EF Tellsons Endeavour (OEIC/Unit Trust)
SRI / Ethical Overview
The heart of the Endeavour investment process has always been the search for sources of return that the managers feel can be sustained over the long-term, from businesses that they believe can be relied on to deliver to expectations, the most dependable. These businesses may just as likely be operating in mature, regulated low growth sectors as innovative, dynamic secular growth sectors and displaying strong brand, technology, price, or cost leadership on the one hand, with perhaps high barriers to entry, regulatory frameworks and highly disciplined balance sheet management on the other. Seeking out the consistency of dividends, the contractual security of bond coupons and consensus estimates for steady growth - at least as a starting point - the Endeavour process naturally captures a lot of businesses where management strategy and culture reflect the highest operational standards. Amongst such standards, environmental, social and governance (ESG) issues rank increasingly prominently and often distinguish these companies as leaders in their fields. The managers of the Endeavour Fund do not negatively screen for ESG investments based on a sense of historical or subjective ethical judgement; rather the starting point for them is that company management set their goals and responsibilities prioritising the interests of the widest stakeholder community and, with pragmatism, should set the standard in their sectors for how they go about it.
For example, the managers do not consider the oil and gas sector as unethical or uninvestible per se; far from it, it would in their opinion actually be unethical to withhold capital investment from an industry that is today the mainstay of affordable energy and the basis of 100 years of relief from poverty and improved living standards for billions, whilst progressively shifting their operations towards cleaner fuels and investing in the development of the next generation of sustainable, renewable energy sources.
Likewise, it is not all carbonated drink and snack food makers who contribute to the inexorable rise in obesity and diabetes rates globally; some are leading the way with healthier ingredients, lower sugar content and replacement products and in educating their customers into new consumption habits. In another example, defence companies in and of themselves may not be considered unethical investments as defence capability in our opinion has always played a vital part in the framework of international peace. That said, some defence companies and some defence products supplied to some countries may well be considered unethical, in the managers’ opinion, and avoided as investments.
We are fortunate in western democratic countries to have the structures of government, institutions and accountability to trust that what is legal in our societies is broadly and increasingly ethical. We believe our investment and corporate engagement process makes a modest but relevant contribution to that evolution: seeking out the probable rather than speculating the possible - a philosophy of stewardship and persistence rather than outright performance - Endeavour naturally appears to capture a lot of ESG characteristics: by country and by capitalisation, by dividend and by growth, by conviction and by success, the Endeavour Fund appears to have captured more ESG factors than over 90% of the Morningstar rated fund universe in the years since the service was launched in 2015……probably one of the most naturally sustainable funds available in the market today, it is ESG that seems to have found Endeavour.
SRI Policies (Primary strategy in bold)
- Tobacco production avoided Find fund options that exclude manufacturers of tobacco (or related) products. Strategies vary and funds may or may not invest in retailers of such products (e.g. supermarkets or hotels). See fund information for further detail.
- Invests in clean energy/renewables Funds that hold companies in the clean energy and renewable energy sectors (at the time research was supplied). Fund strategies vary, in particular the proportion of investment in these areas may vary significantly. Check fund literature for details.
- Child labour exclusion Find funds that have policies in place to ensure they do not invest in companies that employ children.
- ESG integration strategy Find funds that factor in 'environmental, social and governance' issues as part of their investment decision making process. A focus on 'ESG' typically means a fund is carrying out additional research to help reduce ESG related risks. Strategies vary. See fund literature for further information.
- Encourage board diversity e.g. gender Fund managers encourage the companies they invest in to have more diverse board structures (e.g. more women on boards)
- Favours cleaner, greener companies Funds that aim to invest in companies with strong or market leading environmental policies and practices. Strategies vary - in particular the balance between 'financial' aspects and environmental benefits. Some may invest substantially in solutions or 'positive impact' companies - others may invest in more conventional companies providing certain environmental criteria are met. See fund information for further detail.
- 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.
- Positive selection bias Find funds that focus on finding and investing in companies with positive / beneficial attributes. This strategy can be applied in addition to exclusion criteria and engagement/stewardship activity.
- 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 funds that consider both the 'positive' and 'negative' aspects of company behaviour and make balanced, considered decisions as part of their investment approach. May apply to a range of different issues and policy areas.
- Over 50% large cap companies 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.
- 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.
- Limited/few ethical exclusions* Find funds with few exclusions - typically for example exclude tobacco or companies that breach commonly adopted standards or norms such as the UN Global Compact.
- Available via an ISA (OEIC only) Find funds that are available via a tax efficient ISA product wrapper.
- Combines ESG strategy with other SRI criteria Find funds that have an ESG strategy (which is typically focused on avoiding companies that pose environmental, social or governance related risks) with additional criteria such as positive and/or negative screens, themes and stewardship strategies.
- Invests mostly in large cap companies Find funds that have SRI strategies and focus their investment stock selection on larger companies. (e.g. over circa £5-£10bn)
- Positive social impact theme Find funds that specifically state that they aim to deliver positive social (i.e. people related) impacts and/or outcomes.
- ESG weighted / tilt Find funds that invest more heavily in those that have higher ESG ratings/standards or scores and less heavily in companies with lower ESG ratings. Where this is central to a fund's strategy you should expect it to invest in most sectors. Strategies vary.
- Sustainability focus Find funds which substantially focus on sustainability issues
- Encourage higher ESG standards through stewardship activity A core element of these funds will aim to encourage higher ESG standards through responsible ownership / stewardship / engagement /voting activity
- Encourage transition to low carbon through stewardship activity A core element of these funds will aim to encourage the transition to lower carbon activities through responsible ownership / stewardship / engagement / voting activity
- Encourage more sustainable practices through stewardship A core element of these funds aim to encourage higher sustainability standards across business practices through responsible ownership / stewardship / engagement / voting activity
- Focus on ESG risk mitigation A major focus of these funds is the careful management of environmental, social and governance (ESG) related risks - typically by avoiding or being underweight in companies seen as posing major risks in these areas (i.e. not necessarily by using themes, exclusions etc).
- Intended for investors interested in ESG / sustainability Finds funds designed to meet the needs of individual investors with an interest in sustainability, ESG, ethical or related issues. (We would expect almost all funds on this database to tick this box - however can be useful to confirm this for regulatory reasons).
- ESG/SRI engagement (AFM company wide) Find fund management companies that actively encourage higher 'environmental, social and governance' and/or 'sustainable and responsible investment' practices across investee companies - typically where the aim is to encourage positive change that is aligned with the best interests of investors. Strategies vary. See additional information and options.
- Integrates ESG factors into all/most fund research Find fund management companies that consider environmental, social and governance (ESG) issues when deciding whether or not to invest in a company for all / almost all of their funds and other assets. This is increasingly seen as part of sound risk management.
- Vote all* shares at AGMs/EGMs (AFM company wide) Find fund managers that 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' demonstrating their support for or disagreement with management policy. (*situations can legitimately, occasionally occur where voting proves impossible, but in principle all shares should be voted.)
- In house responsible ownership/voting expertise Find fund management companies that employ people to steer and support fund managers in voting shares at company AGM's and EGMs in ways that are consistent with encouraging higher ESG/sustainability standards.
- Responsible Ownership/ESG a key differentiator (AFM co. wide) Find fund managers that consider responsible ownership and ESG to be a key differentiator for their business.
- Review(ing)carbon/fossil fuel exposure for all funds-AFM co wide 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. (Typically with reference to climate change.)
- Boutique/specialist fund management company Find fund management companies that are smaller or specialise in particular areas - notably, ideally ESG related. Strategies vary.
- Encourage responsible corporate taxation (AFM company wide) Find fund management companies that are working with the companies they invest in to encourage more responsible corporate taxation.
- Encourage carbon / greenhouse gas reduction (AFM company wide) Find fund management companies that are working with the companies they invest in to encourage reductions in carbon dioxide and other greenhouse gas emissions.
- Use specialist ESG/SRI/sustainability research companies Find fund management companies that makes use of expert external research companies. This can help deliver specialist expertise and means resources are pooled with other investors.
- Full SRI policy information on company website Find companies that publish information about their sustainable and responsible investment strategies on their company website.
- Responsible ownership / stewardship policy (AFM company wide) Finds fund management companies that have 'responsible investment ownership' - also known as 'stewardship' policy - that covers all investments. Stewardship typically involves encouraging higher ESG standards through voting and dialogue.
SRI / Ethical Policy
Resources, Affiliations & Corporate Strategies
The managers of the Endeavour Fund are always focused about the ESG profile of the companies they invest in, by looking for specific ESG material available and also by contacting the companies directly to gather more information about specific topics. In addition to that, the managers also use the Sustainalytics website to enhance ESG data on the companies held (which are also periodically checked) and when considering an investment in a new company.