Sarasin Responsible Corporate Bond (OEIC/Unit Trust)
SRI / Ethical Overview
The Fund seeks to achieve long term income and capital returns from a diversified portfolio of ethically screened corporate bonds and other credit instruments. In addition to a rigorous credit selection process, the Fund avoids investment in companies which are materially engaged in certain sectors, including the production or distribution of tobacco, alcohol, armaments, gambling and adult entertainment. The Investment Manager purposefully favours exposure to organisations that, in its view, fulfil an environmentally or socially beneficial role and that employ high standards of governance.
Sarasin has an overall bond investment process that specifically examines and evaluates ESG risks as part of our credit research, and applies the conclusions to all of our clients funds (i.e. we have firm-wide “ESG Integration”). However, the Responsible Corporate Bond Fund goes further than this. It uses a strict sector exclusion screen (e.g. armaments and tobacco) and applies an ESG protocol to ensure a “minimum standard” across the E, S and G characteristics of an obligor. There is also a Fund preference for certain sectors (e.g. Housing Association, Charities), but this is not unconditional; the bonds must also be attractively priced from a purely investment perspective.
SRI / themed / ethical assets under management – overview
- Fund Size (GBP): as at 31 May 2018 £161million
- Total value of SRI/ethical/environmental/ social/ environmental or sustainability themed funds: As at 31 May 2018
- Sarasin IE Sustainable Global Real Estate Equity £17mn
- JSS Sustainable Equity – Real Estate Global SICAV £16mn
- JSS Sustainable Equity Global Emerging Markets SICAV £41mn
- Sarasin Responsible Global Equity £54mn
- Sarasin Responsible Global Equity (Sterling Hedged) £16mn
- Sarasin Responsible Corporate Bond £161mn
- Total £305mn
- Total value of assets covered by any additional ESG or responsible ownership policy: As at 31 March 2018 £13,618mn
- Total assets under management: As at 31 March 2018 £13,618mn
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.
- 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.
- 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.
- Child labour exclusion (new) Find funds that have policies in place that ensure they do not invest in companies that employ children.
- Deforestation / palm oil policy (new) Find funds that have policies in place that ensure they do not invest in companies that are significantly involved in deforestation, this typically relates to palm oil plantations.
- Water / sanitation policy (new) Find funds that have policies that focus on the the water industry and/or sanitation.
- Resource efficiency policy or theme (new) Find funds that have a a policy or theme that relates to managing natural resources more efficiently
- Sustainable transport theme or policy (new) Find funds that have stated policies or thematic investment approaches that relate to supporting more sustainable (environmentally aware) transport
- Positive social impact theme (new) Find funds that specifically state that they aim to deliver positive social (ie people related) impacts and/or outcomes
- Responsible supply chain policy or theme (new) Find funds that have policies or a themed that considers the responsible management of supply chain related issues (these may relate to employment, product sourcing, sustainability or other issues)
- Positive environmental impact theme (new) Find funds that specifically set out to help deliver positive environmental impacts, benefits or outcomes
- Plastics policy / reviewing plastics (new) Find funds that are specifically managing or reviewing how they manage issues relating to the over use plastics (particularly single use plastics) as part of their investment processes
- 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.
- 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.
- Faith friendly Find funds that have attributes that commonly suit the aims of investors of faith - although they may not be specifically marketed as being only for religious investors. Strategies vary (as do investor aims). 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.
- Responsible ownership / stewardship policy (new) Find funds that have a policy that sets out what they do with regard to responsible investment ownership - also known as 'stewardship'. This typically relates to issues such as dialogue with companies and shareholder voting.
- ESG integration strategy (new) Find funds that factor in 'environmental, social and governance' issues as part of their investment decision making process. (These typically relate to improved risk management.)
- 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.
- Responsible Ownership policy for non SRI funds Find funds run by fund managers that apply Responsible Ownership or 'Stewardship' policies to all or most of their investment assets. This means that active involvement (e.g. voting, dialogue) with the companies they invest in across funds (not normally limited to ethical or SRI options.) 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.
- 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.
- 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.
- PRI signatory Find fund management companies that have signed up to the UN backed 'Principles of Responsible Investment' initiative.
- 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.
- Fund EcoMarket sponsor/partner (new) Fund management company is supporting this website which aims to raise the profile of and help explain sustainable, responsible and ethical fund strategies. Sponsor funds are listed ahead of other funds and display their company logos.
- Climate Action 100+ or IIGCC member (new) Involved in collaborative institutional investor initiatives that are encouraging companies to address climate change (ie reduce carbon emissions)
- Encourage board diversity eg gender (new) Fund managers encourage the companies they invest in to have more diverse board structures (eg more women on boards)
- Encourage responsible corporate taxation (new) Fund management company is working with the companies it invests in to encourage more responsible corporate taxation (new)
- Encourage carbon / GHG reduction (new) The fund management company is working with the companies it invests in to encourage reductions of carbon dioxide and other greenhouse gas emissions.
- Employ specialist ESG/SRI/sustainability researchers (new) The fund management company directly employs specialist ESG/SRI/sustainability researchers or analysts
- Use specialist ESG/SRI/sustainability research companies (new) The company makes use of expert external research
- Full SRI policy information available on request (new) Information on all selected filter options will be supplied by the fund manager if you ask them to do so
SRI / Ethical Policy
The Sarasin Responsible Corporate Bond offers an environmental, social and governance (ESG) proposition to investors seeking exposure to the UK non-gilt (credit) bond market. The Fund will seek to reduce clients’ exposure to ESG risks, and give them greater exposure to ESG opportunities.
The Fund will seek to achieve its investment objectives by active management, both from a "top-down" and "bottom up" perspective. Being a relative return credit fund, corporate credit selection is at the heart of the investment process. In addition to the standard Sarasin credit research process, the Fund uses sector exclusions and an ESG protocol to ensure that investments are appropriate for a responsibility-oriented corporate bond fund.
The fund will exclude companies operating in certain ‘sin’ sectors and avoid exposure to borrowers with poor environmental and social profiles, and which fail to employ acceptable standards of governance from a creditor’s perspective. The fund will not be exclusively a "Green Bond" or "ESG Bond" fund. It will not unconditionally favour any sector, and will aim for appropriate sector diversification.
The Fund will also actively manage country and currency exposure, interest rate risk (duration), yield curve positioning (convexity) and credit sector risk. Yield is a key driver of fixed income clients’ return expectations and this fund will usually seek a running yield in excess of the index.
Resources, Affiliations & Corporate Strategies
The Fund Manager is responsible for the efficient construction and maintenance of the portfolio. The primary role of the Fund Manager is to select investments for the portfolio that have been reviewed by the Credit Analysts and meet the criteria for inclusion. The Manager structures and maintains the portfolio’s investment allocations, giving careful regard to the prospective returns and risks adopted by the portfolio as a whole and the exposures to individual holdings and market sectors. Tactics discussed and agreed by the Fixed Income Committee and the Credit Committee are also implemented. In addition, the Fund Manager is responsible for effecting, directly or indirectly, purchase and sale transactions with trading counterparties, such as brokerages and market makers. As a result, the Fund Manager is ultimately responsible for the day-to-day management and implementation of the Responsible Bond Fund strategy, including ensuring that all of its guidelines are adhered to and that its objectives are pursued.
Credit Analysts specialise in the rigorous examination and monitoring of the financial and business profile of a borrower and the characteristics of its bonds. Their role is to assess the investment merits of an entity or a bond from a creditor’s perspective. This will include a review of the various protections, covenants and collateral offered by a borrower and an assessment of its Environmental, Social, and Governance attributes. Analysts also examine the market valuation of bonds, both relative to other securities from the same borrower and bonds issued by other entities. Ultimately, the Credit Analysts must decide two things. First, whether an investment meets and maintains the high standards for the timely payment of principal and interest that the manager considers necessary before it is willing to commit investors’ capital. Second, form a judgement about whether the risk profile of the investment is appropriately reflected in the prevailing market price.
Sarasin & Partners are signatories to the UN’s Principles for Responsible Investing, have a long history of ethical investment solutions, and an experienced fixed income team.
We draw on the joint expertise of a dual resource: our dedicated stewardship team works alongside our fixed income specialists, providing day to day advice as well as direct involvement in the examination of borderline cases. Our Stewardship team also has the right to add a debt issuer to the Credit Committee agenda, prompting a review and discussion.
Our responsible investment process adds a screening system and an ESG protocol to our core credit process, which is already used for over 30 existing segregated mandates with ethical requirements.