedge fund continued funding a strategic funding partnership in Tanzania, which supports communities to plant native forestry and agroforestry.
  • A London-based hedge fund manager continued funding a Regeneration project in Ecuador, which supports a forest reserve in an area of rich biodiversity and is beginning reforestation to link the reserve to nearby protected areas.
  • Two hedge funds, one US-based and one UK-based, began providing annual unrestricted funding to Synchronicity Earth, which supports strategic programmatic work on overlooked and underfunded conservation issues.

Sustainable Development Goals:

 

 

Strategic Conservation

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.

 

Outcome

  • Funding for the core costs of the IUCN is crucial for delivery of a range of activities, from maintenance of the Red List of Threatened Species to championing nature’s role in achieving the Sustainable Development Goals.
  • Core funding allows the organisation to remain strategic and deliver its mission to 'Influence, encourage and assist societies throughout the world to conserve the integrity and diversity of nature and to ensure that any use of natural resources is equitable and ecologically sustainable.'

Impact

In 2018:

  • IUCN Red List assessments continued to grow, in line with the objective of reaching 160,000 species by 2020.
  • Specific, community-centred species conservation action plans were developed, targeting endangered and vulnerable species, their habitats and the communities living in them.
  • Country and regional level action plans were supported and implemented to increase resilience and adaptation to climate change, sustainable livelihoods and food security.

Sustainable Development Goals:

  

 

 

Oceans

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.

Outcome

In 2018:

  • Aurum sponsored the first Ocean Risk Summit, which had an objective to engage a range of political, scientific, economic, environmental, technological, risk and legal regulatory leaders (in particular, finance ministers, chief finance officers and chief risk officers) to discuss the causes and impacts of, and possible solutions to, the rapid negative changes taking place in our oceans.

Impact

  • Development of an Ocean Risk Index, a project that Ocean Unite is supporting AXA XL in developing in collaboration with the Economist intelligence Unit. The index will define, value and track key ocean risk factors.

Sustainable Development Goals:

   

Social

One 2 One Children's Fund

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.

Outcome

  • Aurum’s support has allowed One to One Children’s Fund to focus on core gaps in care for some of the world’s most vulnerable children, providing support to children and their families.

Impact

  • Anti-retroviral treatment and support: implemented the first treatment programme for children. Established PATA, a network organisation of 400 HIV clinics and hospitals, sharing knowledge and disseminating best practice; PATA’s expert patient concept was selected as one of the Rockefeller Foundation’s top 100 innovations for the 21st Century.
  • Enable: a programme delivering home-based healthcare for children, their mothers, pregnant women and families suffering HIV, malnutrition and other diseases, contributing to drastically reduced infant mortality. Supporting more than 500 pregnant women so far, in a region where 30% of mothers are HIV+, the most recent results from the project include 0% transmission of HIV from mother to child so far. 9,000 community members have benefited from the service.
  • Young people and HIV: working with health clinics and schools to empower HIV+ young people to manage their treatment and combat stigma, and to empower peer supporters to address pressing issues affecting young people such as HIV, sexual health, puberty and gender-based violence.
  • Post-conflict Kosovo: counselling support to over 10,000 vulnerable children and families. Established four day care centres for children with disabilities that now operate independently, helping 3,000 children every year.
  • Young refugee support: established partnerships to expand psychosocial support for young refugees in Greece and in the UK, developing counselling and arts-based models for this important unmet need within refugee communities.

Sustainable Development Goals:

   

 

 

SACCA ASBL (The Streets Ahead Children’s Centre Association)

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

 

Outcome

  • In 2018 Aurum Research Limited’s CEO led a delegation of donors and potential donors to Rwanda to evaluate the work that they are supporting.

Impact

  • Graduates of SACCA’s educational programmes have received a rich educational experience and have gone on to find full-time employment.
  • Those who complete SACCA’s programme have a significantly enhanced life and livelihood as a consequence of SACCA’s intervention. This sets an example in the community, and has led to referrals from their friends, colleagues and relations seeking new life skills from SACCA.
  • Many of the smallholders with whom SACCA works, as part of the independent living programme, have gone on to rent larger fields and establish their own cooperatives with other local farmers. The knock-on benefits include being able to send their children to school and pay labourers a higher price for their work. 

 

 

The Aurum Team

Aurum encourages group employees to support charities that are important to them and to use their skills and efforts to make a difference.

Outcome

  • Aurum runs a programme that matches each group employee’s fundraising up to £500 per year.
  • In 2018 Aurum introduced an employee volunteering programme. Staff are allocated two days per year to volunteer at a range of London-based charities.

Impact

  • Aurum employees supported the following charities in 2018 through 29 volunteering days:

  • Action Homeless Concern
  • Age UK Charity Shop
  • Art for All: Kids’ Club
  • Barnardo’s Charity Shop
  • Be Enriched: Castle Canteen (community canteen)
  • Dress for Success (help to empower unemployed women)
  • F&C Volunteers (older people’s lunch club)
  • The Felix Project (fighting food poverty)
  • Hammersmith & Fulham Food Bank
  • Share Horticulture (horticultural projects for disabled people)
  • Share Community (training workshops for disabled people)
  • Salopian Gardens
  • Tower Hamlets Cemetery Park

Responsible Investment

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.  

 

Outcome

  • For Aurum’s first submission in 2014 we were awarded a B. We are pleased to report that in 2015 we received an A rating, which we have maintained each year since.
  • As an allocator to hedge funds, Aurum has insight at an industry level as well as a role in influencing hedge funds. In 2018 Aurum was represented in the PRI’s Hedge Fund Working Groups, which were tasked with developing hedge fund industry guides for the incorporation of ESG factors in the investment decision-making process according to different strategies.

Impact

In 2018:

  • Aurum participated in PRI’s hedge fund working group calls and meetings
  • Aurum gave input into the PRI proposed hedge fund module for the 2019 reporting framework.

 

 

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.

Outcome

  • Independent ODD team advising the board.
  • ESG considerations incorporated into both new investment and annual monitoring report templates.

Impact

  • Only funds with robust corporate governance structures are allocated to. Funds with inadequate frameworks are required to improve them before any potential investment.
  • Ongoing dialogue with managers regarding ESG issues.