Sarasin IE Sustainable Global Real Estate Equity (USD) P Acc (OEIC/Unit Trust)
SRI / Ethical Overview
(GBP Acc Shares)
Environmental, social and governance concerns are fully integrated into our investment process.
ESG issues are part of the assessment conducted by each analyst on every stock considered for inclusion on our buy list. The impact of ESG issues considered as part of modelling the revenue and cost projections of every stock, as well as how we consider threats to the business case. Our Stewardship analysts undertake research into specific ESG issues and manage policy engagement and governance.
Sarasin & Partners has managed ethical mandates for over 20 years, predominantly for charity clients, and has extensive experience throughout the firm of implementing ethical and socially responsible policies. Within our client teams we have considerable experience of how ethical issues have evolved and the different ways in which they may be considered by different interest groups.
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.
- 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.
- 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
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- Responsible Ownership/ESG a key differentiator The fund managers have said they consider this area to be a key differentiator for their business
- 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 Responsible Ownership/Stewardship report Find fund management companies that publish information on their approach to responsible investment ownership - also known as 'Stewardship' - following the introduction of 'the Stewardship Code'. This sets out their approach to voting, dialogue with company management and any related activity. This is publicly available.
- 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.
- 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.
- Boutique/specialist fund manager Find options offered by smaller, more specialist fund management companies with a significant (or entire) emphasis on sustainable, responsible, ethical, ESG or responsible ownership related investment strategies. Note - strategies vary significantly. Check fund manager supplied links for further information.
SRI / Ethical Policy
The Fund seeks to achieve long-term growth though investment in the shares of global real estate companies and the global real estate investment trust markets with an overlay of sustainable criteria.
Sustainable research is undertaken on all real estate equities. This leads to many companies being excluded from the investible universe. The main criteria for the assessment of sustainability are the risks and opportunities linked with an investment. For example, this may relate to social issues, products and production methods on one hand and the opportunities arising out of environmentally friendly and/or socially favourable products and technologies on the other hand.
The application of exclusion criteria and the best-of-class approach help avoid certain activities and industries with an unfavourable return-/risk-profile. The best-in-class-approach helps is to identify companies which are not only lower risk but which also offer some opportunities as these are better Sarasin & Partners LLP (S&P) Sustainable REIT RFP for retail purposes | March 2016 7
prepared / placed for a future (more sustainable) industry. We regard proxy-voting as a necessary part of an SRI mandate in order to assume the full responsibility of equity ownership.
The sustainability analyst is responsible for interpreting the information on the basis of a comprehensive list of criteria. The results are converted into scores and entered into a proprietary database (Sustainable Value Builder). It is then assessed using a numerical scoring system. The analyst conducts a plausibility check and refines it where required. Finally there is a peer review. The scoring is then put into the Sarasin Sustainability Matrix®. The SRI criteria include the following:
- Energy-efficiency (e.g. policy & goals, energy consumption/m2)
- Responsible land use, in the face of increasing urbanisation and lack of urban green spaces
- Sustainability of building materials, due to potential for environmental and health damages. Resource-efficient construction & maintenance (energy, water, waste)
- Labour standards. The construction sector is a big employer of low-skilled labour and it needs to implement controls to guarantee minimum labour standards
- Quality of living. Real estate planners need to focus on the quality of living for the residents. Architectural concepts related to housing for the elderly / disabled etc.
- Building flexibility in case requirements change in the future
- Good connection to public transport infrastructure
Resources, Affiliations & Corporate Strategies
The funds are managed in accordance with the sustainability criteria, as defined by the Bank J Safra Sarasin Sustainable Team (BJSSST) in Switzerland. The S&P Developed Property Index universe is screened by BJSSST to produce an investable universe of sustainable global listed real estate stocks.
Where we believe we can play a positive role in shaping markets and regulation in a way that contributes to boosting sustainable economic growth, we will engage in policy outreach. We undertake much of our policy work in collaboration with other investors:
Membership organisations and investor discussion groups related to responsible investment include:
- UN Principles for Responsible Investment (UNPRI)
- The Pensions and Lifetime Savings Association (formerly the National Association of Pension Funds, NAPF) – active in promoting Stewardship within the UK.
- International Corporate Governance Network (ICGN) – Natasha Landell-Mills is a member of the Accounting and Auditing Practices Committee
- Global Investors Governance Network (GIGN) - an informal network of investors on governance matters
- Asian Corporate Governance Association – providing current research on Asian corporate governance matters, and a platform for engagement with companies and policy-makers in the region.
- The UK Sustainable Investment and Finance Association (UKSIF) – promotes responsible investment and other forms of finance that support sustainable economic development.
- Centre for the Study of Financial Innovation – hosts regular roundtable discussions with thought-leaders on key issues facing the financial sector, from stewardship, to financial sector litigation or carbon risks.
- The Local Authority Pension Fund Forum – We have actively supported for many years
Investor coalitions/initiatives related to responsible investment include:
- Institutional Investors Group on Climate Change (IIGCC) – Brings together investors keen to promote a more robust action to counter climate change.
- Energy Futures – A facilitated investor–corporate dialogue which explored the key long-term energy challenges facing the world, and implications for investors.
- The Investor Forum – constituted as a Community Interest Company to represent the interest of the entire investment chain
- Investor coalition on Audit - to promote high quality and independent audits. This group was coordinated by Natasha Landell-Mills since its formation in 2012, and culminated in a position paper (signed by over 30 institutions representing over EUR 2 trillion in assets) and outreach in the European Union to deliver audit market reform.
- Investor coalition on International Financial reporting Standards (IFRS) and Going Concern – This group coordinated by Natasha Landell-Mills was formed in 2012, and is reaching out to policy-makers in the UK and EU to ensure an accounting framework that supports and promotes stewardship for the long-term.
- Corporate Reporting and Auditing Group convened by the IMA – bringing together representatives from the largest long-term investor associations to discuss topical accounting and auditing issues, and feed into government consultations.
- Banking Futures – A facilitated investor-company dialogue around a vision for a sustainable banking sector for the future. This involves thought leaders in long-term investment sector as well as senior executives from large UK based banks.