Sustainable, Responsible &/or ESG Policy:
In general terms, we define ESG (environmental, social and governance) as an investment strategy which believes that long-term growth can be achieved by companies which conduct their business and apply capital responsibly, giving full consideration to a range of social, environmental and ethical issues as they might affect interested parties (employees, customers, share/bond holders, etc) as well as wider society.
The Rathbone Ethical Bond Fund offers the opportunity to invest in a fixed income fund with high-quality investment grade bonds while applying a broad range of both positive and negative screening criteria that will appeal to consumers with ethical concerns.
The fund applies key negative exclusion criteria to issuers of corporate bonds before ensuring that any issuers not in breach of these satisfy at least one of the fund’s positive activity requirements. The fund manager uses the services of Rathbone Greenbank Investment’s (Greenbank) in-house Ethical, Sustainable and Impact (ESI) research team.
The fund’s ethical criteria were developed prior to the launch of the fund in May 2002 with significant guidance from Greenbank. The criteria continue to be reviewed and, where necessary, evolved as part of a formal annual review process. The last substantive changes to the fund’s criteria were made in 2017.
Greenbank’s ESI research team maintains a proprietary database of company ethical profiles. The fund manager can access this database at all times and may purchase a bond from a company which has been previously reviewed and approved.
Companies are assessed against a number of positive and negative top-level social and environmental criteria, comprising over a 100 distinct sub-criteria.
Ratings are assigned on a scale of 1-3 for sub-criteria (each weighted for relevance according to the company’s sector in terms of its social and/or environmental impacts) and a cumulative score is then derived for each of the top-level criteria, again on a scale of 1-3. Assessment is carried out on both a bottom-up (looking in detail at the specific merits of their individual activities and how they address corporate responsibility issues) and a top-down basis (evaluating this performance in comparison to their peers in terms of the range of corporate responsibility issues covered and quality of response).
The ESI research team also applies a sustainability overlay to its assessment of companies. This recognises key sustainable development trends and seeks to identify investable companies with significant exposure. These themes are aligned with the 17 UN Sustainable Development Goals, but focus on eight aspects of greatest relevance to companies and the private sector.
While this detailed methodology is applied with respect to all companies screened by the Ethical, Sustainable & Impact Research Team (for whatever purpose), it is simplified when applied to the fund’s universe as the fund’s ethical criteria require a simple ‘Yes/No’ evaluation when considering if an issuer is in breach of any of the exclusion criteria, or meets any of the positive aspects.
In addition, an annual review meeting is attended by the fund manager, the Ethical, Sustainable & Impact Research Team and senior investment and marketing directors from both Rathbone Unit Trust Management and Rathbone Greenbank.
In regard to intended positive environmental or social impacts and outcomes, we believe in our risk based approach to investment management, and it is clear that ESG factors are key risks, so must be considered at all times, irrespective of the ethical stance of the mandate or the underlying investor. However, from an anecdotal standpoint we have seen many companies underperforming or even defaulting because of ESG issues, and the manager of the Ethical Bond Fund often cites Enron as an example, “Governance in particular has led companies such as Enron to default. Taking into consideration environmental and social factors also give us a better idea of a potential threat to cash flows, and therefore credit fundamentals. Because of the asymmetry of risk/return of bond investments, we believe considering ESG factors enhances risk/adjusted returns.”
Sustainable, Responsible &/or ESG Process:
A summary of the decision making flow on the fund is included below for illustrative purposes:
- The fund manager will first identify corporate bonds that represent an attractive investment proposition;
- Companies issuing these bonds will then be investigated by Greenbank’s ESI researchers;
- Issuing companies involved in any activities that fall into the categories outlined by negative criteria will not be considered for inclusion in the fund universe;
- Issuing companies demonstrating well-developed policies and practices in at least one of the positive areas or which provide products and services that are socially or environmentally beneficial will be included in the fund universe, provided they are not involved in any areas of negative concern;
- Companies identified as being suitable at this stage will then be subject to the consensus approval of at least two senior members of the Rathbone Greenbank team;
- An annual review meeting for the Rathbone Ethical Bond Fund will be held involving the researchers, the fund managers and representatives from Rathbone Greenbank Investments and Rathbone Unit Trust Management. This meeting takes place before the annual short report is issued. The portfolio, criteria, investment process and research process are all reviewed. The criteria and portfolio content will be confirmed (or not);
- The annual short report of the fund will contain summary details of the portfolio and an ethical report. This will include details of any proposed amendments to ethical criteria or to the screening process. Comments and feedback on any aspect of the fund are welcomed; and
- If any proposed changes attract significant comment, there is an ad-hoc meeting to review comments and determine action. Any changes are confirmed in the interim report (if appropriate)
The fund manager has the ultimate control of investment decisions on the fund but inclusion in the fund is dependent on the adherence of the relevant investment to the funds ethical criteria.
ESG Research
The fund’s ethical investment criteria are applied by Greenbank’s Ethical, Sustainable and Impact (ESI) Research Team. This team is part of the wider Rathbones group but is independent from Rathbone Unit Trust Management, ensuring that ethical screening decisions are independent from the investment team. Companies are assessed against a number of positive and negative top-level social and environmental criteria, comprising over a hundred distinct sub-criteria.
Companies are assessed on both a bottom-up (looking in detail at the specific merits of their individual activities and how they address corporate responsibility issues) and a top-down approach (evaluating this performance in comparison to their peers in terms of the range of corporate responsibility issues covered and quality of response).
The ESI research team maintains a proprietary database containing profiles on all issuers held by the fund, or which have been proposed for screening. Research is conducted using a range of sources including specialist ESG research, third party ESG data, companies’ own disclosures, company meetings, NGO insights and daily news monitoring. These also include all of the below:
- Proprietary analysis
- Company Reports
- Newsflow monitoring
- Academic institutions
- Industry bodies
- Research houses
- NGOs
- External ESG Ratings provider - MSCI
When considering if a company’s products and services meet the fund’s positive criteria relating to the “Provision of beneficial products and services” we look for activity alignment with one or more of Greenbank’s eight sustainable development themes.
In addition, the ESI Research Team subscribes to MSCI’s ESG Manager and has access to its ESG Controversies and ESG Ratings tools. These are used as an adjunct to the team’s in-house research rather than relied on in their raw form.
We currently integrate MSCI and Fitch ESG data as part of our credit work and fully include ESG risk data in the credit selection process. We also use ESG data to shape our investment themes and to identify material risks / opportunities. For example, we used banks fossil fuel lending data in order to reduce the banks most exposed to climate change risk.
Resources, Affiliations & Corporate Strategies
a) Ethical research for the fund is carried out by researchers working for Rathbone Greenbank Investments, the specialist ethical, sustainable and impact (ESI) investment unit of Rathbones Group Plc. The team at Rathbone Greenbank has been at the forefront of developments in the ethical investment industry since 1992, launching one of the first bespoke ethical portfolio services in 1997. The fund’s ethical and sustainability framework and methodology have been developed with Rathbone Greenbank, utilising their many years’ experience of managing private client portfolios as well as providing screening services for the other Rathbones’ sustainable funds (including Rathbone Greenbank Multi-Asset Portfolio funds and the Rathbone Greenbank Global Sustainability Fund).
(b) The fund’s policy and strategy are reviewed annually at a meeting which takes place before the annual short report is issued in May. This involves the ethical researchers, fund manager and representatives from Rathbone Greenbank Investments and Rathbone Unit Trust Management. The portfolio, ethical criteria, investment process and research process are all reviewed at this time. The fund manager will initially identify corporate bonds that represent an attractive investment proposition. The entities issuing these bonds will then be investigated by Rathbone Greenbank’s ethical researchers. Issuers identified as being suitable will then be subject to the consensus approval of at least two senior members of the Rathbone Greenbank team.
(c) The investment team for the Rathbone Ethical Bond Fund is headed up by Fund Manager Bryn Jones who is also Head of Fixed Income. Bryn Jones has been managing the Rathbone Ethical Bond Fund since November 2004 and reports to Tom Carroll Chief Investment Officer.
Bryn Jones is supported in his duties by a ‘deep team’, the most immediate element of which is the wider fixed income investment team, which is comprised of Stuart Chilvers (Fund Manager), Emmanouil Makrygiannakis, Elisa Bellantonio, Adoo Narang (Credit Analysts) and Sally Hoang (Fixed Income Research Analyst – maternity cover). The investment team also utilises the resources of the wider group, leveraging from areas such as our investment committee structure and dedicated research function.
- Bryn Jones - Head of Fixed Income and Lead Fund Manager
Bryn is the Head of Fixed Income for Rathbones and is lead manager on the Rathbone Ethical Bond Fund, the Rathbone Strategic Bond Fund and manager of institutional mandates. He joined Rathbones in November 2004 from Merrill Lynch, where he managed $2 billion of fixed income assets.
Bryn is a member of the Rathbone Strategic Asset Allocation Committee, Non-Executive Chairman of Rathbones’ Fixed Income Committee, and adviser to the Rathbone Banking Committee. He is a WMA representative for the HMT DMO’s (Her Majesty’s Treasury- Debt Management Office) Gilt market consultation process.
- Stuart Chilvers - Fund Manager
Stuart works with Bryn Jones, assisting in the management of the Rathbone Ethical Bond Fund and the Rathbone Strategic Bond Fund. He is also the lead fund manager of the Rathbone High Quality Bond Fund.
Stuart joined Rathbones in September 2017 and was made an Assistant Fund Manager in January 2020, then Fund Manager in January 2022. Previously, he gained three years industry experience at Brown Shipley.
He graduated from Bath University with a first-class Bachelor’s degree in Mathematics. He is a CFA Charterholder and also holds the CISI Chartered Wealth Manager qualification, having won the CISI Financial Markets & CISI Chartered Wealth Manager Qualification awards at the annual CISI awards in 2016 & 2017 respectively. He was named in the 2018 Citywire Top 30 under 30 investment management awards.
Rathbone Greenbank ESI research team –specialists responsible for the ethical research conducted for the fund
- Kate Elliot - Head of Ethical, Sustainable and Impact Research, Rathbone Greenbank
Kate is head of Rathbone Greenbank’s ethical, sustainable and impact research team. She oversees the development and implementation of the team’s sustainability assessment framework, analysing investments against a range of environmental, social and governance criteria. She also monitors emerging sustainability themes, sets priorities for Greenbank’s stewardship and engagement activities and has developed the team’s systems for the measurement and reporting of portfolio sustainability and impact performance. She joined Rathbones in 2007 after graduating from the University of Bristol with a masters in Philosophy and Mathematics.
- Sophie Lawrence – Stewardship and Engagement lead
Sophie joined Rathbone Greenbank in January 2020 as a senior ethical, sustainable and impact researcher and has recently moved into a new role as Greenbank’s Stewardship and Engagement Lead. She is responsible for the delivery of key engagement projects, building relationships with external partner organisations, and shaping Greenbank’s engagement strategy, priorities and reporting. She started her career at Barclays Bank in 2013 and most recently spent three years at KKS Advisors, a strategy consultancy in London where she led a team specialising in sustainable and impact investment. She holds an MSc from Imperial College London in Environmental Technology and a BSc in Geographical Sciences from the University of Bristol.
- Perry Rudd - Ethical, Sustainable and Impact Research Adviser
Perry joined Rathbones in 1999 after a career in the IT industry. He acts as adviser to Rathbone Greenbank’s ethical, sustainable and impact research team, which he headed until 2021. He was responsible for establishing the team’s proprietary research database and continues to be involved in its development. He also conducts thematic research into key responsible investment issues as well as monitoring corporate performance on environmental, social and governance matters. Perry was a founder member of Rathbone Greenbank in 2004.
- Emma Williams - Senior Ethical, Sustainable and Impact Researcher
Emma joined Greenbank in September 2022 and is responsible for analysing investments against a range of environmental, social and governance criteria, as well as for conducting thematic research into key responsible investment issues. Emma has over 10 years’ experience working in business valuation, sustainability and social investment, predominantly within professional services firms PwC and Grant Thornton. Emma holds a BSc (Hons) in Natural Sciences (Physics with Philosophy) from Durham University and is also a chartered accountant (ACA).
- Kai Johns - Ethical, Sustainable & Impact Researcher
Kai joined the Ethical, Sustainable & Impact Research Team in March 2019 after graduating from the University of Cambridge with a BA in Law. He responsible for assessing the social and environmental performance of companies.
- Katherine Farr - Assistant Ethical, Sustainable and Impact Researcher
Katherine joined the investment team at Rathbone Greenbank as an intern in March 2020 before moving into the ethical, sustainable and impact research team in January 2021. She is responsible for analysing investments against a range of environmental, social and governance criteria as well as assisting with engagement projects. She holds a BSc in Anthropology from Durham University and a CFA Institute Certificate in ESG Investing.
- Charlie Young - Assistant Ethical, Sustainable and Impact Researcher
Charlie joined Rathbone Greenbank in January 2021 after graduating from the University of Warwick with a BASc (Bachelor of Arts and Sciences) in Economic Studies and Global Sustainable Development. He is responsible for assessing the social and environmental performance of companies.
Rathbones Stewardship team
- Matt Crossman - Stewardship Director
Matt Crossman is the Stewardship Director for the Rathbones group. Overseeing the work of the Stewardship Committee, he ensures active voting at company AGMs, whilst also being the group leading on the integration of Environmental, Social and Governance (ESG) factors into the investment process. He also leads thematic engagement with companies on ESG issues, especially those undertaken via the UN backed through the Principles for Responsible Investment’s Collaboration Platform. Matt is a graduate of the University of Bristol where he studied law, with a particular interest in the administration of environmental law, and also has post-graduate qualifications in Sustainable Development theory and practice. He is a trustee of LoveBristol, and urban regeneration charity, and served on the board of the Ecumenical Council for Corporate Responsibility between 2007 and 2012.
The Stewardship team is led by Matt Crossman and comprises of:
- Archie Pearson: ESG & Stewardship Analyst, Voting Lead
- Tilia Astell: Junior ESG & Stewardship Analyst
- Kazuki Shaw: ESG & Stewardship Analyst
List of RI affiliations/memberships:
- Net Zero Asset Managers initiative (Rathbones).
- Long-term Investors in People’s Health – ShareAction – Signatory (Greenbank)
- Finance for Biodiversity Foundation – Member and signatory (Greenbank)
- Financing a Just Transition Alliance – Member (Greenbank)
- FTSE4Good Index - Constituent (Rathbones)
- Living Wage - Accredited (Rathbones)
- Payroll Giving Award - Accredited (Rathbones)
- PRI - Signatory (Rathbones) / Respondent (Rathbones)
- CDP - Signatory (Rathbones) / Respondent (Rathbones) / Investor Member (Greenbank)
- UKSIF - Member (Greenbank)
- ECCR (Ecumenical Council for Corporate Responsibility) - Member (Greenbank)
- Climate Action 100+ - Signatory (Rathbones)
- IIGCC - Member (Rathbones)
- Access to Nutrition Index - Signatory (Greenbank)
- BBFAW (Business Benchmark on Farm Animal Welfare) - Consultation / Contributor (Greenbank)
- B Team Responsible Tax Principles - Consultation / Contributor (Greenbank)
- FAIRR - Member (Greenbank)
- Just Transition on Climate Change - Signatory (Greenbank)
- New Plastics Economy Global Commitment - Endorser (Greenbank)
- Paris Aligned Investment Initiative - Participant (Greenbank)
- Access to Medicine Index (& AMR) - Participant (Greenbank)
- Workforce Disclosure Initiative Member - (Greenbank)
- Investor Alliance on Human Rights - Member (Greenbank)
- UK Stewardship Code - Commitment (Rathbones)
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