Dymon Asia Capital’s Public Markets Environmental, Social and Governance (“ESG”) Policy outlines our commitment and approach to integrating ESG Factors in our investment processes, in alignment with the values of our investors and our belief that these factors can drive or highlight material risks and opportunities. The Public Markets ESG Policy also sets out how we coordinate and implement responsible investment at the firm and fund level across our public markets business lines. Finally, the Policy also addresses our approach to and management of environmental risk as an area of particular significance, in line with the expectations of our stakeholders and regulators. This Public Markets ESG Policy is reviewed on a regular basis by the firm’s Public Markets ESG Committee and is updated as appropriate based on changes in circumstances and practices.
This document highlights the key aspects of the full ESG Policy, which is available to investors and other stakeholders upon request.
OUR BUSINESS
Dymon Asia is a leading alternative investment management firm which manages investment strategies across public and private markets focused on Asia and global markets. Within our Public Markets business lines, our core strategies may include, but are not limited to macro, equity long-short, relative value, credit, commodity and systematic quant strategies. Core asset classes traded include equities as well as fixed income, currencies, commodities, and credit (“FICCC”).
Our objective is to achieve superior risk-adjusted returns for our clients. Dymon Asia believes that to be successful in navigating markets, it is necessary to understand both fundamental as well as market technical factors.
OUR APPROACH TO ENVIRONMENTAL, SOCIAL AND GOVERNANCE RISK
Dymon Asia believes that sustainable investing can help to improve a portfolio’s risk-return profile and create long-term value for investors, while also mitigating the risk of negative impacts on the climate, environment and society, as well as having a positive social impact. Where appropriate, Dymon Asia is therefore committed to incorporating environmental, social and governance (“ESG”) principles into the investment analyses of the funds and/or client accounts which the Dymon Group manages or advises.
Good governance is central to our approach to climate and ESG at Dymon given the variety of our activities across the public markets, and our profile as an alternative investment management firm. Our approach is directly supported by our wider institutionalized risk management structure and protocols in place. The Boards of Dymon Asia Capital (Singapore) Pte. Ltd and Dymon Asia Capital (HK) Limited have ultimate oversight and responsibility for the implementation of our ESG Policy across all public markets. They have delegated strategic implementation to the Public Markets ESG Committee, comprised of five voting senior management members including the Deputy CEO, and which in turn is supported in day-to-day implementation by the Public Markets ESG Working Group.
Our evolving approach to climate risk is guided by the Taskforce on Climate-related Financial Disclosure (“TCFD”) recommendations and aligns with the expectations of the Monetary Authority of Singapore (“MAS”) as laid out in its Environmental Risk Guidelines, as well as those of the Securities & Futures Commission (“SFC”) of Hong Kong as laid out in its 2021 circular on the management and disclosure of climate-related risks by fund managers. We are developing our framework across the key areas of governance; strategy; portfolio construction; risk and opportunity management; and metrics and targets to assess exposure and track progress.
In general, Dymon’s primary approach across all strategies, asset classes and business lines is the integration of climate and ESG risks and opportunities, defined as ensuring that material climate and ESG factors are incorporated as part of our investment process, where relevant. Climate change and environmental risk issues are factored into our wider ESG integration approach, alongside longer-term macro trends, where they are considered material and appropriate. To support both our day-to-day investment objectives and our management of longer-term climate, environmental and other ESG risks, we incorporate consideration of such issues both at a tactical level into our investment decision making and at a strategic level via periodic risk management processes.
In addition to day-to-day ESG integration at the security level, we also conduct periodic reviews of the exposure of our funds to longer-term physical and transition-related climate risks and selected environmental risks (biodiversity, forest loss, air pollution, water pollution and water stress). Credibly quantifying the material impacts of such long-term risks, particularly climate change, is extremely challenging given the short time horizons of our investments and the varied asset class mix of our portfolios. It is also the case that the relevance and materiality of these risks for Dymon’s investment activities may be limited given their short-term orientation. Nevertheless, we acknowledge the significant risks facing the underlying geographies and issuers in our investment universe; and consequently recognise the need to stay abreast of the evolving risk environment. We are therefore committed to progressively strengthening our understanding of potential impacts in the short-, medium- and long-term. The Public Markets ESG Committee, supported by the Public Markets ESG Working Group, is responsible for leading the firm’s efforts and coordinating with funds on climate-related issues.
Other than as set out in this ESG Policy, specific business lines may be subject to additional climate and/or ESG investment guidelines, restrictions, procedures, or considerations as set out in procedure documents, offering documents or the constitutive documents of the relevant fund or client account. Investment professionals of such public markets business lines should refer to the relevant documents detailing such guidelines or procedures and reach out to Public Markets Legal and/or Compliance if they have any queries.
ESG INTEGRATION
Within our overall approach to ESG and climate risk and opportunity, practices across different business lines can vary considerably given the range of investment strategies we employ. Furthermore, and as a predominantly Asia-focused firm, we recognize the importance of adopting climate and ESG approaches suitable to a range of emerging and developed markets. Our analysis aims to be sensitive to context, norms, and customs, and the maturity/expectations of the investment jurisdiction in relation to these issues. Given the varying strategies adopted by different Business Lines, there is no one single approach taken to ESG integration beyond the long-term strategic outputs associated with our regular climate and environmental materiality analyses. As such, individual investment teams assess ESG considerations as appropriate to their specific strategies and asset class mixes.
Public markets strategies may include, but are not limited to macro, equity long-short, relative value, credit, commodity and systematic quant strategies. Core asset classes traded include equities as well as fixed income, currencies, commodities and credit (“FICCC”), with short time horizons. Within this context, individual investment teams assess ESG considerations as appropriate to their specific strategies and asset class mixes. In general, however, country- and industry-specific ESG and climate analytics, company ESG disclosures, and fundamental research on specific firms by Dymon analysts and portfolio managers are all used to greater or lesser extents by different teams. The main emphasis is the identification and mitigation of downside risks, but ESG considerations may sometimes also help to signal near-term opportunities for alpha generation.
From a governance and investor reporting perspective, the Public Markets ESG Committee, supported by the ESG Working Group, collects information on ESG integration practices on a continuous basis, supported by designated individuals across investment teams with appropriate disclosures.
ESG CONSIDERATIONS
Climate and/or ESG risks and opportunities vary across companies, industry sectors, and countries. Some typical examples of climate and ESG-related questions we may seek to address in the investment process might, for example, include the following:
Climate (transition risk): how can we optimize our long exposure to small-cap and mid-cap companies working in emerging Asian renewables industries such as offshore wind and green hydrogen? Conversely, where do headwinds for carbon-intensive industries translate into structural shorting opportunities?
Climate (physical risk): as climate change advances, how exposed is Dymon’s investment universe in the long term to extreme levels of heat stress that have the potential to affect productivity in certain industries?
Social: Does a country in our portfolio show evidence of long-term improvements in social factors that could boost its near-term prospects for economic growth? Is there evidence that a company which supports gender equality or that has more female senior members on it’s board as part of it’s diversity efforts demonstrates improved performance? Which technology or professional services companies enjoy unusually high retention rates as a result of treating their employees well, and how does this affect their competitiveness?
Governance/Political: How are political dynamics impacting the government’s ability to effectively deliver on economic priorities? Which companies enjoy competitive advantages as a result of robust governance structures, including in markets where conglomerates with complex and opaque governance have traditionally prevailed?
