SDG Engagement Equity Annual Report 2022 – Federated Hermes Limited

In the five years since its launch, the SDG Engagement Equity Strategy has evidentially shown the positive potential of active capital. By investing in and engaging with select global SMIDs, it has been able to improve both the businesses it is invested in and wider society.

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Two themes have dominated the past year: the soaring cost of energy as a result of the war in Ukraine; and the heightened politicisation of environmental, social, and corporate governance (ESG) investing in the United States.
In the case of the former, the energy price shock has pushed up inflation, hitting the performance of many sustainable funds which are underweight energy. However, as countries and companies adapt, the initial headwind should ultimately prove a tailwind, accelerating the need for energy security – on both the national and corporate levels.
While there is no doubt that the opposition to ESG investing by prominent Republican party politicians has generated heated debate, this shift in tone has often felt disconnected from the tenor of Federated Hermes' dialogues with US companies. They have continued to be pleased at the receptivity to engagement among their US holdings and more pleased still at the pace of progress being exhibited by many.

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