Kames Ethical Cautious Managed A Acc (OEIC/Unit Trust)
SRI / Ethical Overview
We launched our first ethical equity fund in 1989. Since then, we have broadened our ethical capabilities to include ethical corporate bond and cautious managed funds. Today we are distinctive among fund providers in offering such a broad suite of ethical products. Some of the characteristics of our ethical proposition are:
- We are committed to ethical investing
- Ethical companies make good investments.
- ‘Dark green’ funds operate strict ethical principles.
- Our ethical funds are rated by Morningstar OBSR.
- A 2014 survey named Kames Capital as one of only three ethical investment providers to be used by over 70% of financial advisers which are members of the Ethical Investment Association.
SRI / themed / ethical assets under management – overview
- Fund Size (GBP): £601.49 million as at 31/05/2017
- Total value of SRI/ethical/environmental/ social/ environmental or sustainability themed funds under management: £1,748.84 million as at 31/05/2017
- Total assets under management: £45,335 million as at 31/03/2017
SRI Policies (Primary strategy in bold)
- Environmental policy Find investment funds with environmental policies - ie that consider issues such as pollution, climate change, resource management, environmental impact. This will include options from all of the different SRI Styles, including funds where their core strategy is to focus on other areas such as ethical funds. See fund information for fund specific policy details.
- Ethical policies Find funds with 'traditional' ethical investment policies. These typically focus on avoiding companies that are involved in the armaments industry, tobacco, gambling and/or pornography. Options will include funds where their core strategy or style may be to focus other issues - like sustainability or the environment, not just 'ethical funds'. Strategies vary significantly. Check fund literature for details.
- Animal welfare policy Find ethical fund options that have policies that require specific animal welfare standards to be adopted by investee companies in order for them to be considered for inclusion within the fund.
- Tobacco production avoided Find fund options that exclude manufacturers of tobacco (or related) products. This typically relates to ethical funds however funds from other SRI Styles commonly avoid this area also. Strategies vary and funds may invest in retailers of such products (e.g. supermarkets or hotels.) See fund information for further information.
- Armaments manufacturers avoided Find ethical fund (and other SRI) options that avoid avoids companies that manufacture products intended specifically for military use. Fund strategies vary - particularly with regard to non strategic military products. Read fund literature for specific details.
- Nuclear exclusion policy Find ethical funds (and other options) that have a published policy that sets out the fund's position on avoiding or limiting exposure to nuclear power. See fund literature for details of their policy.
- Alcohol production excluded This filter helps you to find ethical funds - and other options - that avoid investment in alcohol production. See fund literature for further information.
- Gambling avoidance policy Find ethical fund options (and other options) that avoid companies with significant involvement in the gambling industry. See fund policy for details.
- Pornography avoidance policy Find ethical fund option - and in some cases other options - that avoid companies that derive significant income from pornography. See fund details for further information.
- Human rights Find funds that consider human rights practices when approving companies for investment. Such funds will require decent standards of human rights to be demonstrated - which typically means adherence to international norms as a minimum standard.
- RSMR Rated Find funds that are rated by research agency 'Rayner Spencer Mills Research' (awarded 'RSMR SRI Rated' status). Read fund literature on contact RSMR for further information.
- Negative selection bias Find funds where their main 'ethical approach' is to avoid companies by using negative screening criteria. Read fund literature for further information.
- Strictly screened ethical fund Find funds that have a high level of negative ethical avoidance. These funds are likely to exclude more companies than other ethical (and SRI) fund options. Read fund literature for further information.
- PRI signatory Find fund management companies that have signed up to the UN backed 'Principles of Responsible Investment' initiative.
SRI / Ethical Policy
All three of Kames Capital’s ethical funds apply the same ‘negative’ screen. This means that we screen companies out of the potential investment universe based on certain unacceptable activities. Because we apply stringent screening criteria, our funds are considered ‘dark green’. We do not screen out whole sectors, but some may largely be excluded because of the nature of their business activities.
Our screening criteria are clear and explicit. Certain ethical issues, however, are not black or white. Our 20 years’ experience of managing ethical investments means we can consider these issues appropriately when they arise.
We do not apply ‘positive screening’ criteria like some other funds. The funds may invest in themes that could be considered ‘socially responsible’, like alternative energy or social housing companies, but only if these companies pass our negative screens.
We aim for transparency in our screening process. This means it is easy for clients to understand the types of companies we exclude. Our underlying philosophy is to avoid companies that cause significant negative effects in society or the environment.
We use both external screening databases and in-house research to ensure companies meet our ethical criteria and are suitable for investment. Our Corporate Governance team focuses on the screening and research, freeing our fund managers to focus solely on stock selection and portfolio construction.
Our ‘dark green’ screen is ideally suited to investors looking for a more stringent ethical philosophy. It adopts a negative approach that screens companies out of our funds’ potential investment universe if they engage in certain unacceptable activities. Examples of our screening process are shown below:
- Animal Welfare
- Nuclear power
- Political Donations
- Genetic Engineering
- Oppressive Regimes
Kames Capital aims to be a responsible investor. We ensure that we identify and understand the key environmental, social and governance (ESG) risks for each of the companies, industries and sectors that we invest in. We do this because evidence suggests that companies who rank among the leaders in governance and sustainability tend to outperform as investments over the long term.
Our approach to responsible investment is consistent with the UK Stewardship Code. The Code sets out good practice Principles on engagement with investee companies which UK-based institutional investors should aspire to. You can download our compliance statement from our website.
We are also a signatory to the United Nations Principles for Responsible Investment (UN PRI). The UN PRI is the principal international investor initiative to drive the integration of environmental, social and governance issues into investment decision making. The initiative places a formal requirement on signatories to be active, responsible shareholders and report annually on activities and progress in a transparent manner.
Resources, Affiliations & Corporate Strategies
Our corporate governance team is responsible for the analysis of relevant environmental, social and governance (ESG) issues. They are responsible for identifying the key ESG risks for each of the companies, industries and sectors that we invest in and in turn providing our fund managers with succinct, relevant data that could have investment consequences. Our corporate governance team is linked to equivalent individuals in other Aegon Asset Management country offices.
We use a range of data sources for ESG research purposes and these resources have increased significantly in the last few years as the quality of the data available has improved. Resources currently include:
- MSCI ESG Manager – company ESG research platform
- EIRIS Portfolio Manager – company ESG research platform
- ASSET4 assetmasterProfessional – company ESG research platform
- RiskMetrics ProxyExchange – proxy voting research and processing
- The Association of British Insurers (ABI) IVIS proxy voting research service
- BoardEx - corporate board and remuneration database
- Specialist databases, such as UN Principles for Responsible Investment (UNPRI), Carbon Disclosure Project (CDP) and Extractives Industry Transparency Directive (EITI)
- Specialist research from brokers and academics
- Various specialist journal subscriptions
A strong relationship exists between our corporate governance team and our fund managers, which enables material non-financial information to be incorporated into our investment processes. ESG research reports produced by our corporate governance team sit alongside all the other existing investment research undertaken by our fund managers on a given security. The corporate governance team also provide relevant news-flow and commentary on ESG issues to our fund managers that they might not receive from other sources.
Our fund managers consider ESG research alongside other relevant financial and non-financial factors in the investment decision-making process. The importance that the fund manager attaches to ESG issues is in proportion to their ability to influence security prices.