Sustainable, Responsible &/or ESG Policy:
The fund’s ethical and sustainability investment criteria are applied by Rathbone Greenbank’s Ethical, Sustainable and Impact Research team which maintains a proprietary database of company profiles. Companies are assessed against a number of positive and negative top-level social and environmental criteria, comprising over 100 distinct sub-criteria.
Companies are assessed using two approaches:
- Stock-specific – looking in detail at the specific merits of their individual activities and how they address corporate responsibility issues;
- Macro – evaluating this performance in comparison to peers in terms of the range of corporate responsibility issues covered and quality of response.
In addition to the reporting outputs of companies themselves, the team accesses a variety of sources, including industry groups, non-governmental organisations, sell-side analysts, external research bodies and specialist SRI publications, to arrive at a balanced view of companies’ overall performance. Since June 2015, Rathbone Greenbank’s Ethical, Sustainable and Impact Research team has subscribed to MSCI ESG Manager to reinforce this process.
Research is also conducted on a thematic basis, examining such topics as climate change, clean energy, human rights, community investment and employee welfare. The fund’s holdings are monitored regularly, and reviewed in the light of any relevant news, merger and acquisition activity or findings from ongoing company analysis. A full review of the fund’s eligible investment universe is carried out an annual basis ahead of the annual review meeting.
New stocks that are considered suitable for investment are investigated as requested by the fund’s manager, and subjected to the team’s screening process.
The team conducts reviews of its ethically themed ‘peer groups’ on a rolling basis and looks to update all of its in-depth company profiles on a 12-18 month cycle.
Divestment on ethical and sustainability grounds are likely to be uncommon. If the activities of a company change, such that it is no longer suitable for the fund, the fund’s manager would normally seek to sell the holding within three to six months.
The exclusions and negative screens
The fund will apply screening criteria to avoid investing in:
- Companies involved in specific activities or engaged in behaviour that is of general concern to ethical investors; or
- Companies creating significant negative impacts that are considered to be incompatible with sustainable development.
The fund shall exclude companies in breach of one or more of the following criteria:
- Alcohol;
- Animal welfare: animal testing;
- Animal welfare: fur;
- Animal welfare: intensive livestock farming;
- Armaments;
- Climate change;
- Employment;
- Environment;
- Gambling;
- Human rights;
- Nuclear power;
- Pornography; and
- Tobacco
The positive sustainability criteria
We believe that companies displaying strong policies and practices with regard to environmental, social and governance issues are likely to be well-positioned to deliver long-term value creation for investors.
In order to qualify for inclusion in the fund, companies that pass the negative screen must also display leading or well-developed business practices and policies (operational alignment), and must also allocate capital towards the provision of products or services aligned with sustainable development (activity alignment).
In September 2015, the UN launched the Sustainable Development Goals (SDGs). These comprise 17 goals, with 169 underlying targets that aim to ‘end poverty, protect the planet and ensure prosperity for all’ by 2030. The SDGs provide a comprehensive framework for international action on the many social and environmental challenges facing the world.
Rathbone Greenbank has mapped the UN SDGs to a set of eight sustainable development themes and a number of underlying sub-themes. These themes ultimately align with the same ambitions as the UN SDGs, but translate them into something more relevant to companies. We use these themes to determine how successful individual companies are at translating aspirations into tangible results.
Operational alignment
Our focus is on three principal areas of operations: employment, environment and human rights. Businesses under consideration are expected to exhibit positive action in at least one of these areas. One should think of this as a minimum threshold with regard to how the company operates.
Activity alignment
Having satisfied the initial hurdle, we require companies to have significant involvement in the provision of products or services aligned with sustainable development. Essentially, we are asking whether companies are allocating capital in alignment with any of the United Nations Sustainable Development Goals, and if this practice is central to their business models.
Sustainable, Responsible &/or ESG Process:
The first step in the investment process is identifying companies displaying the characteristics we look for in durable franchises.
This is founded on our core investment principles:
- A clear, rational and repeatable investment process is vital for investment success over long time periods;
- Over time, share prices will reflect the intrinsic value of the business;
- Stock market prices fluctuate more than underlying business values;
- A long-term perspective is essential to take advantage of share price volatility;
- For above-average results, investors must think and act differently to the rest of the market;
- Risk is defined as a permanent loss of capital, and usually comes from overpaying for assets, or misjudging company finances or fundamentals;
- A conservative approach will include a margin of safety to minimise the risk of permanent losses;
- By buying and holding investments that pass our strict investment criteria, investors should benefit from the compound growth in capital and dividends; and
- All investors (fund managers in this case) will perform poorly from time to time
We take a risk based approach, defining risk as the threat of a permanent fall in the value of our investments. Risk is not viewed as volatility, illiquidity, deviation from a benchmark, or underperformance.
We use a framework focusing on three key areas and how they impact on this:
- Business risk – deteriorating earnings power
- Financial risk – inappropriate levels of debt
- Price risk – overpaying for an investment
Ultimately, we view the value of an investment as the present value of future cash flows. The three areas above allow us to evaluate an investment opportunity, the first two allow us to take a view on the likelihood of achieving the expected future cash flows, and the third the price we are paying for their value. We look to balance all three, with, for example, the more secure and predictable the cash flows (the lower the business/financial risk) the less margin of safety we require (higher price risk) and vice versa. There is no one particular permutation we are looking for, but assess each opportunity on its individual merits.
Once a stock has been researched and approved it then needs to be scrutinised in line with pre-determined ethical criteria. These criteria have been agreed between the fund managers and the team at Rathbone Greenbank, who will be the final arbiters. The fund managers may propose a stock, but Rathbone Greenbank has the power of veto if the company fails this primary screen, ensuring validation by an independent, third party.
Rathbone Greenbank is responsible for the monitoring of corporate news on environmental and social matters. As companies change their activities, merge with others or develop new policies and practices, their suitability and risks will alter. The Greenbank Ethical, Sustainable & Impact Research Team works with Rathbone Unit Trust Management to ensure that investments are only made in approved organisations.
Thereafter, companies must evidence strong positive policies and practices. Using the 17 UN Sustainable Development Goals as a starting point, Rathbone Greenbank has mapped these goals to a set of eight sustainable development themes and underlying sub-themes. The fund manager seeks to invest in alignment with these themes, in the process marrying investment returns with positive social and environmental commitments.
Finally, corporate stewardship forms an essential part of our approach to responsible investment. Rathbones has directed substantial resources toward a separate corporate governance team over the last few years, and it grows in importance and relevance. Corporate engagement is a crucial third leg to the process, and involves the participation of both the fund managers and a dedicated corporate governance team, when scrutinising policies and management teams.
Research
For equity research, there is a very strong emphasis on in-house research. The investment team undertake their own stock and industry analysis. Whilst this will be supplemented by external sources of research, home-grown ideas and themes are valued highly.
The investment process has been developed over many years, and every member of the team understands that an investment rationale has to be framed within certain lines of argument: - trinity of risk (price, business, financial) with a firm understanding of cash returns on invested capital. Thereafter, the individual is free to come to his or her own conclusion.
Whilst much third party research is discarded as being biased or corporate led, there are some sources that are held in high regard. This can be especially useful in understanding the wider industry. We can also benefit from research demonstrating views which oppose our own. We are open to challenge, and understanding differing views and expectations can improve our own analysis and outcomes. Elsewhere, Rathbones pays for economics and strategy research from several independent groups, in addition to in-house teams.
Finally, the team is also in a position to leverage intellectual capital from across the Rathbones Group in terms of utilising the various committees (stock selections, collectives, overseas equities, amongst others), analysts and the internal and external research available.
The ethical and sustainability research for the Rathbone Greenbank Global Sustainability Fund is provided by Rathbone Greenbank Investments, the specialist ethical investment unit of Rathbones Investment Management Limited (part of Rathbones Group Plc). The team at Rathbone Greenbank has been at the forefront of developments in the ethical investment industry since 1997, launching one of the first bespoke ethical portfolio services. This team is dedicated to the application of social, environmental and ethical principles in the management and screening of client portfolios. The ethical framework, methodology and screens have been developed by Rathbone Greenbank, based on many years’ experience of managing private client portfolios as well as providing screening services for the highly successful Rathbone Ethical Bond Fund since 2002.
Rathbone Greenbank and Rathbone Unit Trust Management have long collaborated on a fixed income product, the Rathbone Ethical Bond fund, and this relationship has been extended to produce an equity product using our well developed equity investment process.
For further detail please see the Rathbone Greenbank Global Sustainability Fund Product Brochure.
Resources, Affiliations & Corporate Strategies
Ethical and sustainability research for the fund is carried out by researchers working for Rathbone Greenbank Investments, the specialist ethical, sustainable and impact (ESI) investment unit of Rathbones Group Plc. The team at Rathbone Greenbank has been at the forefront of developments in the ethical investment industry since 1992, launching one of the first bespoke ethical portfolio services in 1997. The fund’s ethical and sustainability framework and methodology have been developed with Rathbone Greenbank, utilising their many years’ experience of managing private client portfolios as well as providing screening services for the highly successful Rathbone Ethical Bond Fund since 2002 and the Rathbone Greenbank Multi-Asset Portfolio funds.
David Harrison is the lead manager of the fund, and he is supported by Neil Smith and Siyuan Lin. Importantly, they are supported by a wider investment team with over 100 years of combined investment experience, a team at the very core of the investment process upon which the fund is established. The team approach is crucial. It orchestrates a challenging environment in which our managers test investment ideas through a form of peer review. It also creates a natural diversification because different people are interested in different things, but the core process means all these ideas are explored in the same way. Finally, work is not duplicated – trust in each other and the process breeds efficiency.
- David Harrison – Fund Manager
David fund manager of the Rathbone Greenbank Global Sustainability fund. David has a wealth of experience, and has been involved in Environmental Social Governance (ESG) mandates at Merrill Lynch and Hermes (he was actively involved in the day-to-day integration of ESG analysis into the fund’s management) on behalf of the BT pension scheme. He has also held positions at Goldman Sachs and Close Brothers. David joined Rathbones in June 2014, and holds the Investment Management Certificate and is a CFA (Chartered Financial Analyst) charter holder.
- Neil Smith - Research Assistant
Neil joined our unit trust team in September 2017 as a research assistant. He has been instrumental in developing the methodology upon which the fund is established, especially with regard to the use of the UN Sustainable Development Goals to adjudge positive corporate responsibility.
Rathbone Greenbank ESI research team –specialists responsible for the ethical research conducted for the fund
- Kate Elliot - Head of Ethical, Sustainable and Impact Research, Rathbone Greenbank
Kate is head of Rathbone Greenbank’s ethical, sustainable and impact research team. She oversees the development and implementation of the team’s sustainability assessment framework, analysing investments against a range of environmental, social and governance criteria. She also monitors emerging sustainability themes, sets priorities for Greenbank’s stewardship and engagement activities and has developed the team’s systems for the measurement and reporting of portfolio sustainability and impact performance. She joined Rathbones in 2007 after graduating from the University of Bristol with a masters in Philosophy and Mathematics.
- Sophie Lawrence – Stewardship and Engagement lead
Sophie joined Rathbone Greenbank in January 2020 as a senior ethical, sustainable and impact researcher and has recently moved into a new role as Greenbank’s Stewardship and Engagement Lead. She is responsible for the delivery of key engagement projects, building relationships with external partner organisations, and shaping Greenbank’s engagement strategy, priorities and reporting. She started her career at Barclays Bank in 2013 and most recently spent three years at KKS Advisors, a strategy consultancy in London where she led a team specialising in sustainable and impact investment. She holds an MSc from Imperial College London in Environmental Technology and a BSc in Geographical Sciences from the University of Bristol.
- Perry Rudd - Ethical, Sustainable and Impact Research Adviser
Perry joined Rathbones in 1999 after a career in the IT industry. He acts as adviser to Rathbone Greenbank’s ethical, sustainable and impact research team, which he headed until 2021. He was responsible for establishing the team’s proprietary research database and continues to be involved in its development. He also conducts thematic research into key responsible investment issues as well as monitoring corporate performance on environmental, social and governance matters. Perry was a founder member of Rathbone Greenbank in 2004.
- Emma Williams - Senior Ethical, Sustainable and Impact Researcher
Emma joined Greenbank in September 2022 and is responsible for analysing investments against a range of environmental, social and governance criteria, as well as for conducting thematic research into key responsible investment issues. Emma has over 10 years’ experience working in business valuation, sustainability and social investment, predominantly within professional services firms PwC and Grant Thornton. Emma holds a BSc (Hons) in Natural Sciences (Physics with Philosophy) from Durham University and is also a chartered accountant (ACA).
- Kai Johns - Ethical, Sustainable & Impact Researcher
Kai joined the Ethical, Sustainable & Impact Research Team in March 2019 after graduating from the University of Cambridge with a BA in Law. He responsible for assessing the social and environmental performance of companies.
- Katherine Farr - Assistant Ethical, Sustainable and Impact Researcher
Katherine joined the investment team at Rathbone Greenbank as an intern in March 2020 before moving into the ethical, sustainable and impact research team in January 2021. She is responsible for analysing investments against a range of environmental, social and governance criteria as well as assisting with engagement projects. She holds a BSc in Anthropology from Durham University and a CFA Institute Certificate in ESG Investing.
- Charlie Young - Assistant Ethical, Sustainable and Impact Researcher
Charlie joined Rathbone Greenbank in January 2021 after graduating from the University of Warwick with a BASc (Bachelor of Arts and Sciences) in Economic Studies and Global Sustainable Development. He is responsible for assessing the social and environmental performance of companies.
Rathbones Stewardship team
- Matt Crossman - Stewardship Director
Matt Crossman is the Stewardship Director for the Rathbones group. Overseeing the work of the Stewardship Committee, he ensures active voting at company AGMs, whilst also being the group leading on the integration of Environmental, Social and Governance (ESG) factors into the investment process. He also leads thematic engagement with companies on ESG issues, especially those undertaken via the UN backed through the Principles for Responsible Investment’s Collaboration Platform. Matt is a graduate of the University of Bristol where he studied law, with a particular interest in the administration of environmental law, and also has post-graduate qualifications in Sustainable Development theory and practice. He is a trustee of LoveBristol, and urban regeneration charity, and served on the board of the Ecumenical Council for Corporate Responsibility between 2007 and 2012.
The Stewardship team is led by Matt Crossman and comprises of:
- Archie Pearson: ESG & Stewardship Analyst, Voting Lead
- Tilia Astell: Junior ESG & Stewardship Analyst
- Kazuki Shaw: ESG & Stewardship Analyst
List of RI affiliations/memberships:
- Net Zero Asset Managers initiative (Rathbones).
- Long-term Investors in People’s Health – ShareAction – Signatory (Greenbank)
- Finance for Biodiversity Foundation – Member and signatory (Greenbank)
- Financing a Just Transition Alliance – Member (Greenbank)
- FTSE4Good Index - Constituent (Rathbones)
- Living Wage - Accredited (Rathbones)
- Payroll Giving Award - Accredited (Rathbones)
- PRI - Signatory (Rathbones) / Respondent (Rathbones)
- CDP - Signatory (Rathbones) / Respondent (Rathbones) / Investor Member (Greenbank)
- UKSIF - Member (Greenbank)
- ECCR (Ecumenical Council for Corporate Responsibility) - Member (Greenbank)
- Climate Action 100+ - Signatory (Rathbones)
- IIGCC - Member (Rathbones)
- Access to Nutrition Index - Signatory (Greenbank)
- BBFAW (Business Benchmark on Farm Animal Welfare) - Consultation / Contributor (Greenbank)
- B Team Responsible Tax Principles - Consultation / Contributor (Greenbank)
- FAIRR - Member (Greenbank)
- Just Transition on Climate Change - Signatory (Greenbank)
- New Plastics Economy Global Commitment - Endorser (Greenbank)
- Paris Aligned Investment Initiative - Participant (Greenbank)
- Access to Medicine Index (& AMR) - Participant (Greenbank)
- Workforce Disclosure Initiative Member - (Greenbank)
- Investor Alliance on Human Rights - Member (Greenbank)
- UK Stewardship Code - Commitment (Rathbones)
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