Jessica Donohue

State Street Corporation (NYSE: STT) has announced it has appointed Executive Vice President Jessica Donohue as head of Global Investment Insights, Sustainability and Impact.

Donohue succeeds Rick Lacaille who announced his retirement earlier this year. She will report to Lou Maiuri, president, chief operating officer, and head of Investment Services.

In this role, Donohue will oversee State Street’s sustainability efforts with a focus on delivering insights to our clients and the industry. In addition, Donohue will lead and coordinate across State Street’s Investment Services and the broader organisation to bring together investment insights and solutions to deepen relationships, particularly with Chief Investment Officers at our client organisations.

“Being a strategic and trusted partner to our clients to meet their complex and changing needs requires us to continue to evolve our investment-related thought leadership and solutions,” said Maiuri. “Jessica’s background in research and investment-related insights, coupled with her deep understanding of clients’ unique challenges and the market overall is precisely what our clients need as we continue to deliver as their essential partner.”

Donohue has held a variety of senior roles for more than two decades with State Street including leading Investor Behaviour Research at State Street Associates, the company’s partnership with academia, and then expanding her role to head this group. She also served as Chief Innovation Officer and Head of Advisory and Information Solutions for Global Exchange (now State Street Alpha℠) and head of Performance & Analytics for Investment Services. Most recently, she was the global head of State Street’s Asset Owner segment.

Donohue’s financial services experience is complemented by her background in academia where she held several teaching positions at Brandeis University and the University of Minnesota. She is also a champion of our inclusion, diversity, and equity program and serves as the co-executive sponsor of our Disability Awareness Alliance.

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Rick Lacaille

State Street Corporation has announced its intention to establish its Agency Lending Program’s first Environmental, Social, and Corporate Governance (ESG) aware commingled cash collateral reinvestment strategy.

The Agency Lending team of State Street Global Markets has partnered with State Street Global Advisors, the asset management business of State Street Corporation, to provide securities lending clients with a commingled cash collateral reinvestment strategy that follows short-term investment guidelines, while considering R-FactorTM, a proprietary ESG scoring system as a component in making its investment decisions, to the extent consistent with applicable law.

“The continued rise in interest in ESG principles across markets underscores client appetite for their securities lending strategies to work in synergy with their ESG strategies,” said Nadine Chakar, executive vice president and head of Global Markets at State Street Global Markets. “This move builds on State Street’s commitment to leadership and innovation in applying ESG principles to cash reinvestment for securities lending.”

The strategy is currently available only to retirement plan clients that participate in State Street’s Agency Lending Program, and not otherwise available to the public.

“The groundswell of ESG support among the institutional lender and beneficial owner community in recent years has given rise to a multiplicity of related products, but the product category for ESG-aware, commingled cash reinvestment funds remains untapped,” said Francesco Squillacioti, global head of client management – securities finance at State Street Global Markets. “This launch affords State Street’s institutional client base yet another opportunity to express their focus on ESG and reaffirm their attention to socially-responsible yet prudent investing through a securities lending program.”

“We are excited to partner with State Street Global Markets to provide investment management services for this ESG-aware securities lending commingled cash collateral reinvestment strategy. As a firm, State Street Global Advisors has firmly committed to ESG principles,” said Pia McCusker, senior managing director and global head of cash management at State Street Global Advisors. “Partnering with State Street Global Markets, one of the largest securities lending cash collateral managers in the world, is a natural and logical combination and one that supports institutional investors’ ESG goals.”

State Street has been actively involved in the ESG space for a number of years, including recently announcing that Rick Lacaille, formally the chief investment officer for State Street Global Advisors, will provide enterprise-wide leadership of the company’s ESG solutions, services and thought leadership across all of State Street’s businesses. The bank also recently introduced enhancements to its ESG Solutions, ESG Risk Analytics, which now provides clients the ability to address new global regulatory reporting requirements through a single platform.

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Rick Lacaille

State Street Global Advisors, the asset management business of State Street Corporation (NYSE: STT), today announced the release of its Annual Stewardship Report, showcasing the results of its annual stewardship activities, highlighting year-to-date progress, and identifying key focus areas into 2020.

“Stewardship is integral to our investment approach because we regard it is an essential aspect of fulfilling our fiduciary duty. We are committed to practicing proactive responsible stewardship across our entire asset base,” said Rick Lacaille, Global Chief Investment Officer at State Street Global Advisors. “While environmental, social and governance considerations have always had a place in our firms’ approach, over the past year we have prioritized a deeper examination of how we can improve our integration across all investment strategies – a reflection of our view that these issues will only become more important as drivers of return and risk.”

Continued Lacaille: “In 2018, we observed that social issues such as gender diversity and human capital management moved to the fore of the ESG conversation and were increasingly recognized by other investors as important long term value drivers. In 2020 our stewardship team will continue to explore how our portfolio companies carefully navigate these issues to deliver better long term value.”

The State Street annual report provides a comprehensive look at the asset stewardship team’s engagement efforts, including the impact of core multi-year campaigns focused on gender diversity and climate change, its increased focus on key social issues, and a briefing on how the asset manager is integrating ESG and State Street’s ESG scoring system, “Responsibility- Factor” (R-FactorTM), across stewardship efforts.

“Our stewardship program is designed to have an impact,” said Rakhi Kumar, Head of ESG Investments and Asset Stewardship at State Street Global Advisors. “I am especially pleased to announce that as of June 30, 2019, 43 percent or more than 580 of the 1,350 companies identified as part of our Fearless Girl campaign responded to our call by either adding a female director or committing to do so. On climate change, we have conducted more than 365 engagements since we began engaging on the issue in 2014. This year, we found that while boards are starting to see climate change as a risk that needs to be mitigated, they are responding in a short-term tactical manner to a long-term strategic challenge.”

In 2018, State Street’s stewardship team focused on board guidance in several sectors, including retail, pharmaceuticals, and materials. In addition, they also focused on broader themes of corporate governance in the U.S., U.K., Australia, and Europe; pay strategies; and the incorporation of sustainability into long-term strategy. The firm engaged with 1,530 companies on key stewardship issues, representing about 70 percent of the firm’s equity assets under management. Almost half of those engagements were comprehensive engagements centered around in-person meetings or via conference calls, while the rest focused on letter-writing campaigns. The report also provides insights into the impact of its stewardship program over the last year by sharing illustrative examples of company responsiveness to State Street’s voting or engagement action.

ESG Integration

The report details the ways in which State Street has prioritized ESG integration across strategies and investment teams. The firm has invested significant resources into building R- FactorTM — proprietary ESG scoring system launched this year, measuring the performance of a company’s business operations and governance as it relates to financial material ESG issues facing the company’s industry. Using transparent materiality frameworks and more than 450 data points from four leading data providers, the system scores more than 5,000 companies on their ESG practices.

“We’ve dedicated significant time and resources to developing R-FactorTM because of our belief in the value of ESG integration across investment strategies,” said Kumar. “By sharing R-FactorTM scores and educational ESG resources with portfolio companies, and developing investment solutions powered by the system, we are enabling investors and companies to help us build more sustainable capital markets for the future.”

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Rick Lacaille

State Street Global Advisors, the asset management business of State Street Corporation (NYSE: STT) yesterday published its 2019 Mid-Year Global Market Outlook, providing a medium-term forecast for global markets. While trade risks have come sharply into focus in recent months, we continue to see room for moderate global economic growth given the Fed’s more accommodative policy stance.

“Looking back over the last year, we can see that the biggest lesson is to look through the noise and to focus on where fundamentals might take us over the longer term,” said Rick Lacaille, global chief investment officer at State Street Global Advisors. “We see potential for the economic cycle to extend, especially in the US where there is considerable momentum, but continue to monitor trade developments carefully.”

“First quarter growth in the US and globally was not as bad as feared and, while wage inflation has risen, inflation overall remains manageable,” commented Lori Heinel, deputy global chief investment officer for State Street Global Advisors. “Last December, markets became overly concerned about the outlook for global growth, thanks to the impact of the US-China trade conflict and what many saw as the Fed’s overly hawkish tightening schedule. Today trade risks persist, but the policy stance has shifted.”

Equity market growth should continue, with spikes in volatility

Macro factors should, therefore, continue to support earnings growth but investors need to be cautious as volatility could easily spike given the significant geopolitical and growth risks facing the global economy.

“We remain overweight equities amid significant policy support but believe that investors should maintain a defensive bias as fundamentals disconnect from returns and trade risks mount,” said Bill Street, head of Investments EMEA at State Street Global Advisors. “Equity valuation multiples relative to the length of the current cycle (longest on record), and past cycles, should prove justified if trade risks moderate and earnings growth comes through towards the latter part of 2019.”

China and India drive growth despite trade risks

Rising protectionism from developed markets such as the US remains an important risk for emerging markets. But State Street Global Advisors believes that the growth stories of two of the largest countries – India and China – continue to offer opportunities for investors in both the equity and debt space.

“Emerging market equity valuations relative to other regions are at all-time lows, while earnings per share and sales forecasts are holding up well,” highlighted Kevin Anderson, head of Investments in the Asia Pacific region at State Street Global Advisors. “We think emerging markets are attractive and the long-term growth story is intact although risks remain with the ongoing US-China trade dispute. For fixed income investors, higher-yielding emerging market debt should drive long-term returns despite local currency volatility in the short run. Overall, the stabilization of the Chinese economy is also positive for emerging markets.”

Climate risks increasingly salient among investors

Climate-related investment risks have moved up the agenda in 2019, with a broader discussion of how climate change may have potentially systemic effects on financial markets and threaten business models and long-term asset values across a range of asset classes and sectors. “At State Street Global Advisors, we have developed new tools to identify and monitor climate risks at a security level and new strategies for investors to mitigate their climate exposures to take advantage of new opportunities,” said Rick Lacaille, global chief investment officer at State Street Global Advisors.

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