Fund Complex: Old Westbury Funds
Management Company: Bessemer Investment Management LLC
Funds Affected: Old Westbury All Cap ESG Fund
Sustainable Investing Strategy: Exclusions may apply; ESG Integration
The adviser will seek to achieve the fund’s investment goal by using a quantitative approach to invest in companies that, on an overall portfolio level, achieve a higher environmental, social and governance (ESG) score than the fund’s benchmark. Under normal circumstances, the fund invests at least 80% of its net assets, including any borrowings for investment purposes, in securities of any market capitalization or sector that meet the adviser’s ESG sustainability criteria. The adviser’s investment process combines ESG scores with a proprietary quantitative process.
ESG scores are provided by a third party vendor who measures a company’s management of industry-relevant ESG-related risks and opportunities. Scores are based on a checklist approach of numerous underlying ESG metrics, such as environmental policies and systems, employee diversity programs, workplace safety programs and board independence. The vendor weights ESG factors differently by industry, depending on materiality to that particular industry, meaning those issues that could cause the most significant business and/or environmental/social impacts if not managed well. Companies are then scored relative to their industry peers on a scale of 0 to 100. The adviser also uses a proprietary quantitative process that scores a universe of publicly-traded companies based on multiple fundamental factors that encompass valuation, profitability, earnings quality and business risk. Companies are ranked based on these factors. In constructing the fund’s portfolio, companies scoring in the bottom ESG quintile are excluded from the investment universe, and the ESG-eligible companies are overlaid on top of the universe of companies ranked by fundamental factors. A proprietary optimization process systematically selects and weights stocks in a manner that achieves a higher ESG score relative to the benchmark. As a result, the fund’s holdings will consist of a subset of the eligible ESG investable universe.
The adviser monitors the fund’s portfolio for escalating ESG controversies such as business incidents that have a negative impact on the environment and society. The adviser may exclude companies with significant ESG-related controversies.