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A sustainable fund with an impact allocation to address diversity and inclusion imbalances, classified as Article 9 under SFDR
London, 24 January 2022 – M&G is expanding its range of sustainable solutions with the launch of an equity strategy investing in companies demonstrating gender and ethnic diversity and those offering solutions driving greater social inclusion and equality, while seeking to deliver attractive investment returns.
The M&G (Lux) Diversity and Inclusion Fund, managed by Thembeka Stemela Dagbo and supported by John William Olsen, is a global equity strategy with a concentrated portfolio of 30-40 stocks aiming to provide a higher total return1 than that of the MSCI ACWI over any five-year period. The Fund is a hybrid strategy incorporating sustainability and impact considerations into the stock selection process:
- At least 15% of the portfolio is invested in impactful companies providing solutions to empower social inclusion. This portion of the fund follows the same investment approach and process as M&G’s Positive Impact and Climate Solution strategies that assess stocks with the ‘III’ framework, assessing the Investment, Intention and Impact of each company, and classifying them as ‘pioneers’, ‘enablers’ and ‘leaders’.
- The rest of the fund is allocated to sustainable companies demonstrating gender and ethnic diversity at work. The analysis goes beyond representation by extending the assessment of diversity to factors such as targets, processes and policies2. All stocks in this part of the portfolio must have a minimum of 30% women and/or ethnic minority representation at board level at the time of purchase and must pass the ‘E.Q.L’ framework, where the team assesses ESG credentials, quality of the business model and leadership characteristics of each stock.
The fund, which is supported by the M&G’s Stewardship & Sustainability team, embraces the United Nations Sustainable Development Goals (SDG) framework. The fund maps each holding to its prime or dominant SDG, focusing on six key areas: Quality Education, Gender Equality, Decent work and Economic Growth, Industry, Innovation and Infrastructure, Reduced Inequalities and Peace, Justice and Strong Institutions. M&G will annually report key diversity and impact indicator at stock level, stating their absolute level as well as their year on year change.
Thembeka Stemela Dagbo, manager of the Fund, says: “Social inclusion and diversity are not only the right thing to do, they also make good economic sense. Left unaddressed, the exclusion of disadvantaged groups and the lack of diversity can be costly and result in lost GDP and human capital wealth, whereas pioneers of the diversity and inclusion initiatives are being increasingly recognised for their financial outperformance. Indeed, companies with top quartile levels of gender diversity are 25% more likely to outperform, and 36% more likely for ethnically diverse ones3. This Fund provides our customers with the opportunity to capitalize on these trends and address diversity imbalances while putting their savings to work with a purpose.”
The M&G (Lux) Diversity and Inclusion Fund complements M&G’s existing range of impact and sustainable funds and sits under Article 9 of the EU SFDR regulation.
1 The combination of capital growth and income
2 Covering policies such as flexible working policies, parental leave, anti-harassment policies, strategy and pay gap reporting
3 Source: McKinsey & Co Diversity Wins Report