For financial professionals in the UK

ESG hard-coded in Henderson Diversified Income’s DNA

While Environmental, Social and Governance (ESG) assessments of companies have only become a mainstay within investment processes in recent years, analyses of these risks have long been embedded in Henderson Diversified Income’s ‘sensible income’ approach. Here, we find out how the company has ESG analysis at the core of its investment process.

Jenna Barnard, CFA

Jenna Barnard, CFA

Co-Head of Global Bonds | Portfolio Manager

John Pattullo

John Pattullo

Co-Head of Global Bonds | Portfolio Manager

Nicholas Ware

Nicholas Ware

Portfolio Manager

29 Sep 2022
4 minute read

Key takeaways:

  • The Henderson Diversified Income Trust has transitioned to Article 8 under the EU’s Sustainable Finance Disclosure Regulation (SFDR). This hard-codes the assessment of ESG risks that have long been part of the Trust’s investment approach.
  • The Trust combines ESG assessments with its ‘Sensible Income’ approach to provide a sustainable income stream to investors. The managers believe that companies will only grow in the long term if they genuinely look after all their stakeholders.
  • ESG considerations should not be an overlay to the investment process, but rather an integral part given their impact on research effectiveness and quality

ESG investing has shot to prominence in recent years – the assessment of environmental, social and governance (ESG) credentials when making investment decisions. Yet, for Henderson Diversified Income, ESG considerations are nothing new, with the managers realising early on that companies will only grow and do well if they genuinely look after the cross-section of stakeholders from across a business’ value chain. What is more, the recent hard-coding of certain exclusions into the investment process due to ESG risks does little to change the company’s investment approach, with it going hand-in-hand with its ‘sensible income’ investment philosophy.

A sea change

When the American Business Roundtable – a powerful lobby of the US’ top CEOs – switched its shareholder focused mantra towards encompassing all stakeholders in 2019, it thrust responsible investing into the limelight. In recent years, the rising number of extreme weather events have shone a light on climate change, and as social justice causes become much more widely reported, ESG investing has grown sharply to meet demand from increasingly socially conscious investors.

Large data providers such as MSCI and Sustainalytics have expanded their coverage in lockstep – and with new indices, data, and fresh tools available, investors are able to dig deeper for insights that may be financially material to their investments.

Hard-coded into HDIV’s DNA

Fund managers Jenna Barnard, John Pattullo and Nicholas Ware believe that as stewards of their clients’ capital, assessing ESG issues is a crucial component of investment analysis, helping mitigate tail risks, mitigate against long-term underperformance, and uncover opportunities. Moreover, they believe strong ESG credentials are vital as companies only grow if they consider all of their stakeholders, from employees, to customers, suppliers, bondholders, shareholders, and wider society, including the environment. This is the broadest definition of “sustainable” from their perspective.

As a result, the managers believe ESG considerations should not be an overlay to the investment process, but rather an integral part given their impact on research effectiveness and quality. Recently, this approach has been formalised by shareholders, with the Company transitioning to Article 8 under SFDR. As a result, the company will not make any direct investments in corporate issuers who derive more than 10% of their revenue from oil and gas generation and production, oil sands extraction, and shale extraction, for example. In addition, they will not invest in issuers that derive any revenues from furs or controversial weapons, and they will not invest in countries deemed “Not Free” by the Freedom House Index (see map below).

HDIV Article(1)

In addition, where necessary, the managers will utilise the combined power of the wider Janus Henderson group to engage with management to ensure companies are travelling in the right direction on ESG issues. The managers embrace and welcome positive change. They believe that investing in better managed companies from an ESG perspective enables them to gain exposure to more resilient business models, more sustainable cash flows and places them in the best possible position to deliver strong risk adjusted returns for clients over the long-term.

A good portfolio example is Equinix, which builds digital infrastructure and data centres around the world. Companies operating in this area can score poorly for their environmental impact given potentially high levels of water and energy usage. However, after assessing the company’s ESG credentials and engaging with management, the managers have found these risks to be manageable due to the firms’ clear focus on sustainability. Equinix has placed significant resources into research and development projects that aim to decarbonise data centres, better manage water usage, and seek alternative, more renewable sources of fuel for the future.

While the Company has enhanced its ESG considerations – there has been no material change in the investment process or strategy. The Company’s ‘sensible income’ approach has always focused on larger, higher ‘quality’ companies, in non-cyclical and defensive parts of the economy. As such, the managers have always invested in businesses that are doing the right things, are in it for the long term (playing an infinite game) and look after all their stakeholders, including the environment. Such an approach is the reason why the Company has been able to pay a high, stable, and sustainable income to investors over the years.

3Source: Henderson Diversified Income Trust – Annual Report 2022

These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.


Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.


The information in this article does not qualify as an investment recommendation.


Marketing Communication.






Important information

Please read the following important information regarding funds related to this article.

Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser. This is a marketing communication. Please refer to the AIFMD Disclosure document and Annual Report of the AIF before making any final investment decisions.
    Specific risks
  • If a Company's portfolio is concentrated towards a particular country or geographical region, the investment carries greater risk than a portfolio that is diversified across more countries.
  • Higher yielding bonds are issued by companies that may have greater difficulty in repaying their financial obligations. High yield bonds are not traded as frequently as government bonds and therefore may be more difficult to trade in distressed markets.
  • This Company is suitable to be used as one component of several within a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested in this Company.
  • Active management techniques that have worked well in normal market conditions could prove ineffective or negative for performance at other times.
  • The Company could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the Company.
  • The return on your investment is directly related to the prevailing market price of the Company's shares, which will trade at a varying discount (or premium) relative to the value of the underlying assets of the Company. As a result, losses (or gains) may be higher or lower than those of the Company's assets.
  • The Company may use gearing (borrowing to invest) as part of its investment strategy. If the Company utilises its ability to gear, the profits and losses incurred by the Company can be greater than those of a Company that does not use gearing.
  • All or part of the Company's management fee is taken from its capital. While this allows more income to be paid, it may also restrict capital growth or even result in capital erosion over time.