Our approach to responsible investing

Standard Chartered’s (the Group) approach to sustainability is underpinned by our Stands. There are three areas to our approach – responsible business practices, bespoke sustainable finance solutions and innovation in service of our markets. These reflect our commitment to our brand promise – Here for Good – in support of sustainable social and economic development.

Wealth Solutions (WS) offers investment advice, products, and services to our clients. Our solutions range from fixed income, equities, foreign currency, structured products, mutual funds and Exchange Traded Funds (ETFs) to discretionary portfolios, insurance and wealth lending. We operate an open-architecture model which allows us to distribute products from third-party providers. Under our Discretionary Portfolio Management (DPM) services, we also offer customised solutions to our private banking clients.

This document outlines the Group’s approach to integrating environmental, social and governance (ESG) considerations into the product selection and design, investment process and analysis, as part of our Responsible Investing approach.

The WS Responsible Investing approach is underpinned by the following principles:

• We believe the integration of material ESG factors into investment decisions supports long-term positive outcomes for our clients.
• We support the UN Global Compact Principles (UNGCP) and have developed exclusionary policies aligned with UNGCP and our Position Statements.

1. Governance and oversight

The oversight and management of sustainability-related risks and opportunities are an integral part of our business management, involving several executive committees. WS products and processes are governed by the WS Product Committee, whereas the Sustainable Finance Governance Committee is our foremost committee for managing greenwashing risk in sustainable finance product design and labelling.

1.1 WS Product Committee (WS PC)

The WS PC oversees and manages risks associated with the selection, distribution, execution, and operational activities of WS products.

1.2 Sustainable Finance Governance Committee (SFGC)

The SFGC is our forum for reviewing sustainable finance products and frameworks and derives its authority from the Group Responsibility and Reputational Risk Committee (GRRRC)¹. The SFGC provides leadership, governance and oversight in delivering the Group’s sustainable finance offerings and guides the Group in identifying sustainable finance opportunities and managing greenwashing risks. SFGC reviews and endorses sustainable finance products prior to launch.

2. Exclusions

2.1 Baseline Screen – Basic Exclusion List

The Basic Exclusion List (BEL) is a baseline screen to identify products in the WS universe where there is a heightened potential for environmental and social (E&S) risks. It is adapted from the Group’s Position Statements on sensitive sectors, where applicable. The BEL screening applies to all WS products irrespective of whether they are labelled as sustainable investments.

For single securities, we exclude issuers who generate revenues over our internally defined thresholds from the following industries: thermal coal, unconventional oil and gas, adult entertainment, and nuclear and controversial weapons. Issuers are also screened for their compliance to global norms such as the UNGCP which cover human rights, labour standards, the environment and anti-corruption.

For mutual funds, hedge funds, private equity and ETFs and insurance linked investments, any products whose strategies solely focus on any of the abovementioned activity categories are restricted from any advisory sales.

The approach for discretionary portfolios which invest in funds and ETFs, is the same as above. For portfolios which invest in single securities, the holdings are screened using the pre-defined revenue thresholds in the BEL.

For structured products with single securities as the underlying, the single securities are also screened using pre-defined revenue thresholds.

The BEL restrictions do not apply to execution-only trades which are client directed or do-it-yourself (DIY) trades.

2.2 Enhanced screen – Enhanced Exclusion List

The Sustainable Investments Universe (explained below) applies a stricter screening, known as the Enhanced Exclusion List (EEL) to reflect more stringent E&S standards aligned to the asset management industry. The EEL screening applies to single holding WS products that are labelled as sustainable investments and high conviction Fund Select mutual funds in the sustainable investment universe.

Products that pass this enhanced stage of screening can be distributed as sustainable investments (SI).

3. Sustainable Investment Universe

The Group has a Sustainable Investments’ Universe (SIU) comprising equities, bonds, mutual funds, ETFs and structured products that are labelled as sustainable investments. We rely on data from third-party data providers to define our SIU.

3.1 Equities and Bonds

Companies with a negligible or low ESG risk rating as classified by Sustainalytics form part of the SIU. Using these risk ratings helps investors identify and understand financially material ESG-related risks within their portfolios and how those risks might impact performance. Green/social/sustainable bonds, as defined by Bloomberg, are also part of the SIU.

3.2 Mutual Funds and ETFs

Mutual funds and ETFs with a “ESG Intentional Investment – Overall” tag from Morningstar can be classified as part of the SIU. This refers to funds that incorporate ESG factors into the investment process or funds with a thematic focus on sustainability-related areas such as: environment, gender diversity, low carbon, renewable energy, water or community development. Funds that state this explicitly in their prospectus and regulatory filings are included in the SIU.

The mutual funds universe contains a subset of high conviction Fund Select (FS) funds. FS is a proprietary fund selection process that identifies high-quality mutual funds and ETFs for investment. It aims to provide investors with a curated list of funds that have the potential to outperform their peers and benchmarks. The process involves rigorous due diligence, focusing on performance, people, and process. 

FS funds in the SIU undergo deeper due diligence to determine if such funds align with the our Enhanced Exclusions list, and whether the asset manager is meaningfully embedding ESG factors into their investment process. The deeper due diligence comprises the evaluation of corporate profile, ESG Expertise, ESG Strategy, ESG Integration, Impact and Measurement. Only FS funds that pass the FS evaluation (with an ESG overlay) and EEL screen can be recommended as high conviction sustainable investments.

The ETF universe contains a subset of high conviction ETFs. These SI FS ETFs undergo further review to ensure that the ETFs’ ESG integration methodologies are aligned to the stated ESG objectives, and that they pass the EEL screen.

3.3 Structured Products

Structured products must fulfil two criteria to form part of the SIU:

• The sustainable finance framework of the instrument’s issuer must broadly align with the Group’s Green and Sustainable Product Framework; and
• The underlying assets of the instrument must be part of the SIU or approved by the SFGC.

3.4 Others

For other products that are not in scope within the SIU, approval for inclusion into the SIU must be obtained from the SFGC.

4. Managing third-party providers

The Group operates an open architecture model and its WS business works closely with a range of third-party product and data providers to bring on board compelling products for clients.

For sustainable products, third-party providers include financial institutions and asset managers for product solutions and ESG data providers for research data that WS uses to qualify relevant products into its sustainable investments’ universe.

4.1 Third-Party Product Providers

Due diligence is performed on third-party product providers. This includes complying with Group third-party related policies and standards and country outsourcing requirements, where applicable. There are agreements in place with providers, setting out their roles and responsibilities as well as service level requirements to ensure compliance with the investment mandate, applicable laws and regulations and monitoring of performance. This includes any sustainable investment mandates.

4.2 ESG Third-Party Data Providers

WS works with a range of third-party ESG data providers to define and maintain our SIU. Due diligence is conducted on the methodologies of these third-party data providers. Annual reviews are conducted to ensure that their approach remains in line with industry practices and the Group’s requirements.

5. Proxy voting

Proxy voting is a key component of good investment management and corporate governance. Our DPM and MI teams delegate proxy voting to the third-party sub-advisors or investment managers, who will proxy vote on behalf of our clients.

Conclusion

As a provider of investment products and services, the Group has a responsibility towards our clients, stakeholders, and the environment. We believe the incorporation of ESG considerations into our business and investment processes is integral to delivering sustainable investment returns and outcomes for our clients.

1. The GRRRC is the ultimate approval body for all of our Sustainable Finance Frameworks. Its membership is drawn from the Chief Sustainability Office (CSO), Legal, CFCR, and ESG and Reputational Risk.

Standard Chartered has an important role to play in supporting our clients, sectors and markets to deliver net zero, but to do so in a manner that supports livelihoods and promotes sustainable economic growth. We currently provide financial services to clients, sectors and markets that contribute to greenhouse gas emissions however we’re committed to net zero in our own operations by 2025 and in our financed emissions by 2050.

Learn more about our approach.