Fund Size: £3.00m

Total screened & themed / SRI assets: £15173.00

Total Responsible Ownership assets: £15173.00

Total assets under management: £15173.00

As at: 30/06/24

Overview

Filters

Fund information

Policy

The investment strategy is founded on the principle of stewardship. Stewardship relates to the ability and desire of the owners and leaders of companies to make good long-term decisions on behalf of the businesses they run while effectively balancing the interest of all stakeholders. The investment team takes a bottom-up and qualitative approach to finding and investing in companies which it believes are both of (a) high quality and (b) contribute to, and benefit from, sustainable development. To determine whether a company contributes to, and benefits from, sustainable development, the team will assess whether the activities of a company lead to positive social or environmental outcomes (see process description below).

An output of our process is that we avoid companies that do not contribute positively to sustainable development. In response to client requests we have documented our position on harmful and controversial products and services. You can read our position statement on our website.

The investment team has a strong conviction that such companies face fewer risks and are better placed to deliver positive long-term, risk-adjusted returns. The team believes that this approach will help to preserve client capital in volatile and falling markets allowing for the steady compounding of returns through economic cycles.

The investment team does not set quantitative thresholds for incorporating sustainability or ESG considerations, but rather evaluates a company’s track record and business model against the following quality and sustainability frameworks and makes qualitative judgements.

Quality assessment

The team will only invest in companies that have been through its quality assessment process. When assessing the quality of a company, they consider quality across three dimensions: management, franchise and financials.

Sustainability assessment

In assessing whether a company “contributes to and benefits from” sustainable development, the investment team will consider whether:

1. there is either a direct or enabling link between the activities of the company and the achievement of a positive social or environmental outcome;
2. any contribution to positive social or environmental outcomes has resulted from revenue or growth drivers inherent in the company’s business model, strategic initiatives that are backed by research and development or capital expenditure, or from the company’s strong culture and sense of stewardship e.g. for equity and diversity; and
3. the company recognises potential negative social or environmental outcomes associated with its product or services and works towards minimising such outcomes, e.g. a company that sells affordable nutritious food products in plastic packaging, but is investigating alternative packaging options.

The investment team documents and discloses its assessment and framework mapping of investee companies on its website through its Portfolio Explorer tool.

Process

Sustainability is core to our investment philosophy and integrated into our investment process. The investment team focus on the sustainability of each company’s products and services as well as operational ESG factors. We define development as sustainable if it furthers human development and has an ecological footprint that respects planetary boundaries. We focus on company stewardship and sound governance, avoiding businesses linked to harmful activities, and engaging and voting for change. All members of the investment team sign our Hippocratic Oath, pledging to uphold the principles of stewardship.

The sustainable investment objective of our portfolios is to invest in companies which both contribute to, and benefit from, sustainable development achieving positive social and environmental sustainable outcomes. All investee companies contribute to improving human development, while many also contribute to positive environmental outcomes.

Positive social outcomes

The team assesses positive social outcomes by reference to the our human development pillars. Stewart Investors has developed these human development pillars, by reference to, amongst other things, the UN Human Development Index.

Positive environmental outcomes

The team assesses positive environmental outcomes by reference to the climate solutions developed by Project Drawdown, a non-profit organisation that has mapped, measured and modelled over 90 different solutions that it believes will contribute to reaching drawdown – i.e., the point in the future when emissions stop increasing and start to steadily decline.

Our consideration of sustainability is holistic; it includes ESG but is more than ESG. For example, financial sustainability in the form of conservatism around the balance sheet, or the fair treatment of all stakeholders by management in the time of crisis. We believe these considerations to be as important to the sustainability positioning of a company as the product or service it sells.

When assessing a company’s sustainability we ask ourselves the following questions:

• Products and services - Do the products and services make a valuable contribution to sustainable development?
• Context - Can the company benefit from sustainability tailwinds and navigate headwinds?
• Company ethos - Do the culture and values embody sustainability and continuous improvement?
• Operational impact - Is the company trying to reduce impacts from its operations?

We avoid companies that do not contribute to sustainable development and we engage with companies to improve sustainability outcomes. We have established a materiality threshold for harmful or controversial activities at 5% of revenues – 0% threshold for manufacture of tobacco products and controversial weapons. Details can be found in our position statement available on our website.

An initial investment will only be made if the company contributes to, and benefits from, sustainable development. Sustainability must be core to each company’s business model and management must be committed to managing ESG risks and opportunities effectively.

Following a period of research and team discussion which results in the creation of a company report, analysts will add high conviction companies (based on quality and sustainability) to the focus list. These companies may stay on this list for a long time before they become positions in one (or more) of our strategies. Whether a company is on the focus list or in the portfolio will depend on an ongoing evaluation of the relative merits of the companies in the strategies and those on the list relating to quality, sustainability, valuation, long term growth prospects, and portfolio construction considerations relating to diversification.

We supplement our internal research around sustainability using Sustainalytics. At the end of each quarter, portfolios are checked to ensure companies meet global norms for best practices and raise no exceptions against our thresholds for harmful activities. We also receive controversy reporting from RepRisk.

Issues such as climate change, biodiversity and water, human rights and modern slavery, and diversity and inclusion are integrated into our investment selection and engagement and voting processes. Our approach to climate change is explained in detail in our recently published report. Our approach to biodiversity and water is reflected in our selection of companies that mitigate their impact on the natural environment or provide services/products that improve efficiencies. We have engaged on a number of related issues such as palm oil, deforestation, plastic waste and the use of harmful chemicals. Human rights and modern slavery are a risk throughout the supply chain of our investee companies. Our approach is to focus on quality companies that treat their employees well and manage the risks in their supply chain effectively. Where we identify problems we engage. Our recent collaborative engagement on conflict minerals in the semi-conductor supply chain is a good example of this. Our approach to diversity is explained in our statement and article about what we have done so far. We will provide updates on related activities on these issues, amongst others, in our annual report.

Resources, Affiliations & Corporate Strategies

Dialshifter

This fund is helping to ‘shift the dial from brown to green’ by…

• Investing in companies contributing to sustainable development
• Avoiding companies engaged directly in harmful and controversial products and services
• Engaging and voting to improve companies’ environmental and social policies and processes and practices (including leading collaborative engagements)
• Promoting transparency and accountability
• Researching and knowledge sharing on sustainable investing.

Our organisation is helping to support the Paris Climate Agreement and the Race to Net Zero by…

engaging with investee companies on their net zero targets and action plans. Creating transparent climate change reporting and sharing our learning with clients, prospects and the industry. Given our investment approach is committed to allocating capital to high-quality companies that are developing and implementing solutions to alleviate climate change and biodiversity loss, while not investing in fossil fuel companies, our portfolio are c.90% lower in carbon than their corresponding benchmarks, free of fossil fuel extraction companies, and have more than 50% of companies contributing to climate change solutions.

Literature

• Fund literature (including factsheet)
• Fund Policy
• Our Policies
• Hippocratic Oath
• Sustainable Fund Group Microsite

Last amended: 30/08/23 09:41