Standard Life Inv Ethical Corporate Bond Ret Acc (OEIC/Unit Trust)
SRI / Ethical Overview
Standard Life Investments’ Ethical Corporate Bond Fund aims to provide high, stable income by investing predominantly in investment grade bonds that meet our strict ethical criteria. The Fund is actively managed by our investment team, focusing on bottom-up security selection while adjusting the overall risk and themes through a careful assessment of macro and geopolitical drivers. The Portfolio Manager excludes companies that fail to meet our ethical criteria while seeking to include companies whose business activities make a positive contribution to society. These criteria are
agreed with the Standard Life Ethical Funds Advisory Group and may be amended occasionally.
SRI / themed / ethical assets under management – overview:
- Fund Size (GBP): £310.2 million as of 31 March 2017
- Total value of SRI/ethical/environmental/ social/ environmental or sustainability themed funds under management: £2,571.2 million as of 31 March 2017
- Standard Life Investments has a total of £277,929.6 million assets under management as of 31 December 2016
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.
- Sustainability policy Find fund options that consider issues relating to the sustainability agenda (e.g. resource management, environmental impact, climate change and/or social issues such as equal opportunities, human rights and adherence to recognised codes). This will include funds from all of the different SRI Styles. See fund information for explanations of the different strategies.
- Social policy Find fund options that consider social issues (e.g. human rights, labour standards, equal opportunities, child labour and adherence to internationally recognised codes such as the UN Global Compact). This will include funds in most of the different SRI Styles as this is considered a core issue. See fund information for detail.
- Governance policy Find fund options that have policies that relate to corporate governance issues such as board structure, executive remuneration, bribery and/or corporate corruption. These funds will typically avoid companies with poor practices.
- Animal testing exclusion policy Find ethical investment options that avoid companies that are involved in testing their products on animals. Ethical fund strategies vary - some exclude all companies that test on animals, others allow companies that test for medical purposes or where required by law. Read fund details for fund specific information.
- 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.
- Health & wellbeing policies Find ethical or sustainable investment fund options that have a policy which supports (ie aims to invest in) companies that are viewed as offering positive lifestyle, health or wellbeing related benefits.
- 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.
- Climate change / GHG policy Find sustainable investment and ethical fund options that pay significant attention to climate change related issues such as greenhouse gas/carbon emissions. Strategies vary, see fund literature for individual fund information.
- Invests in clean energy/renewables Find ethical, sustainable investment and other environmentally aware fund options that aim to invest in companies in the clean technology and renewable energy sectors. Fund strategies vary. Some funds may have limited exposure to this area, others may have significant exposure. Check fund literature for details.
- 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.
- Fracking and tar sands excluded Find fund options that avoid companies involved in fracking and tar sands - which are widely regarded as more controversial methods of oil and gas extraction.
- 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.
- Positive selection bias Find funds where their main 'ethical approach' is to invest in companies that are considered to be positive/good or useful to people and/or the environment. The fund may also have negative avoidance criteria - see fund details to read more about fund strategies.
- 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.
- Balances company 'pros and cons'/best in sector Find ethical funds and other options that consider both the 'positive' things companies do and the 'negative' things they do in order to make balanced, often complex decisions about where they might invest. Such funds often invest in the best/most ethical companies across most industries ('best in sector'), rather than excluding entire sectors. The fund manager may combine this with 'responsible engagement' activity to encourage better business practices. See fund literature for specific policy explanations.
- Eurosif transparency Find funds that meet the standards of the EUROSIF transparency Code. This means that they are a leading fund in terms of openness and transparency, publishing - for example - extensive information about where they invest and how they deal with companies.
- Over 50% large cap Find funds that invests more than half of their money into what are commonly regarded as 'large companies'. This will typically mean that the market capitalisation (or value) of the companies they hold is in excess of £5 to £10 billion.
- Favours cleaner, greener companies Find funds that aim to nvest in companies with strong environmental policies and practices. This may mean it invests in smaller companies offering market leading environmental services or products and/or larger companies that are working towards the improved management of their negative impacts. Read fund literature for further information.
- Favours companies with strong social policies Find funds that invest in line with positive strategies that relate to 'people' issues - such as having strong human rights, labour standards and equal opportunities practices. Such funds are likely to invest in companies that have market leading standards with regard to employee and supplier practices. 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.
- Aims to generate positive impacts Find funds that aim to help deliver positive social or environmental impacts or outcomes through their investment decisions - which typically involves holding companies that are viewed as being necessary or beneficial. Strategies and approaches vary. A small number of funds have recently started to measure outcomes (see 'Measures Impacts' in the Policy filter). This is a new area - so most funds do not do this yet. See fund literature for further information.
- Available via an ISA Find funds that are available via a tax efficient ISA product wrapper
- ESG/SRI engagement Find funds and fund management companies that actively encourages higher 'environmental, social and governance' and/or 'sustainable and responsible investment' practices amongst investee companies - when positive change is aligned with the best interest of investors. This may apply to a single fund or a group of funds. Read fund literature for further information.
- Integrates ESG factors into all/most fund research Find fund management companies that research environmental, social and governance (ESG) issues when deciding whether or not to invest in a company. This typically applies to all funds, not only those which are promoted as being 'ethical' or 'SRI themed'. This is increasingly often used as a risk management tool.
- Vote all* shares at AGMs/EGMs This fund manager votes or aims to vote all* the shares they own at Annual General Meetings and Extraordinary General Meetings. A commitment to voting shares is a key indicator of 'responsible share ownership' - where fund managers consider - and express their views on - the key business issues effecting the companies they part own. (*Allowance is made for exceptional situations such as when shares are in the process of being sold.)
- In house responsible ownership/voting expertise Find fund / fund management companies where there is in-house expertise that enables the fund manager to make their own decisions on issues such as shareholder voting, setting of in-house guidelines - for example - particularly with regard to environmental, social and governance (ESG) issues.
- UK Stewardship Code signatory Find fund managers that are signatories to the FRC UK Stewardship Code, which sets out a framework for constructive investor / investee relations where fund managers are encouraged to behave as responsible 'company owners'.
- Publish full voting record Find fund management companies that publishes a full record of how they vote at AGMs and EGMs. This information is publicly available.
SRI / Ethical Policy
Standard Life Investments recognises that the world faces significant environmental and social challenges. Our Ethical Funds seek to invest in companies that are supporting the solutions to these challenges and uphold the highest standards of corporate responsibility. The criteria of the ethical investment policy aim to reflect this.
Using positive criteria, we favour companies that are involved in activities that benefit society and the environment. We use the UN Global Compact to define the four areas where we seek positive business practices and services.
- Environment: We seek to invest in companies that have a positive impact on the environment, and contribute to environmental protection and enhancement through its products and services.
- Human Rights & Community: We seek companies that respect and support the human rights of those affected by its business, offer products and services that provide access to some of the world’s most basic rights, and have strong relationships within their communities.
- Employment: We seek to invest in companies that have strong labour practices, and implement strong safety, health and welfare policies.
- Anti-bribery & Corruption: We favour investment in companies that uphold the highest standards of business ethics and demonstrate strong anti-corruption policies, and adopted and embed a code which encourages employees to follow principles of good business behaviour and positive corporate culture.
The funds adopt a formal corporate governance policy. We actively vote at the AGMs of the companies held in the funds. Due consideration is given to issues such as board independence, excessive remuneration and audit issues. Voting is conducted within the terms of the Ethical Funds Investment Policy and in the best of interests of the investors in the funds.
In addition, the funds will adopt a policy of voting:
- against the Chairman of any company where the board fails to have set policy, have oversight or take responsibility for environmental, social, health & safety and human rights issues.
- against members of any health, safety and environment committee where insufficient oversight has resulted in poor performance in these areas.
The fund pursues an active engagement policy. We engage with companies on a range of environmental and social issues with the aim that good corporate behaviour is adopted by the companies in which the funds invest. Where engagement proves ineffective and concerns remain over corporate behaviour and oversight of these issues, we will disinvest from a company. It is our ambition that this active engagement will challenge and encourage companies in which the funds invest to improve their environmental and social performance and practices.
If a company is involved in the activities listed below, the funds will avoid investment in them.
- Environmental damage and pollution
- Human rights abuses
- Alcohol production
- Animal testing
- Animal husbandry
- Marketing breast milk substitutes
- Poor business practices
Fracking is not explicitly excluded, though is unlikely to pass our environmental screen.
The funds will also avoid companies that have failed one or more of the ten principles of the UN Global Compact.
Resources, Affiliations & Corporate Strategies
Our investment process is research-intensive and built around our core approach of ‘stock selection tailored to the overall environment’. This enables us to focus on bottom-up credit selection and add value predominately from idiosyncratic credit risk whilst adjusting the overall risk and themes within the portfolio through a careful assessment of macro and geopolitical drivers. This approach enables us to outperform across different market environments and deliver consistent excess returns.
Fundamental research is a key component of our corporate bond process and drives our stock selection views. There are three broad areas in which we focus to help form our fundamental views:
- Idiosyncratic Risk – This is company specific and determines whether profits or the balance sheet are expected to change due to factors such as self-help; good or bad management; relatively poor or strong business models.
- Cyclical/Sector Themes - In particular, we look to assess how well positioned the company is to cyclical or sector pressures relative to its peers. Here we break companies down into either stable or beta companies, where beta companies are those most positively geared to a changing sector theme.
- Systemic Risk - we look to identify how the company would be impacted from broader based themes, such as regulatory or rating agency changes
Within our Credit Team, We take a non-segregated approach to research and where appropriate an individual may have both portfolio management and research responsibilities. This provides added value in portfolio construction by giving managers intimate knowledge of the securities in which they invest and practical experience of putting ideas to work within a portfolio. Furthermore analysts value investment ideas within the context of the wider market to identify relative value and ensure portfolios are constructed from the best risk adjusted opportunities. This flat structure ensures joint accountability and full engagement of analysts.
Central to our process is understanding the companies which we invest in. Our Corporate Bond Portfolio Managers and sector specialists conduct meetings in conjunction with our Equity Analysts/Portfolio Managers. These joint equity meetings help guarantee access to senior company management and provide valuable cross capital insights. Our Corporate Bond Team leverage from the extensive company research generated by our 72 strong Equity Team.
In addition, ESG Investment Team has a systematic programme of ongoing engagement with companies to encourage and monitor sustainability practices, and to discuss a range of relevant corporate governance issues such as Board balance and composition, remuneration policies, and audit and risk issues. The Team is closely integrated with our asset class teams and they regularly attend company meetings together, providing analysis from both a financial and ESG perspective to get a comprehensive view of the company. Our main ESG data providers are Sustainalytics, Bloomberg, GMI, Institutional Shareholder Services (ISS) and IVIS. Additionally, MSCI, an independent research agency, is a key system used to determine which companies comply with our strict ethical criteria within our Ethical Funds. We input our negative and positive criteria into the MSCI web-based database system, which then generates lists of the companies that pass or fail the criteria. We also use the system to identify which companies are rated as “preferred” on the basis of their positive criteria. These ratings are added to our proprietary quantitative models, which are used as a screening input and decision support tool to the stock analysis process using normal investment criteria.