ESG and Sustainable Investing
As a signatory for the Principles of Responsible Investment (“PRI”), Aetos is committed to promoting sustainable investing. We believe that actively incorporating Environmental, Social and Corporate Governance (“ESG”) factors into our investment process is both prudent from a fiduciary perspective and additive to our investment decision-making. Our ESG Policy explicitly recognizes the importance of including ESG considerations in our investment analysis. Aetos maintains ESG Committees charged with establishing and enhancing our ESG policies, procedures and activities, which consist of representatives from our investment, client service, legal and compliance and human resources teams.
Aetos implements an ESG-approach in our investment process through the following steps, which are overseen by our ESG Investment Committee:
- Actively incorporate questions into our manager due diligence process to determine a manager’s ESG integration level at both the corporate and investment level
- Evaluate the level of a manager’s “E”, “S” and “G” incorporation into the investment process, where relevant, including assessing the manager’s utilization of internal and external tools
Aetos recognizes that each manager will take a different approach to utilizing ESG factors. However, we believe there are substantial commonalities at the company level in what constitutes a best-in-class approach to corporate sustainability and ESG excellence. In evaluating each manager’s approach to ESG, we seek to understand how potentially material ESG issues are factored into the investment process. Aetos also encourages managers that incorporate ESG considerations in their investment process to track relevant sustainability outcomes, including the furtherance of Sustainable Development Goals (SDGs).
Moreover, Aetos evaluates ESG issues at certain underlying companies in managers’ portfolios—leveraging both internal research and third-party rating systems—to address material ESG concerns. We can also incorporate engagement with both managers and portfolio companies as part of our ESG investment process.
Promoting ESG Principles Within the Investment Industry
Aetos is committed to raising the awareness of ESG and other socially responsible investing initiatives in the alternatives investing community through numerous avenues, including our active participation on PRI’s Hedge Fund Advisory Committee that is tasked with raising awareness and supporting the implementation of PRI Principles across hedge fund strategies.
Moreover, Aetos supports the goals of the Paris Agreement under the United Nations Framework Convention on Climate Change (UNFCC) with respect to sustainable development. We also support the recommended disclosure framework of the Task Force on Climate-related Financial Disclosures (TCFD) and encourage asset managers to champion the adoption of similar disclosures by their portfolio companies to promote a better understanding of their climate-related risks, opportunities, and financial impacts.