Investments of the Parmenion Group are based on three main themes:
- New Finance
- Changing World
At “About our Group” you will find a short description of these three themes. We believe that they are intrinsic within our broad Investment Concept. The third theme, Sustainability, deserves special attention. At Parmenion Group we support the investment guidelines that were defined by the United Nations (UN PRI): only responsible investment strategies can be sustained. Together with our ethical advisors we have developed filter rules that help us ensure that our investments will not just be in sync with the changing world, but that they will also help create a better world for the people living in it.
Standard Parmenion approach
The filter rules have been combined into a proprietary system that will award investments one of three ratings: ‘positive’, ‘neutral’ or ‘negative’. We will at all times refrain from direct investments in projects/companies with a ‘negative’ rating. At least 50 percent of our investments will have a ‘positive’ rating and the remainder can be ‘neutral’. We strive to increase the percentage allocation to ‘positive’ ratings as much as we can, but sometimes diversification and risk management considerations will force us to settle for ‘neutral’. We will explain below why we believe that ‘neutral’ is often not that bad.
An in-depth rating
Parmenion Group companies are also directly or indirectly associated as investment advisor or consultant with Fund-of-Funds.
In such cases we will assign a rating to the funds we invest in and try to dig as deep as possible. Within such a fund investment we then translate evaluations at the individual holding level to an overall score for the fund.
In other words: we will not just use the information provided to us by the fund manager, but do our own ethical due diligence as well. We will only invest in Funds that can be assigned a ‘positive’ or ‘neutral’ rating.
Positive fund ratings will only be assigned to:
- Funds that are run by UN PRI signatories and comply with these rules; and / or
- Funds for which we can analyse the full portfolio at the individual holding level with none of the individual investments achieving a negative score in our system.
Funds will receive a ‘negative’ rating when the following applies:
- Pwgt(+) x 1 + Pwgt(-) x -1 + Pwgt(?) x -0.5 < 0.25
In this equation Pwgt(+), Pwgt(-) and Pwgt(?) stand for the portfolio allocations (in %) to individual holdings receiving a ‘positive’, ‘negative’ and ‘unknown’ Parmenion ethical rating respectively.
Funds with a score above 0.25 are considered ‘neutral’ unless they qualify as ‘positive’ (see above).
Why neutral isn’t that bad
The world is changing (one of our three main investment themes) and we believe that one of the main problems with dozens of existing ethical approaches lies in the fact that these approaches are too harsh on projects in emerging and frontier markets.
Countries will go through development phases and one cannot simply apply absolute filters to all countries in the world, independent of development phase. Practising these absolute filters would leave us underinvested in emerging and frontier markets countries. We find this unfair and even against our ‘changing world’ theme, since investment activity also provides support to developments in these countries. Applying such strict filters could even result in actually obstructing their development.
That is why Parmenion has created its own filter system, even though we collaborate closely with external ethical advisors. Our relative filters will often translate into ‘neutral’ ratings in emerging and frontier markets.
Parmenion Ethical Approach
Within our Group, Parmenion Ethical will apply an even stricter version of this rating system. Parmenion Ethical will only invest in opportunities that comply with our ‘Western-style’ ethical filters and with Shariah-compliant filters as well. For more information, see the Parmenion Ethical website.
Is Parmenion a UN PRI Signatory?
Although we do support UN PRI and have it incorporated into our proprietary ethical filters, we are not yet a UN PRI Signatory. However, we are carefully studying this opportunity. One of the main reasons for our reluctance until now lies in our belief in more relative – as opposed to absolute – filters in emerging and frontier markets. But we are happy to see that UN PRI ongoing research and adjustments on the one hand, and developments at the corporate level in emerging and frontier markets countries on the other make differences smaller.