As at: 30/09/21

Contact: adam.kelly@edentreeim.com

Overview

Filters

Fund information

Policy

The Fund seeks to avoid investment in certain areas such as companies which have a material involvement (10% or more) in alcohol and tobacco production, conventional weapon production, gambling, publication of violent or explicit materials, intensive farming, fossil fuel exploration and production and high interest (sub-prime) lending.

The Fund will seek to avoid companies with material operations in oppressive regimes. The Fund has a proprietary means of assessing oppressive regime risk, and operates this on a case by case basis.

It will also seek to avoid companies that have exposure to the manufacture of unconventional weapons where these are defined as nuclear, biological and chemical weapons, land mines and cluster bombs. Finally, the Fund will seek to avoid companies using animals to test cosmetic, beauty or household products. It will invest in pharmaceuticals companies that may conduct animal testing but will encourage the adoption of the 3R principles: refine, reduce, and replace.

Our responsible and sustainable screening captures the quality and strength of a company’s approach to sustainable business. This includes assessing a diverse range of indicators including environment and climate change, conflict minerals, custody of supply in raw materials sourcing (e.g. timber) and pollution etc. By way of example when specifically assessing corporate sustainability as it relates to climate change we would analyse key indicators such as emissions disclosure, how targets are set, whether they are science based and ambitious enough to demonstrate commitment to a low carbon economy and whether the company is providing solutions that support climate resilience, mitigation and / or adaptation.

The Fund favours companies that follow good Business Ethics, Corporate Governance, Employment & Labour practices, Environment and Climate Change Management, Human Rights, and Community Relations and is particularly positive on companies that contribute to Education, Health & Wellbeing, Social Infrastructure and Sustainable Solutions.

Process

Idea Generation – Investment ideas originate from a variety of sources including sell-side analyst research from Investment banks, investor roadshows, external credit ratings research providers such as Moody’s, alongside internally-generated research and thematic screens in developing investment theses.

Credit Analysis – Applying a long-term horizon, we then set out to conduct in-depth analysis to gauge the ability and willingness of an issuer to repay outstanding debt obligations. We seek to identify high quality companies with sound financials, solid balance sheets and good growth prospects. Bond indentures, sustainable debt frameworks and peer comparisons are conducted to ensure that valuation metrics adequately reflect inherent credit and ESG risks. Credit research is typically undertaken in tandem with responsible screening, with the results both being presented and discussed by the relevant individuals and or the Investment team at large. We have access to global credit ratings research from Moody’s, utilise sell-side analyst research from Investment banks, independent economic research providers such as Oxford Economics along with other analytical tools including Bloomberg. External research is considered alongside internally-generated investment analysis in forming our investment views on a macro-economic, sector- and or credit-specific level.

Portfolio construction – Following on from the investment decision, suggested transactions are assessed within the context of the overall portfolio in terms of fit, liquidity, risk and conviction.

We seek to vary average duration and asset allocation positioning based on the prevailing economic outlook and market conditions in line with the investment strategy. For instance, were yields to rise to a level at which we feel would compensate investors for the underlying duration risks, the Fund’s duration would be lengthened and vice versa.

Review – Portfolio holdings are typically subject to ongoing reviews including performance, risk analysis, need for engagement, market outlook and with respect to asset and sector allocations. Active engagement is particularly integral to the review process and enables for the optimisation of risk, return and impact. We routinely seek to engage with issuers directly and via collaborative initiatives to catalyse change and ensure desired direction of travel on all ESG factors in addition to the financial performance of the company.

We accept that circumstances change and therefore revisit positions to ensure that they continue to deliver on the Fund’s objectives.

Resources, Affiliations & Corporate Strategies

EdenTree’s Head of Responsible Investment Carlota Esguevillas reports into EdenTree’s Chief Investment Officer Charlie Thomas, who is part of EdenTree’s Executive Committee. The Executive Committee and ultimately the EdenTree Investment Management Board have responsibility for oversight for EdenTree’s ESG Processes.

The RI Team is part of the wider Investment Team, and provides the specialist in-house resource for ESG screening, engagement, voting and thought leadership. The Team sit together in our London office and there is ongoing interaction between them, whether they are discussing a company screen, upcoming webinar, potential expert briefing for our website or evolving regulatory requirements.

• Carlota Esguevillas, Head of Responsible Investment – Carlota is responsible for leading the Team. Prior to being promoted at the start of this year, Carlota led EdenTree’s work on social topics such as human rights, diversity and workforce issues.
• Amelia Gaston, Senior Responsible Investment Analyst – Amelia leads EdenTree’s work environment and climate change issues.
• Hayley Grafton, Senior Responsible Investment Analyst – Hayley leads on the firm's approach to corporate governance and proxy voting.
• Cordelia Dower-Tylee, Responsible Investment Analyst – Cordelia leads EdenTree’s environmental work, with an emphasis on water, and supports the company’s work on governance.

Our basic ESG risk analysis is provided by our data providers, ISS ESG & Sustainalytics, who flag potential violations of global norms. In addition, if any of our holdings breach our screens we are immediately notified by our data providers and can then review the breach with the ultimate sanction of divestment if we deem it necessary. Furthermore, periodically stocks and instruments held within our funds are reviewed by the RI Team to ensure that they remain suitable, whilst the team monitors any negative news flow, engaging with companies to provide clarity and assess the risk level involved.

Our RI team conducts additional research and analysis from publicly available materials including:

• Company literature (annual reports, websites and sustainability reports)
• Industry or trade body publications and websites
• NGO reports and websites e.g. Banktrack
• Government and academic research
• Investor benchmark initiatives

Edentree plays a leading and longstanding role across multiple organisations. They are signatories, members and subscribers to a number of industry partnerships and initiatives including:

Signatory organisations

• Principles of Responsible Investing (PRI);
• UK Sustainable Investment & Finance Association (UKSIF);
• Global Impact Investing Network;
• UK Stewardship Code FRC;
• CDP (formerly Carbon Disclosure Project);
• Institutional Investors Group on Climate Change (IIGCC);
• Farm Animal Investment Risk & Return (FAIRR);
• Financing a Just Transition Alliance;
• World Benchmarking Alliance;
• Workforce Disclosure Initiative (WDI);
• Access to Nutrition Initiative;
• Access to Medicine Initiative;
• Investor Initiative on Hazardous Chemicals

Collaborative engagement initiatives

• PRI Advance Human Rights - Human Rights;
• IIGCC Banks Working Group - Climate Change;
• Climate Action 100+ - Climate Change;
• Nature Action 100+ - Biodiversity;
• Investor Action Group on AMR - Water & AMR;Valuing Water Initiative - Water;
• Investor Initiative on Hazardous Chemicals - Water & Chemicals;
• Microfibre pollution initiative - Plastics Pollution;
• 30% Club Investor Group - Diversity;
• WBA – Digital Inclusion Group - Digital rights;
• Good Work Coalition - Good work;
• Votes Against Slavery - Modern slavery

EdenTree believes these partnerships signals their commitment to having an active and positive role in the investment community. Collaborations are critical to driving change, whilst learning from expert sources allows them to provide more for their clients.

EdenTree also sits on UKSIF’s Analyst Committee, which advises on the development of UKSIF’s knowledge sharing programme on evolving sustainability issues. They also sit on the PRI’s Circular Economy Reference Group, which explores how investors can better integrate the principles of a circular economy into investment processes. EdenTree’s CIO, Charlie Thomas, sits on the IA’s Sustainability and Responsible Investment Committee.

Responsible Investment Panel Review

In addition to the review provided by the RI Team, this Team itself has external oversight from an independent Advisory Panel of eight senior industry practitioners with expertise in the field of responsible investment.

The EdenTree Responsible Investment Advisory Panel exists to provide advisory oversight of our ESG processes. They may advise and inform but not mandate a course of action. For assurance purposes, we view the Panel as providing external independent assurance of our process and RI activity. Our Group Internal Audit function also plays a role in reviewing and certifying key internal controls, risk functions and other stewardship processes such as proxy voting. The Executive Committee and ultimately the EdenTree Investment Management Board have responsibility for oversight.

The Panel is made up of a number of industry experts, including:

• Will Oulton – Panel Chair, (former Head of RI at First Sentier)
• Mike Barry – Former Director of Sustainable Business
• Verity Mitchell - Independent Consultant, (former Director of Utilities for HSBC Global Research)
• Julian Parrott – Client Member, Ethical Futures
• Sue Round – Chair of EdenTree Investment Management ACD Board and former CEO
• Annette Ferguson – Independent Consultant (former Head of Sustainable Business at Vodafone
• Paul Simpson OBE – Strategic Advisor (former CEO of CDP

Literature

• Fund literature (including factsheet)
• Fund Policy details
• Insights

Last amended: 08/02/24 03:31