Old Mutual Ethical A Acc (OEIC/Unit Trust)
SRI / Ethical Overview
The fund is a long-only global equity portfolio with focus on sustainable investment and ethical overlay. Sustainable investment (SI), for the team at Quilter Cheviot, identifies companies around the world that provide solutions to the economic and environmental challenges of a cleaner and more efficient economy – delivering more with less for a fast growing population with a finite supply of resources, and within a carbon constrained environment.
SI is different from ethical investment, which just avoids investing in companies based on negative screening (e.g. tobacco or weapons). The fund strategy complies with the ethical policy- it does not invest in companies directly involved in tobacco, alcohol, gambling, armaments, pornography, nuclear power generation, banks, factory farming or animal testing. The final portfolio is suitable for both ethical and sustainable investors, while keeping in mind that sustainable investment is not the same as ethical investment.
The funds’ ethical screening is carried out by an independent third party research specialist, www.ethicalscreening.co.uk. The focus is on mid and large-cap equities and we do not invest in blue-sky type companies. The strategy tends to focus on established business models and cash generative companies. Security selection is focused across four investment themes: low carbon energy, food, resources and water. The investment process is centralised and final investment oversight is provided by the Chief Investment Strategist. The fund managers leverage from the in-house investment expertise of investment committees and analyst teams.
SRI / themed / ethical assets under management – overview
- Fund Size (GBP): £122.2 million as at 31 May 2017
- Total value of SRI/ethical/environmental/ social/ environmental or sustainability themed funds under management: Circa £214m as at 31 May 2017.
This includes the Climate Assets Fund and discretionary mandates for private clients and charities based on Quilter Cheviot’s sustainable investment strategy.
Claudia Quiroz also manages segregated portfolios on behalf of private clients, pensions and charities with a focus on sustainable and ethical investment.
- Total value of assets covered by responsible ownership policy: All
- Total assets under management: £34,480 million as at 31 March 2017 for the firm across all asset classes (including non-ethical).
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.
- 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.
- Limits exposure to carbon intensive industries Find environmental, sustainable investment, ethical fund and other options that aim to significantly reduce or limit exposure to carbon intensive industries (ie sectors which are major contributors to climate change). Funds vary - strategies may involve excluding sectors such as coal, oil & gas, mining or airlines - or may indicate a 'best in sector' approach is taken. See fund literature for details.
- Measures positive impacts Find funds that measure the positive effect of their investment decision making on society and/or the environment. (This may involve eg carbon saved or jobs supported.) Managers aim to quantify the benefits they deliver (relative to other strategies or other benchmarks) to ensure they are delivering positive benefiting. This is a new and evolving area. See fund literature for information
- 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.
- 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.
- 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 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.
- 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.
- 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.
- Coal, oil &/or gas majors excluded Find sustainable investment and ethical fund options that avoid significant involvement in coal, oil and/or gas producing companies. Funds vary. See individual fund literature to confirm details.
- 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.
- 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.
- 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.
- 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.
- Sustainability themed Find funds where there is a significant emphasis on sustainability issues either as its primary strategy or as a core strategy that compliments other criteria. (This may apply to a number of different SRI Styles). Such funds will consider environmental and social issues when making stock selection decisions. Read fund literature for further information.
- 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.
- 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
- Clean energy themed Find funds that in clean technology / clean energy companies. See fund information for further details.
- Over 50% small/mid cap Find funds where more than half of the funds' assets are invested in smaller or medium sized companies (ie below around £5 -10 billion).
- 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'.
- Review(ing) carbon/fossil fuel exposure for all funds Find funds / fund managers that are reviewing or have reviewed their exposure to carbon intensive industries including (but not only) mining, oil and gas companies. This work is being carried out in the context of climate change related concerns, and may often reference international agreements.
- Regularly lead collaborative ESG initiatives Find funds managed by fund management companies that regularly initiate or help run industry wide (collaborative) investor projects aimed at raising environmental, social and governance standards amongst investee companies.
SRI / Ethical Policy
OMGI is committed, as part of the Old Mutual Group, to the United Nations-supported Principles for Responsible Investment (UN PRI).
Old Mutual became a signatory to UN PRI as an asset owner in June 2012; in the same year we completed a group-wide review of our Responsible Investment practices using the UN PRI reporting framework. From 2014, we have reported on our progress in this area using the PRI framework on an annual basis.
In September 2015 we became signatory to the Montreal Pledge, a PRI-led voluntary carbon disclosure initiative whereby signatories commit to annually assessing and disclosing the carbon footprint of all of or part of their total holdings.
Resources, Affiliations & Corporate Strategies
All of our primary research is generated internally. We monitor a large universe of stocks looking for the early signs that conditions for investment may be met over our investment horizon. Early signs may include cyclical recovery, improved competitive position, management change, restructuring, corporate activity and extreme under-valuation.
We draw on the research of many leading investment banks, brokers and other providers. We supplement this with our own research and meetings with management, maintaining excellent company and industry awareness. The in-house team of equity analysts focuses on global industry sectors, backed up by experienced investment managers to ensure a very high level of market awareness.
Stocks are monitored using a wide range of valuation criteria including EV/EBITDA, PE, Yield, DCF, P/BV as appropriate to the sector and market at that time. Low valuation alone is not sufficient to make a stock attractive.
The Quilter Cheviot Research process utilises a combination of primary (internally generated) and secondary (outside) sources. Our eight equity analysts use a range of broker and industry research to gain a deeper understanding of industries and companies. This is always validated by our own work before the team publishes an investment recommendation to our investment managers.
The funds’ ethical screening is carried out by an independent third party research specialist, Ethical Screening (ES). (www.ethicalscreening.co.uk). ES monitors the portfolio on a monthly basis.
Within our fundamental equity strategies we aim to be long-term holders of companies; as a result, our fund managers consider key ESG factors as part of the process. ESG factors may be considered in determining whether to make an investment and in managing that investment once a holding is acquired. Thus, a material ESG risk (for example, the quality of a management team) may influence our approach to buying or selling a holding, our engagement with the company and how we will proxy vote with respect to the holding.