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ESG ASSURANCE CASE STUDY

CLIENT: FEDERATED HERMES

In April 2021, Prime Advocates was instructed to provide stewardship and ESG integration (“S-ESG Integration”) assurance of the policies and processes of the International Business of Federated Hermes (“IFH”), now Federated Hermes Ltd, for the period of June 2020 to July 2021. S-ESG assurance is a novel service that aims to provide stakeholders with confidence that an organisation’s stewardship, environmental, social and governance policies, processes and procedures are implemented as stated. Expert S-ESG verification, due diligence and strategy work give investors and other stakeholders confidence that the organisation’s S-ESG processes and policies are accurately represented and meet the standards of relevant legislation and best practice. The value of this service is in the confirmation that all policies, procedures and processes are followed by the organisation. Our bespoke S-ESG assurance service goes beyond that of our competitors by also highlighting the aspects of policies that need to be refined and noting where compliance with best practice and regulation can be improved.

In order to provide confidence that IFH follows high standards and can be trusted as a sustainable organisation, we assessed its implementation of best practice and regulation while benchmarking it against competitors and peers. In addition to this, we provided tailored advice on how ESG policies and procedures could be strengthened. Our process for this was as below:

  • Cooperative work to devise our approach to the assurance undertaking.

  • Thorough review of all relevant S-ESG IFH materials (including representations, reports, policies and processes) following a regulatory and best practice framework combined with our proprietary S-ESG methodology.

  • Independent and self-assured information gathering approach supplemented by interviews and limited questionnaire completion by senior management.

  • Guidance of IFH through documentational requirements and internal data needs in order to ensure the consistency of the organisation’s S-ESG strategy and the veracity of any public declarations made.

Prime S-ESG Assurance was unique in its scope and approach, covering not just a set of statistics or a specific report (as is common in this form of assurance) but rather the holistic S-ESG integration across the business lines of Public Equity, Credit, Real Estate and Infrastructure. This compelled us to carry out what was perhaps the most comprehensive review of the stewardship and ESG policies and processes of a fund manager of IFH’s size. Through this process, we gained an intimate understanding of the functioning of IFH’s complex market-leading responsible investment organisation and the level of its stewardship and ESG integration. IFH is now applying the operational, procedural and practical improvements flagged by our S-ESG Assurance exercise to its already excellent S-ESG Integration.