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Kames Ethical Corporate Bond A Acc (OEIC/Unit Trust)

Logo for Kames Ethical Corporate Bond A Acc
SRI Style: Negative Ethical
Fund Type: OEIC/Unit Trust
Region: UK
Asset Type: Fixed Interest
Launch Date: 28/04/2000

SRI / Ethical Overview

We launched our first ethical equity fund in 1989. Since then, we have broadened our responsible investment capabilities to include ethical corporate bond, cautious managed and sustainable equity funds. Today we are distinctive among fund providers in offering such a broad suite of responsible investment products. Here is a reminder of some of the characteristics of our responsible investment proposition:

Commitment to responsible investing

We have publicly reaffirmed our commitment to managing responsible investment portfolios and we are now also offering a sustainable investment solution. Today we manage £2.51 billion* in responsible investments and we aim to be a leader in responsible investment.

*Source: Kames Capital as at 31 December 2017.


Sustainable companies make good investments

Across both mainstream and specialist responsible investment portfolios we ensure that we identify and understand the key environmental, social and governance risks for the companies in which we invest for our clients. Evidence shows that companies which rank among the leaders and improvers in ESG achievements tend to outperform as investments over the long term.


Our approach to sustainability is disciplined, clear and transparent.

Our sustainability process seeks to leverage our excellent record in corporate governance and global equities to generate alpha by increasing our exposure to sustainably managed companies.  We will consider the environmental and social impacts of a company’s products, services and capital deployment as well as the quality of governance as a key part of the fundamental investment considerations.  We deploy a consistent and rigorous approach to our sustainability analysis and seek to communicate the rationale for our decisions with the market and clients in an open and transparent way.


Our responsible investment approach is highly regarded

A 2015 survey named Kames Capital as one of only four responsible investment providers to be used by over 70% of financial advisers which are members of the Ethical Investment Association. The Kames Ethical Equity Fund was also named as one of the top five sustainable investment funds in the UK.


Active stewardship of clients assets

Kames is a signatory to the UK Stewardship Code and the UN backed Principles for Responsible Investment (PRI). In the most recent PRI Annual assessment, Kames scored A+ for its overall approach to responsible investment and A+ for Active Equity Ownership.



SRI / themed / ethical assets under management – overview

  •  Fund Size (GBP):   £467 million (at 31 Dec 2017)
  • Total value of SRI/ethical/environmental/ social/ environmental or sustainability themed funds:   £2.51 billion (at 31 Dec 2017)
  • Total value of assets covered by any additional ESG or responsible ownership policy
  • Total assets under management:   £44.17 billion (at 31 Dec 2017)


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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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 Find funds that have policies in place that ensure they do not invest in companies that employ children.
  • Deforestation / palm oil policy 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.
  • Responsible supply chain policy or theme 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)

SRI Features

  • 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.
  • Norms focus Find funds that use internationally agreed standards, conventions and 'norms' to help direct where the fund can and cannot invest (e.g. the UN Global Compact, UN Sustainable Development Goals). Read fund literature for further information.
  • 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.
  • 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.
  • 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.
  • Responsible ownership / stewardship policy 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 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.)
  • Combines ESG strategy with other SRI criteria Find funds that have an ESG strategy (which is typically focuses on avoiding companies that post environmental, social or governance related risks) with additional criteria such as positive and/or negative screens or engagement/stewardship strategies.
  • Invests in social housing Find funds that have significant investment in social housing or similar assets

Corporate Activity

  • 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.
  • 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 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.
  • PRI signatory Find fund management companies that have signed up to the UN backed 'Principles of Responsible Investment' initiative.
  • UKSIF member The fund management company is a member of UKSIF - the UK Sustainable Investment and Finance association
  • Fund EcoMarket sponsor/partner 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 Involved in collaborative institutional investor initiatives that are encouraging companies to address climate change (ie reduce carbon emissions)
  • Encourage board diversity eg gender Fund managers encourage the companies they invest in to have more diverse board structures (eg more women on boards)
  • Encourage carbon / GHG reduction 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 The fund management company directly employs specialist ESG/SRI/sustainability researchers or analysts
  • Use specialist ESG/SRI/sustainability research companies The company makes use of expert external research

SRI / Ethical Policy

We apply a negative screen which means that we screen companies out of the potential investment universe based on certain unacceptable activities. Because we apply stringent screening criteria, the fund is considered ‘dark green’.

We do not apply positive screening criteria like some other funds. The fund may invest in themes that could be considered socially responsible, like alternative energy or social housing companies, but only if these companies pass our negative screens. For example, a British Telecom stock/issue would be accepted by positive screening on the grounds of the firm making a positive contribution to society. Conversely, our negative screening process rules out this firm due to the fact that it provides strategic communications equipment to the military.

We aim for transparency in our screening process. This means it is easy for clients to understand the types of companies we exclude. Our underlying philosophy is to avoid companies that cause significant negative effects in society or the environment.

We use both external screening databases and in-house research to ensure the companies in our ethical universe are suitable for investment. We adopt a negative approach that screens companies out if they engage in certain unacceptable activities.


Our ethical exclusion criteria are as follows: (These Negative Screens exclude companies which:)


Animal welfare

  • Provide animal testing services or manufacture or sell animal-tested cosmetics or pharmaceuticals.
  • Have any involvement in intensive farming.
  • Operate abattoirs or slaughterhouse facilities.
  • Are producers or retailers of meat, poultry, fish or dairy products or slaughterhouse by-products.


  • Manufacture armaments, nuclear weapons or associated strategic products.

Nuclear power

  • Own, operate or provide critical services to nuclear facilities.


  • Are involved in activities which are commonly held to be environmentally unsound, including manufacturers of PVC, ozone depleting chemicals and hazardous pesticides.
  • Are in breach of internationally recognised conventions on biodiversity and companies in energy intensive industries which are not tackling the issue of climate change

Political donations

  • Have made political donations of more than £25,000 in the past 12 months

Genetic engineering

  • Have patented genes


  • Have investments in betting shops, casinos or amusement arcades accounting for more than 10% of their total business.


  • Derive more than 10% of their total business through involvement in brewing, distillation or sale of alcoholic drinks.


  • Derive more than 10% of their business from the growing, processing or sale of tobacco products.


  • Provide adult entertainment services.


  • Are corporate or international banks with exposure to large corporate or Developing World debt.

Oppressive regimes

  • Operate in countries with poor human rights records, and which have no established management policies on human rights issues.


Ethical screening process


Step 1 - In order to screen based on these criteria, we use an independent ESG research platform, EIRIS Portfolio Manager. This process involves inputting our potential investible universe (the iBoxx Sterling Non-Gilt index) from which we will eliminate the majority of companies that we believe are inappropriate for our ethical vehicles, based on the criteria provided above. We do not screen out whole sectors, but some may largely be excluded because of the nature of their business activities.


Step 2 - Although our screening criteria are clear and explicit, certain ethical issues are not black or white. With over 25 years’ experience in managing ethical investments, we can consider these issues appropriately when they arise. Our pragmatic approach to screening means that we apply an additional in-house screen. This allows us to screen on issues not adequately captured by the EIRIS platform or are particularly recent (e.g. a mergers/acquisitions between an acceptable and unacceptable business will often result in the combined entity being unacceptable for investment).


Step 3 - Finally, we ensure that every bond left in the investible universe adheres to our underlying ethical philosophy, to avoid companies that cause significant negative effects in society or the environment. For example, a payday lender may pass the EIRIS screen and our in-house screen based on its business conduct, however it does not fit into the ethos of our ethical investments.

Once the ethical universe has been identified, our investment managers invest according to the investment process, using only those companies deemed acceptable for inclusion in the fund.


Our approach to socially responsible investing


As active investors we believe it is our responsibility to encourage companies to maximise investment returns through good governance, including respect for society and the environment. As a significant shareholder in many companies, we are well-placed to actively promote best-practice in environmental, social and governance (ESG) matters.

Our investment managers and ESG Research team work together to monitor and engage with the companies in which we invest. This activity covers all asset classes, including equities, fixed income and property.


We believe that our commitment to ESG integration brings three main benefits for our clients:


Deepens our understanding -  Our focus on ESG means we better understand the environments in which companies operate. This helps us to quantify risks and opportunities.


Strengthens our conviction - Kames Capital is an active investment manager with a fundamental, research-driven approach. Our ESG analysis supports the management of concentrated, high-conviction portfolios.


Promotes a long-term focus - Evidence shows that companies which rank among the leaders in governance and sustainability are more likely to outperform as investments over the long term. Integrating ESG factors in our research helps us to avoid short-term distractions and stay focused on the long-term prospects for companies and sectors.


Our Responsible Investment Policy provides a framework for overseeing the performance of the companies in which we invest. In particular, it deals with our responsibilities, as set out by the Financial Reporting Council’s UK Stewardship Code and the Japanese Stewardship Code, although we endeavour to apply the same principles to all client holdings regardless of their listing or domicile.

Further details of our approach to responsible investment are available on our website at www.kamescapital.com

Resources, Affiliations & Corporate Strategies

Our in-house ESG Research team is responsible for the ethical screening and the analysis of environmental, social and governance (ESG) issues. The ethical screening process is undertaken independently from our investment managers. Our ESG Research team focuses on the screening and research, freeing our investment managers to focus solely on stock selection and portfolio construction.

We use a range of data sources for ESG research purposes and these resources have increased significantly in the last few years as the quality of the data available has improved. Resources currently include:


  • Bloomberg
  • MSCI ESG Manager – company ESG research platform
  • EIRIS Portfolio Manager – company ESG research platform
  • ISS Quickscore – Corporate governance research
  • Empirical Research – ESG ratings data
  • ISS ProxyExchange – proxy voting research and processing
  • The Investment Association (IA) IVIS proxy voting research service
  • BoardEx - corporate board and remuneration database
  • Specialist databases, such as UN backed Principles for Responsible Investment (PRI), Carbon Disclosure Project (CDP) and Extractives Industry Transparency Directive (EITI)
  • Specialist research from brokers and academics
  • Various specialist journal subscriptions


A strong relationship exists between our ESG Research team and our investment managers, which enables material non-financial information to be incorporated into our investment processes. ESG research reports produced by our ESG Research team sit alongside all the other existing investment research undertaken by our investment managers on a given security. The ESG Research team also provide relevant news-flow and commentary on ESG issues to our investment managers that they might not receive from other sources. 

Our investment managers consider ESG research alongside other relevant financial and non-financial factors in the investment decision-making process. The importance that the investment manager attaches to ESG issues is in proportion to their ability to influence security prices.

As a subsidiary of the Aegon NV Group, Kames Capital contributes to and participates in Aegon’s broader responsible investment activities. As an active member of both the UK Investment Association’s Governance and Engagement Committee and its Sustainability and Responsible Investment Committee we are closely involved in formulating best practice for responsible investment.

Kames Capital is a member of or supports a range of other responsible investment initiatives, including the UN-backed Principles for Responsible Investment, the UK Sustainable Investment and Finance Association, the Extractives Industry Transparency Initiative, Carbon Disclosure Project, Climate Action 100+ and the Farm Animal Investment Risk and Return initiative. Our participation in these initiatives helps us to deepen our knowledge and maximise our influence on ESG issues.


Important Note

For Professional Clients only and not to be distributed to or relied upon by retail clients.

The principal risk of this product is the loss of capital. Please refer to the KIID and/or prospectus or offering documents for details of all relevant risks.

All data is sourced to Kames Capital unless otherwise stated. The document is accurate at the time of writing but is subject to change without notice.

Kames Capital plc is authorised and regulated by the Financial Conduct Authority.


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