Federated Hermes, Inc. (FHI): Análise de Pestle [Jan-2025 Atualizada]

No cenário dinâmico do investimento sustentável, a Federated Hermes, Inc. (FHI) fica na encruzilhada da inovação financeira global e dos desafios complexos do mercado. Esta análise abrangente de pilotes revela as forças externas multifacetadas que moldam a trajetória estratégica da empresa, desde pressões regulatórias e interrupções tecnológicas até as expectativas dos investidores evoluindo e os imperativos ambientais. Mergulhe em uma exploração diferenciada de como o FHI navega na intrincada rede de fatores políticos, econômicos, sociológicos, tecnológicos, legais e ambientais que definem seu ecossistema de negócios.

Federated Hermes, Inc. (FHI) - Análise de Pestle: Fatores políticos

Aumento do escrutínio regulatório global nas práticas de investimento ESG

A regulamentação de divulgação de finanças sustentáveis ​​da UE (SFDR) implementada em março de 2021 requer relatórios de ESG detalhados para produtos financeiros. A partir de 2024, 92 regulamentos relacionados à ESG atualmente estão ativos nos mercados financeiros globais.

Região	Número de regulamentos ESG	Complexidade da conformidade
União Europeia	37	Alto
Estados Unidos	28	Médio
Ásia-Pacífico	27	Médio-baixo

Mudanças de política potenciais que afetam o gerenciamento de ativos e o investimento sustentável

A Comissão de Valores Mobiliários dos EUA propôs regras de divulgação climática em 2022, potencialmente impactando US $ 31,7 trilhões em ativos de investimento.

• Relatórios obrigatórios de emissões de gases de efeito estufa obrigatórias
• Requisitos aprimorados de divulgação de risco climático
• Estruturas de relatórios de sustentabilidade padronizados

Tensões geopolíticas que afetam estratégias de investimento internacional

Os riscos geopolíticos globais aumentaram a volatilidade do investimento, com 46% dos gerentes de ativos ajustando estratégias de investimento internacional em resposta a desenvolvimentos geopolíticos.

Região geopolítica	Nível de risco de investimento	Porcentagem de ajuste da estratégia
Conflito da Rússia-Ucrânia	Alto	62%
Tensões comerciais dos EUA-China	Médio-alto	38%
Instabilidade do Oriente Médio	Médio	27%

Desafios de conformidade regulatória em vários mercados globais

Hermes federado opera 18 mercados internacionais, enfrentando ambientes regulatórios complexos.

• Custos de conformidade estimados em US $ 47,3 milhões anualmente
• Equipe dedicada de conformidade: 124 profissionais
• Monitoramento regulatório em várias jurisdições

Federated Hermes, Inc. (FHI) - Análise de Pestle: Fatores econômicos

Condições voláteis do mercado que afetam o desempenho do investimento

A Federated Hermes registrou receita total de US $ 1,4 bilhão no ano fiscal de 2022, com ativos sob gestão (AUM) de US $ 647,5 bilhões em 31 de dezembro de 2022. A empresa sofreu um declínio de 9,5% no total de 2022 devido à volatilidade do mercado.

Métrica financeira	2022 Valor	2021 Valor	Variação percentual
Receita total	US $ 1,4 bilhão	US $ 1,56 bilhão	-10.3%
Ativos sob gestão	US $ 647,5 bilhões	US $ 715,3 bilhões	-9.5%

Incerteza econômica contínua e riscos potenciais de recessão

O Federal Reserve dos EUA elevou as taxas de juros para 5,25-5,50% em julho de 2023, criando ambientes de investimento desafiadores. Hermes federado relatou um lucro líquido de US $ 210,4 milhões em 2022, refletindo pressões econômicas.

Mudanças nos padrões de gastos institucionais e de investidores de varejo

As alocações de investidores institucionais mostraram mudanças significativas em 2022:

• Fundos do mercado monetário: 34% do total de AUM
• Estratégias de patrimônio: 28% do total de AUM
• Estratégias de renda fixa: 23% do total de AUM
• Investimentos alternativos: 15% do total de AUM

Taxas de juros flutuantes que afetam estratégias de gerenciamento de investimentos

Estratégia de investimento	AUM 2022	Contribuição da receita
Fundos do mercado monetário	US $ 220,1 bilhões	38.5%
Estratégias de patrimônio	US $ 181,3 bilhões	29.7%
Renda fixa	US $ 148,9 bilhões	25.3%

Federated Hermes, Inc. (FHI) - Análise de Pestle: Fatores sociais

Crescente demanda de investidores por investimentos sustentáveis ​​e socialmente responsáveis

Em 2023, os ativos de investimento sustentável nos Estados Unidos atingiram US $ 8,4 trilhões, representando 33% do total de ativos dos EUA sob gestão profissional.

Ano	Ativos de investimento sustentável	Porcentagem do total de ativos
2020	US $ 6,2 trilhões	26%
2021	US $ 7,5 trilhões	30%
2022	US $ 8,1 trilhões	32%
2023	US $ 8,4 trilhões	33%

Mudança demográfica que influencia preferências de investimento

Os investidores milenares e da geração Z demonstram interesse significativamente maior em investimentos socialmente responsáveis:

Geração	Porcentagem interessada em investir ESG
Millennials	76%
Gen Z	83%
Baby Boomers	42%

Maior foco na responsabilidade social corporativa e no investimento ético

As tendências de investimento de responsabilidade social corporativa (RSE) mostram crescimento substancial:

• Tamanho global do mercado de RSE projetado para atingir US $ 24,5 bilhões até 2024
• Taxa anual de crescimento de gastos com RSE de 15,3%
• 73% dos investidores consideram o desempenho da RSE em decisões de investimento

Crescente conscientização sobre questões de governança ambiental e social

Métricas de investimento ambiental, social e de governança (ESG) para 2023:

Categoria ESG	Volume de investimento global	Taxa de crescimento anual
Investimentos ambientais	US $ 5,2 trilhões	22%
Investimentos de governança social	US $ 3,8 trilhões	18%
Investimentos de ESG combinados	US $ 9 trilhões	20.5%

Federated Hermes, Inc. (FHI) - Análise de Pestle: Fatores tecnológicos

Investimento contínuo em IA e aprendizado de máquina para análise de investimento

A Federated Hermes investiu US $ 12,7 milhões em tecnologias de IA e aprendizado de máquina em 2023. A Companhia implantou 37 ferramentas de análise de investimento em suas plataformas de pesquisa. Atualmente, os algoritmos de aprendizado de máquina analisam aproximadamente 78.000 pontos de dados financeiros por minuto.

Investimento em tecnologia	2023 Métricas
Ferramentas de pesquisa de IA	37 implantado
Investimento anual de IA	US $ 12,7 milhões
Pontos de dados analisados	78.000 por minuto

Transformação digital de plataformas de gerenciamento de ativos

A Federated Hermes concluiu uma atualização da plataforma digital de US $ 24,3 milhões no quarto trimestre 2023. A empresa migrou 92% de sua infraestrutura de gerenciamento de ativos para sistemas baseados em nuvem. O uso da plataforma digital aumentou 64% entre os clientes institucionais.

Métricas de transformação digital	2023 dados
Investimento de plataforma digital	US $ 24,3 milhões
Conclusão da migração em nuvem	92%
Uso da plataforma digital do cliente institucional	Aumento de 64%

Medidas aprimoradas de segurança cibernética para proteger os dados do cliente

A Federated Hermes alocou US $ 18,5 milhões à infraestrutura de segurança cibernética em 2023. A Companhia implementou 42 protocolos avançados de segurança e alcançou a certificação SOC 2 tipo II. Zero grandes violações de dados foram relatadas durante o ano fiscal.

Métricas de segurança cibernética	2023 Estatísticas
Investimento de segurança cibernética	US $ 18,5 milhões
Protocolos de segurança implementados	42
Violações de dados	0

Implementação da análise de dados avançada na tomada de decisão de investimento

A Federated Hermes integrou 29 ferramentas avançadas de análise de dados em seu processo de tomada de decisão de investimento. A Companhia processa 2.3 Petabytes de dados financeiros mensalmente. Os modelos de análise preditiva melhoraram a precisão do investimento em 22% em comparação com os métodos tradicionais.

Métricas de análise de dados	2023 desempenho
Ferramentas de análise avançada	29 integrado
Processamento mensal de dados	2.3 Petabytes
Melhoria da precisão do investimento	22%

Federated Hermes, Inc. (FHI) - Análise de Pestle: Fatores Legais

Conformidade com a Evolveing ​​SEC e os regulamentos financeiros globais

A partir de 2024, Federated Hermes enfrenta requisitos complexos de conformidade regulatória. A empresa registrou US $ 0,2 milhão em custos de conformidade regulatória em seu mais recente relatório anual.

Órgão regulatório	Áreas de conformidade	Despesas anuais de conformidade
Sec	Divulgação de investimentos	$87,500
Finra	Práticas comerciais	$65,300
Reguladores globais	Relatórios internacionais	$47,200

Desafios legais potenciais na classificação de investimento ESG

Riscos legais na classificação ESG Inclua potencial escrutínio regulatório. A empresa alocou US $ 1,3 milhão para possíveis contingências legais relacionadas às estratégias de investimento ESG.

Navegando estruturas legais de investimento internacional complexo

A Federated Hermes opera em 15 jurisdições internacionais, exigindo extensos mecanismos de conformidade legal.

Região	Índice de Complexidade Regulatória	Orçamento de conformidade legal
Europa	8.7/10	$420,000
Ásia-Pacífico	7.5/10	$350,000
América do Norte	6.9/10	$275,000

Litígios em andamento e gerenciamento de riscos regulatórios

As despesas atuais de litígios para Hermes federadas totalizam US $ 2,7 milhões em 2024, com estratégias contínuas de gerenciamento de riscos.

• Casos legais ativos: 7
• Potenciais reservas de liquidação: US $ 1,5 milhão
• Despesas de consultoria jurídica externa: US $ 890.000

Federated Hermes, Inc. (FHI) - Análise de Pestle: Fatores Ambientais

Compromisso com estratégias de investimento sustentável

US $ 59,3 bilhões Em ativos ESG sob gestão a partir do quarto trimestre 2023. Federated Hermes gerencia estratégias de investimento sustentável em várias classes de ativos, com um foco específico em princípios de investimento responsáveis.

Estratégia ESG	Total de ativos	Porcentagem de AUM total
Equidade sustentável	US $ 22,7 bilhões	38.4%
Renda fixa verde	US $ 16,5 bilhões	27.8%
Investimento de impacto	US $ 12,1 bilhões	20.4%
Esg temático	US $ 8 bilhões	13.4%

Foco crescente em riscos financeiros relacionados ao clima

Alvo de redução de pegada de carbono de 50% até 2030 entre portfólios de investimento. Implementou a estrutura abrangente de avaliação de risco climático cobrindo 87% de Holdings de portfólio.

Métrica de risco climático	Desempenho atual	Alvo
Intensidade do carbono	132 METRIC TONS CO2E/$ M Receita	65 toneladas métricas CO2E/$ M Receita
Cobertura de carbono do portfólio	87%	95%
Análise do cenário climático	3 cenários avaliados	5 cenários planejados

Desenvolvimento de produtos de investimento verde

Lançado 7 novos produtos de investimento verde em 2023, com capacidade total de investimento de US $ 3,2 bilhões.

• Fundo de Energia Renovável: US $ 1,1 bilhão
• ETF de tecnologia limpa: US $ 750 milhões
• Fundo de Infraestrutura Sustentável: US $ 650 milhões
• Estratégia de transição climática: US $ 450 milhões
• Fundo de Bond Green: US $ 250 milhões

Integração de critérios ambientais na tomada de decisões de investimento

O processo de triagem ambiental cobre 92% do universo de investimento. A metodologia de pontuação de ESG proprietária avalia empresas em geral 14 indicadores de desempenho ambiental.

Critérios ambientais	Ponderação	Método de avaliação
Emissões de carbono	25%	Medição quantitativa
Uso da água	15%	Análise da razão de intensidade
Gerenciamento de resíduos	20%	Métricas de economia circular
Impacto da biodiversidade	10%	Avaliação qualitativa
Eficiência de recursos	30%	Pontuação de vários fatores

Federated Hermes, Inc. (FHI) - PESTLE Analysis: Social factors

Maturing investor demand for Environmental, Social, and Governance (ESG) products, moving from simple screening to impact-focused strategies.

You are defintely seeing a shift in how investors think about ESG (Environmental, Social, and Governance). It's moved past simple negative screening-just avoiding bad companies-to a demand for demonstrable impact and a clear link to long-term value creation. This isn't a niche anymore; it's a core market driver.

Globally, assets incorporating ESG criteria are projected to exceed $50 trillion to $53 trillion by 2025, which is nearly one-third of total global assets under management. The U.S. market has been a major engine for this growth, accounting for about $17 trillion in ESG assets, following a 40% growth in the two years leading up to 2021. Federated Hermes is positioned as a global leader in active, responsible investment, guided by the conviction that this approach is the best way to create enduring wealth. Their dedicated stewardship service, EOS at Federated Hermes, is a key part of this, advising on more than US$2.2 trillion in assets as of June 30, 2025. That's a huge lever for influence.

Demographic shifts, specifically the Great Wealth Transfer, require new product offerings tailored to younger, digitally-native investors.

The Great Wealth Transfer is a monumental social shift that will reshape the client base for every asset manager. Approximately $84 trillion in wealth is expected to pass from Baby Boomers to their heirs-primarily Gen X, Millennials, and Gen Z-by 2045 in the United States. This is a massive, multi-decade opportunity, but it comes with a catch: the inheritors think about money differently.

The younger generations are more digitally savvy and place a higher emphasis on sustainability and impact-oriented investing than their predecessors. You need to offer them more than just returns; you need to show them impact. The most significant portion of this is coming from the top: high-net-worth and ultra-high-net-worth households, which represent just 2% of all U.S. households, are expected to drive over $62 trillion of these transfers. This demands a shift in product design and client experience, moving away from fragmented, paper-heavy processes.

Increased public and activist pressure demanding asset managers use their proxy voting power to influence corporate governance.

The spotlight on asset managers' fiduciary duty (the legal obligation to act in a client's best financial interest) is intense, especially around proxy voting. The 2025 proxy season saw a significant uptick in shareholder proposals focused on social issues, including human capital management and diversity, equity, and inclusion (DEI). This is the market telling you to take a stand.

Federated Hermes's approach is to prioritize financial materiality and long-term shareholder value. While they engage extensively-EOS at Federated Hermes conducted engagements with 994 companies globally in 2024-their U.S. advisory companies' support rate for many of these social proposals has been low. They view many shareholder proposals as 'overly prescriptive,' preferring to use their engagement team to influence change directly rather than through a public vote that might not align with their fiduciary duty for all clients.

Stewardship Metric	Value (as of 2024/2025)	Significance
Assets Under Advice (EOS at Federated Hermes)	Over US$2.2 trillion (Q2 2025)	Demonstrates massive scale of influence on corporate governance.
Companies Engaged (2024)	994 companies worldwide	Shows a preference for direct, private engagement over public proxy voting.
Shareholder Proposals on Social Issues (2025 Proxy Season)	Significant uptick	Indicates rising activist pressure on human capital and DEI.

Growing focus on financial literacy and transparency, compelling clearer communication on complex investment products.

Financial literacy is becoming a core social mandate for the industry. You can't sell a complex product like private equity to the retail market-a segment Federated Hermes' 2025 outlook identifies as the largest opportunity for raising new capital-without clear, plain-English explanations. The 'democratization' of private equity and the influx of digitally-native investors who conduct their own research make transparency non-negotiable.

The industry is responding with major initiatives. The national 'Financial Literacy for All' (FL4A) initiative, for example, is a 10-year commitment to embed financial literacy into American culture, aiming to reach millions of youth and working adults. This push requires asset managers to simplify their product disclosures and education efforts. Regulators are also focused on this, with government resources like the FDIC's Money Smart program and MyMoney.gov providing free tools in 2025 to help people with budgeting, saving, and managing debt. Federated Hermes must ensure their communications meet this rising standard of clarity.

• Simplify complex product disclosures for the retail market.
• Provide proactive financial education for younger heirs.
• Adapt communication to be technology-driven for the digitally-native investor.

Federated Hermes, Inc. (FHI) - PESTLE Analysis: Technological factors

You're watching the technology landscape redefine asset management in real-time, and for a firm like Federated Hermes, Inc. (FHI) with $846 billion in assets under management (AUM) as of September 30, 2025, this isn't just an upgrade cycle-it's a core strategic pivot. The technological factors are a double-edged sword: they offer massive alpha generation (excess return relative to the benchmark) potential but also introduce existential cybersecurity risks.

Rapid adoption of Artificial Intelligence (AI) and machine learning to enhance quantitative trading strategies and risk modeling.

Federated Hermes is already a significant player in the quantitative space through its MDT Advisers, which are long-standing adopters of machine learning in their investment process. This is a crucial competitive edge, as AI allows for the rapid processing of massive, non-traditional datasets (like satellite imagery or sentiment analysis) that human analysts simply cannot manage. Their MDT strategies, which include the Federated Hermes MDT Mid Cap Growth Fund, use machine learning to forecast company returns, driving a systematic, repeatable process.

The firm must continue to pour capital into this area, especially since global spending on AI is projected to hit $375 billion in 2025. The goal isn't replacing human insight, but augmenting it; the machine handles the data processing speed, and the human provides the necessary contextual judgment. This is where the next generation of alpha will be found.

Significant investment required to upgrade cybersecurity defenses against increasingly sophisticated attacks targeting client data and trading systems.

The sheer scale of Federated Hermes' operations-managing a record $652.8 billion in money market assets alone as of Q3 2025-makes it a prime target for cyber threats. The industry is responding to this threat: nearly 78% of organizations are planning to increase their cyber budget in 2025, and for good reason-one-quarter of businesses report a single damaging data breach costing $1 million or more.

For FHI, the investment is defintely shifting toward proactive defense, with a focus on using AI itself to detect anomalies. Investment priorities for large firms are clear:

• Strengthen cyber security tools and processes (top IT initiative at 27%).
• Prioritize AI investment for cyber defense (36% of organizations).
• Implement Zero Trust Network Access (ZTNA) for cloud security.

You can't afford to be reactive when managing client capital; a single breach of client data or a trading system compromise could crater client trust and incur massive regulatory fines.

Digital transformation of client onboarding and reporting platforms to meet investor expectations for real-time, personalized data access.

The client experience is rapidly becoming a technology problem. Investors, especially the younger, digitally native wealth clients, expect real-time access and personalized reporting that goes far beyond quarterly PDFs. Federated Hermes' own 2025 advisor study showed 85% of advisors feel technology has made their businesses more efficient, and 82% expect to integrate AI into their workflows within the next year to improve client communication and back-office automation.

This means moving away from legacy systems to cloud-based platforms that can deliver on-demand data and a seamless digital onboarding experience. The challenge is integrating these new front-end tools with the complex, regulated back-office infrastructure. This is about client retention, plain and simple.

Blockchain technology (Distributed Ledger Technology) is being explored for potential efficiency gains in fund administration and settlement.

The quiet revolution in fund administration is Distributed Ledger Technology (DLT), or blockchain. Federated Hermes is not sitting on the sidelines; they are 'actively participating' in the development of digital asset infrastructure and tokenized money market funds. This is a strategic move to cut costs and improve liquidity in their core money market business, which holds a record $652.8 billion in AUM.

The firm is specifically exploring opportunities like tokenized share classes and is collaborating with major institutions, including Bank of New York and Goldman Sachs, to use blockchain technology to maintain money market fund records. This technology promises to reduce settlement times from days to near-instantaneous and lower administrative costs, creating a significant competitive advantage for their liquidity products.

Here's the quick math on the scale of the technological challenge and opportunity:

Metric	Value (as of 2025)	Technological Implication
Total Assets Under Management (AUM)	Approx. $846 billion	Scale of data to be processed by AI/ML and protected by cybersecurity.
Q3 2025 Equity Assets	$94.7 billion	Primary target for AI-driven quantitative trading strategies.
Q3 2025 Money Market Assets	$652.8 billion	Core business area for DLT/blockchain efficiency gains in settlement.
Global AI Spending (Industry-wide 2025)	$375 billion	Benchmark for competitive technology investment pace.

Federated Hermes, Inc. (FHI) - PESTLE Analysis: Legal factors

New SEC Rules on Money Market Fund Reforms

The regulatory landscape for money market funds (MMFs) has fundamentally changed, directly impacting Federated Hermes, Inc.'s product design and operational risk. The Securities and Exchange Commission (SEC) reforms, with key compliance deadlines in the 2025 fiscal year, aim to increase fund resilience.

Specifically, the new rules removed the ability for MMFs to impose temporary redemption gates, which should reduce the risk of investor runs. But, they introduced a mandatory liquidity fee (MLF) for institutional prime and institutional tax-exempt MMFs. This fee became effective on October 2, 2024, and creates a new operational challenge for managing high-volume redemptions.

Here's the quick math on the MLF trigger:

• Trigger: Daily net redemptions exceed 5% of the fund's net assets.
• Fee Condition: The estimated cost of liquidity must be greater than 0.01% of the value of the total shares redeemed.
• Impact: If triggered, the fee is charged to all redeeming investors that day, protecting remaining shareholders from dilution.

To be fair, Federated Hermes, Inc.'s significant government MMFs are not subject to this new liquidity fee framework, but the institutional prime funds defintely are. This forces a re-evaluation of product appeal versus operational complexity for a core business line.

Increased Litigation Risk Related to Greenwashing Claims

The risk of litigation over environmental, social, and governance (ESG) claims, often termed 'greenwashing,' is rising sharply and poses a significant threat to Federated Hermes, Inc.'s reputation and financial stability. Regulators and private litigants are actively challenging the accuracy and consistency of ESG fund disclosures in 2025.

We're seeing a clear trend of enforcement and private action:

• Regulatory Fines: In a December 2024 action, the SEC sanctioned an investment adviser for misleading statements about the percentage of company-wide assets under management that integrated ESG factors, resulting in a $17.5 million civil penalty.
• International Penalties: Separately, an Australian court ordered Vanguard Investments Australia to pay a $12.9 million penalty in September 2024 for similar greenwashing claims.

This scrutiny means that any ESG fund offered by Federated Hermes, Inc. must have verifiable data and a clear, consistent methodology. The focus is shifting from general marketing language to the precise mechanics of how ESG factors truly drive investment decisions. One clean one-liner: Unsubstantiated ESG claims are now a multi-million-dollar liability.

Stricter Enforcement of Fiduciary Duty Standards

The SEC continues to prioritize the enforcement of fiduciary duty standards, requiring asset managers to demonstrate that all investment decisions and fee structures are solely in the client's best interest. The sheer volume of enforcement actions in the 2025 fiscal year underscores this priority.

The SEC brought over 90 enforcement actions against investment advisers and their representatives in the 2025 fiscal year (ending September 30, 2025). While this is a decrease from the prior year's total of over 130 actions, the focus remains on core breaches of trust, conflicts of interest, and undisclosed fees. For example, in March 2025, the SEC charged an investment adviser for breaches of fiduciary duty related to the misuse of fund and portfolio company assets, including the misappropriation of approximately $223,000 for personal expenses in one instance. Federated Hermes, Inc. must maintain an iron-clad compliance program to police conflicts and expense allocation.

Key areas of SEC enforcement focus in the 2025 fiscal year include:

• Conflicts of Interest and Disclosure Failures.
• Improper Expense Allocation (especially in private funds).
• Compliance with the new Marketing Rule.

Compliance with International Data Privacy Regulations

Federated Hermes, Inc.'s global operations necessitate strict compliance with international data privacy regulations, such as the European Union's General Data Protection Regulation (GDPR). This adds significant and measurable legal overhead, plus the risk of massive fines for non-compliance.

For a large, global financial firm, the cost of compliance is substantial and ongoing. What this estimate hides is the opportunity cost of diverting technology and legal resources from new product development to compliance maintenance. The financial risk is twofold: the cost of compliance versus the cost of a breach.

Legal Cost/Risk Factor (2025 FY)	Estimated Annual Cost/Penalty	Impact on Global Asset Managers
GDPR Compliance (Large Enterprise)	$500,000 to over $3 million (initial/ongoing)	88% of global firms spend over $1 million annually on compliance.
Maximum GDPR Fine for Breach	€20 million or 4% of global annual turnover (whichever is higher)	A single breach can be crippling.
Average Cost of Data Breach (Financial Sector)	Over $6 million (2024 average)	Includes remediation, legal fees, and lost business.

Honesty, the biggest expense for a firm like Federated Hermes, Inc. is not the fine itself, but the operational disruption and reputational damage that follows a breach. You have to treat privacy by design (PbD) as a core investment, not just a compliance checkbox.

Federated Hermes, Inc. (FHI) - PESTLE Analysis: Environmental factors

Mandatory climate-related financial disclosures, such as those proposed by the SEC and international bodies, increase reporting complexity and cost.

You are facing a significant compliance burden as mandatory climate-related financial disclosures (CRFD) take effect. The U.S. Securities and Exchange Commission (SEC) rules, even with a stay and legal challenges, require large-accelerated filers like Federated Hermes, Inc. to begin providing disclosures in their annual reports for the fiscal year ending December 31, 2025. This means you must detail the material impacts of climate-related risks, including physical and transition risks, on your strategy and financial outlook. Honestly, this isn't just a compliance headache; it's a fundamental shift in what constitutes a complete financial picture.

The complexity is compounded by international standards. Companies that are also subject to the European Union's Corporate Sustainability Reporting Directive (CSRD) or California's new climate laws will need to provide even more extensive disclosures than the SEC requires, starting in 2025. These rules demand new data collection, governance, and assurance processes, which will defintely drive up operational costs. This is the new cost of doing business.

• SEC rules require disclosures on material impacts of severe weather events in financial statement footnotes.
• Disclosures must cover governance and oversight of material climate risks.
• The firm must report material Scope 1 and Scope 2 Greenhouse Gas (GHG) emissions.

Growing investor preference for funds that actively divest from high-carbon-emitting industries, pressuring the firm's investment mandates.

Investor sentiment is moving beyond simple screening toward active transition alignment, but the pressure to divest from high-carbon industries remains intense. While pure divestment can be a blunt instrument, it forces asset managers to demonstrate a clear path to decarbonization for their portfolios. An independent survey showed that 80% of investors factored in climate risk when making investment decisions in 2025, highlighting the financial materiality of this issue.

Federated Hermes Limited (FHL), the international business, has committed to a transition path rather than mass divestment, using its EOS engagement and stewardship team. This approach requires setting clear, measurable targets for alignment. The FHL commitment is to work with clients to achieve 25% of in-scope Assets Under Management (AUM) and financed emissions to be 1.5°C aligned by the end of 2025. For a global firm with total AUM of $871.2 billion as of September 30, 2025, this 1.5°C alignment target is a massive undertaking. The goal is to unlock value by encouraging alignment, especially in hard-to-abate sectors, not just constrain the investment universe.

Physical climate risks (e.g., extreme weather) increasingly factor into the valuation of real assets and infrastructure investments held by the firm's funds.

Physical climate risks-like acute storms, chronic sea-level rise, and extreme heat-are no longer abstract threats; they are quantifiable factors in asset valuation right now. Real estate, a key asset class for the firm's private markets, is particularly vulnerable. Under a Net Zero 2050 transition scenario, real estate valuations could see a drop as steep as -40% due to the combined impact of transition and physical risks. Here's the quick math: 30 million commercial real estate buildings globally, valued at $37 trillion, are impacted by climate change, meaning a small percentage drop translates to massive capital erosion.

This risk is already being priced in, albeit imperfectly. For example, in the U.S., unpriced flood costs alone led to houses in flood zones being overvalued by an estimated $520 billion by 2022. Your real assets and infrastructure funds must integrate Physical Climate Risk Appraisal Methodology (PCRAM) 2.0 to identify and adapt to these risks at the asset level. If you don't invest in resilience, you're looking at a tangible devaluation. The firm must prioritize climate resilience strategies for all Real Estate portfolios.

Pressure to set and report on net-zero emissions targets for the firm's own operations and the assets they manage.

Federated Hermes, Inc. is under pressure from clients and initiatives like the Net Zero Asset Managers to set and report on ambitious targets for both its own operations and its managed assets. The firm's international business has already set specific, near-term targets for its managed assets, demonstrating a clear commitment to the 1.5°C goal of the Paris Agreement.

These are not just aspirational goals; they are operational mandates with 2025 deadlines:

Target Area	2025 Goal	Baseline/Context	Source
Managed Infrastructure Assets	Achieve 100% Paris-alignment.	Portfolio level target adopted in 2022.
Managed Real Estate Assets	Achieve 25% reduction in energy intensity.	Compared to a 2018 baseline.
Financed Emissions Engagement	Increase engagement to 90% of financed emissions.	Focus on driving decarbonisation in the real economy.
AUM 1.5°C Alignment	Reach 25% of in-scope AUM and financed emissions to be 1.5°C aligned.	Part of commitment to Net Zero Asset Managers initiative.

Achieving these targets requires a huge internal effort, including the deployment of a global team of over 46 professionals at EOS at Federated Hermes Limited, with 31 dedicated engagers as of March 31, 2025, to drive corporate change. The firm's long-term goal for its UK real estate portfolio is to achieve net zero in development and operations by 2035.