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Royal London Investment Grade Short Dated Credit Z (OEIC/Unit Trust)

SRI Style: Negative Ethical
Fund Type: OEIC/Unit Trust
Region: UK
Asset Type: Fixed Interest
Launch Date: 07/12/2015

SRI / Ethical Overview

The Fund invests predominantly in investment grade sterling bonds, of which these will be primarily short dated, which meet predefined ethical criteria. The policy of the Fund considers all of the following ethical issues: armaments and tobacco.


SRI / themed / ethical assets under management – overview


  • Fund Size (GBP):   £348.60m as of 31 May 2017.
  • Total value of SRI/ethical/environmental/ social/ environmental or sustainability themed funds under management:   £11,793.22m as of 31 May 2017.
  • Total value of assets covered by responsible ownership policy:   £1,416.04m as of 31 May 2017        (Please note that this figure only includes our sustainable range, however, RLAM’s Responsible Investment Policy will detail how this is an over-arching approach across most of the firm’s assets).
  • Total assets under management:    £104,507.32m as of 31 May 2017.


SRI Policies (Primary strategy in bold)

  • 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.
  • 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.

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.
  • 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.
  • Available via an ISA Find funds that are available via a tax efficient ISA product wrapper

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.
  • 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'.
  • 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.
  • PRI signatory Find fund management companies that have signed up to the UN backed 'Principles of Responsible Investment' initiative.

SRI / Ethical Policy

Our ethical investment process begins with screening for eligible investments, which is conducted by specialist independent consultancy EIRiS (Ethical Investment Research Services). With over 25 years’ experience, EIRiS is a leading provider of research into the environmental, social and governance (ESG) and ethical performance of companies. RLAM’s ethical framework combines the avoidance of companies involved in excluded activities with the identification of best of breed companies in permitted sectors.


Companies that generate over 10% of their turnover from either one or a combination of the following categories are excluded:


Armaments:        manufacturing armaments or nuclear weapons, or associated strategic products

Tobacco:             growing, processing or selling tobacco products


If a company breaches this threshold, then it is likely that that company’s involvement in that excluded sector is a noteworthy part of their business and strategy.


Also, this threshold is deemed to be realistic and appropriate in terms of assessing a company, given that it may not be possible to always pinpoint the exact turnover derived from an excluded activity. This threshold ensures that a minimum of 90% of each holding meets the ethical criteria.


There is no static list of firms and organisations eligible for investment by the Fund.  The ethical criteria screening process is ongoing and implemented pre-trade as part of the rigorous RLAM in-house credit analysis process coupled with independent ethical screening of issuing companies (and other companies that we request adhoc) carried out by the EIRiS. As per all of RLAM’s unit funds, weekly the Fund managers will sign off on the portfolio construction certifying that it adheres to the investment and borrowing powers as set out in the prospectus, and the Royal London Unit Trust Managers (RLUTM) Executive Committee will review the ethical criteria themselves on a quarterly basis.

Resources, Affiliations & Corporate Strategies

As previously outlined, our ethical investment process screening is conducted by specialist independent consultancy EIRiS (Ethical Investment Research Services). With over 25 years’ experience, EIRiS is a leading provider of research into the environmental, social and governance (ESG) and ethical performance of companies.


When researching a bond we typically use the following sources of corporate information:


  • Audited and unaudited financial accounts
  • Ratings reports/analysis
  • Company meetings/presentations
  • Third party equity/credit research
  • Specific investor reports
  • Barclays Live – key tool for relative value assessment
  • ·Regulatory News Service – ‘Investigate’
  • The Credit team employs a range of models, both external and bespoke.


The Credit team also uses a number of external providers of information for ongoing surveillance. Principally these are:


  • Bloomberg, which is used for bond analytics and descriptive data, including bond documentation and access to equity research reports.
  • S&P, through their ‘Ratings Direct’ and ‘Capital IQ’ services. Ratings Direct provides up to date access to bond rating reports and research and other company and sector financial data across the rated bond universe and Capital IQ provides access to reported financial information of thousands of listed and unlisted companies. Usefully, we are able to embed the financial data provided by Capital IQ into bespoke financial models that provide inputs that are relevant to RLAM’s evaluation of credit. This represents very time effective and high quality provision of credit ratios to enhance the decision making process in higher profile areas of the corporate bond market.
  • Barclay’s Live database to help assess relative value across issuers and sectors and the production of issuer credit curves.


This external data is used to supplement RLAM’s research effort and, in particular, enables our Analysts to focus their primary analysis and financial modelling on lower profile corporate bonds that we consider to be less extensively researched by the wider market. Maintenance of research does not follow a prescriptive formula but will typically tend to follow the reporting timetable of our bond issuers (e.g. RMBS/covered bonds – monthly; CMBS – quarterly; corporates – semi-annual) supplemented by the team’s ongoing focus on market developments and the formal alerts outlined above. Whilst we believe a flexible and interactive approach is optimal and practical given our team size, RLAM has a large database of relevant and targeted credit information that can be accessed by all members of the team effectively.


RLAM is well served by the sell-side community, particularly in the secured space, as our counterparties know the level of embedded knowledge across the team, both in terms of stocks and underlying client requirements, and the likelihood of receiving a prompt evaluation of any proposal.


It is worth re-emphasising that, whether primary inputs have been internally derived or otherwise, we will never delegate the final decision as to whether a bond is selected in our portfolios, given our very different philosophical approach to valuation. In addition, as previously discussed, our team structure and overlap between the research and Fund manager functions ensures that the stock selection process outlined above is not undertaken by any individuals operating in isolation from the rest of the team. By contrast, this process benefits from continuous and ongoing interaction between the whole team, allowing all members of the team, with different and complementary skills and experience, to contribute to investment decisions.



RLAM Voting Policy:   



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