Total assets under management: £86872.77

As at: 31/03/24

Contact: Ryan Grey, Sales - Intermediary (UK) ryan.grey@bnymellon.com

Overview

Filters

Fund information

Policy

The investment process leverages the expertise and resources of Newton’s broader investment team. The Fund is constructed using a fundamental, security selection process.

We make direct investments in securities providing investors with a direct line of sight as to what is held by the Fund. Investment decisions are predicated on two key factors:

• an investment’s eligibility based on the Fund’s SRI screening criteria; and
• the requirement for attractive valuation and upside potential as identified through our multidimensional research, which includes use of themes and taking into consideration material and relevant ESG factors*. We would never purchase a security simply for its ethical/ ESG credentials, as we believe maximising returns and delivery of the Fund’s investment objectives is key.

The Fund is screened using both sectoral-based exclusions and ethical threshold-based exclusions. A sectoral-based exclusion will effectively exclude any company within a given sector, whereas a threshold-based exclusion will look-through to a company’s revenues to identify earnings from the respective activity. In both cases, compliance with the Fund’s SRI screens is monitored through Newton’s order management system (OMS). Sector exclusions are implemented directly into the OMS using industry classifications from market data providers.

*ESG can be one of many inputs into the fundamental analysis. Newton will make investment decisions that are not based solely on ESG analysis. Other attributes of an investment may outweigh ESG analysis when making investment decisions. The way that material ESG analysis is assessed may vary depending on the asset class and strategy involved. As of September 2022, the equity investment team performs ESG analysis on equity securities prior to their recommendation. ESG analysis is not performed for all fixed income securities. The portfolio managers may purchase equity securities that are not formally recommended and for which ESG analysis has not been performed. Analysis of themes may vary depending on the type of security, investment rationale and investment strategy. Newton will make investment decisions that are not based on themes and may conclude that other attributes of an investment outweigh the thematic structure the security has been assigned to.

Process

Constructing the Newton SRI Fund for Charities

The Fund aims to strike the balance between providing an investment solution focused on capital growth and income generation and being firmly aligned with SRI standards for charity investors. It aims to achieve a combination of capital growth and income through a multi–asset portfolio screened against SRI criteria. Our focus is very much on delivering attractive total returns for our clients – we recognize that ethical investors seek return, like any other investors. Where this Fund differs from non-screened funds is that we aim to deliver that return within the constraints of a relevant
and dynamic ethical policy which reflects the needs of our investors.

The SRI criteria for the Fund aims to meet the requirements of a broad range of charities and was established in response to feedback from our investors and other charities. The Fund is screened against a range of negative criteria, reflecting these areas of concern and interest for our charity investors. The full criteria are mentioned below:

• Tobacco production, distribution and support
  • Over 10% of turnover from production or distribution of tobacco.
  • Over 10% of turnover from support to the tobacco industry.
• Alcohol production and distribution
  • Over 10% of turnover from production or distribution of alcoholic beverages.
• Gambling
  • Over 10% of turnover from gambling operations or products.
• Pornography
  • Over 3% of turnover from pornography and adult entertainment services.
• Manufacture of products tested on animals and the production or sale of fur
  • Any turnover from production or sale of fur products.
  • Over 10% of turnover from the manufacture of cosmetic products tested on animals.
  • Over 10% of turnover from the manufacture of non-cosmetic products that are tested on animals.
• Environment
  • No investment permitted in a company that has any critical severity controversies; is considered a persistent offender; and is considered non-communicative in respect of Energy-related controversies. This covers the following topics: energy consumption thresholds, greenhouse gas emission thresholds, energy, climate change and air pollution.
  • No investment permitted in a company that has any critical severity controversies; is considered a persistent offender; and is considered non-communicative in respect of Biodiversity-related controversies. This covers the following topics: biodiversity and/or animal testing, including exploitation of sensitive eco-systems, and farm animal welfare.
• Developing world
  • Broken International Code on Marketing of Breast Milk Substitutes
• Human rights
  • No investment permitted in a company that has any critical severity controversies; is considered a persistent offender; and is considered non-communicative in respect of Human Rights-related controversies. This covers the following topics: Fundamental Human Rights, Fundamental Labour Rights, Non Discrimination, Child and Forced Labour.
• Military
  • Over 10% of turnover from production of conventional weapons.
  • Over 5% of turnover from production of key parts or services for conventional weapons.
  • Produces cluster munition systems.
  • Not addressed allegations or indications of involvement in anti-personnel landmines.
• Reproductive medicine
  • Production of abortifacients.
  • Provision of abortion-related services.
• Climate change (fossil fuels)
  • Over 10% turnover from thermal coal mining activities.
  • Over 10% turnover from the extraction of tar sands or oil shale.
• High interest rate lending
  • Over 5% turnover from high interest rate lending. High interest lending will typically have an APR of over 100%, a loan duration of 18 months or less and require no collateral with little or no credit checks performed.

Screening criteria is correct as of 26 August 2021. Newton may make changes to the above screens from time to time. Newton uses a third party vendor, Vigeo EIRIS, in order to apply the negative screening criteria to the Fund, apart from the anti-personnel landmine and cluster munitions  screens. The negative screening criteria are based upon Vigeo EIRIS’ own definitions of each controversial activity/area of controversy and are implemented using Vigeo EIRIS’ in-house research. For the anti-personnel landmine and cluster munitions screens, Newton uses output from Sustainalytics to implement the screens.

The Fund is actively managed and draws on an investment process which concentrates on identifying high quality, well-managed companies that benefit from themes and secular growth trends. It is constructed holistically, with no regional, sector or benchmark constraints and with the ability to invest anywhere. Sector and regional allocations may result as much from a series of security selection decisions as from more top-down considerations. The Fund is constructed with reference to the mixed assets and charities team’s model portfolio; however, the portfolio managers do take into account the Fund’s ethical policy and investment objective. The portfolio managers carefully consider risk in the portfolio and make qualitative judgments on the impact new positions, exiting from current positions or existing market conditions would have on the overall portfolio.

The portfolio managers draw upon the output of our proprietary global research team as well as conduct their own research to ensure that the portfolio is composed of securities in which they have strong conviction*. The portfolio managers have a broad and diversified universe of equities, bonds and listed vehicles from which to construct the Fund. The ethical screens exclude approximately 15% of the investible universe, although this varies by region. The global nature of the Fund minimizes the impact of this constricted universe and provides an ample opportunity set from which to deliver attractive returns.

* There is no compulsion for portfolio managers to purchase recommended ideas, and portfolio managers may choose to invest in securities that are not on the research recommended list (RRL).

Buy discipline

The decision to buy the security rests with the lead portfolio manager. This is dictated by the manager’s conviction in the investment idea along with the risk/reward characteristics of the security as well as how it will impact the overall portfolio. The skill of the portfolio manager is in selecting the best combination of securities in the right proportion with the aim of delivering the best risk-weighted return from the portfolio.

The aim is to create a diversified portfolio of active positions. Positions are sized by:

•  Conviction
• Downside risk
• Market liquidity conditions
• Active tactical cash allocation

Sell discipline

Securities will be sold if they no longer conform to our SRI ethical criteria or if our view on the fundamentals and valuation changes. If a security falls out of the investable universe, it must be sold within three months to maintain the ethical rigour of the portfolio but at the same time to avoid a ‘forced sale’ at an inopportune time. Changes in the fundamentals of a company, such as a change in management or acquisitions, etc., would prompt the portfolio manager to reassess a company's rating.

We aim to invest for the medium to long term; however, securities may be sold for the following reasons:

• Investment thesis deteriorates
• Change in ‘acceptability’ on ethical screening grounds
• Change in model weight and conviction
• Taking profits
• Switching to more attractive investment opportunities

Ethical investment process

Newton’s investment team employs a straight-forward and transparent approach to ethical investment on behalf of our clients and pooled fund investors. We partner with charities to ensure that we understand their specific needs and desired outcomes. We monitor the evolving ethical landscape for trends in ethical investing and develop the Fund’s strategy to align with these trends. We aim to ensure that the Fund’s policy is relevant and dynamic for all the unit holders in the Fund, that it continues to provide adequate coverage and can be implemented effectively.

Our process leverages the expertise and resources of Newton’s broader investment team. We construct portfolios using a fundamental, security selection process driven by themes and taking account of key ESG factors*. Our detailed analysis provides valuable insight into what a company does (activities/industry) and how it does it (management/governance). It is this detailed understanding of the companies we invest in which also provides a level of risk management within the investment process.

We make direct investments in securities, resulting in greater transparency and knowledge of the portfolio at a deeper level to provide our investors with confidence that the ethical policy is being implemented effectively.

All investment decisions are predicated on two key factors: 1) an investment’s eligibility based on the ethical policy; and 2) the requirement for attractive valuation and upside potential. We would never purchase a security simply for its ethical/ESG credentials, as we believe maximizing returns and delivery of the Fund’s investment objectives is key.

NIM is able to implement a client’s ethical policy using both sectoral-based exclusions and ethical threshold-based exclusions. A sectoral-based exclusion will effectively exclude any company within a given sector, whereas a threshold-based exclusion will look-through to a company’s revenues to identify earnings from the respective activity.

In both cases, compliance with the client’s ethical policy are monitored through NIM’s order management system (OMS).

Sector exclusions are implemented directly into NIM’s OMS using industry classifications from the major market data providers.

We use the expertise of specialist, market leading data providers to facilitate the provision of ethical threshold-based screens. NIM’s main provider of ethical threshold-based screens is Moody’s ESG Solutions (formerly Vigeo EIRIS), but we also retain access to supplementary screens provided by Sustainalytics and MSCI. We ensure that our data providers are reviewed on a regular basis.

For ethical threshold-based exclusions NIM will create an ethical strategy within Moody’s ESG Solutions online platform (DataLab) in line with the respective client/fund’s ethical requirements, choosing from a suite of screens provided by the vendor. The ethical strategy is compared to Moody’s research universe and will then produce a list of companies that are not permitted under the screens selected. The resultant security list is downloaded into NIM’s OMS and can then be used to prevent the purchase of non-compliant companies, as well as flag any holdings that become “restricted”.

Security lists are downloaded into NIM’s OMS from DataLab on a weekly basis.

The integrity of the ethical screens implemented on behalf of our clients/funds and the respective portfolio’s adherence to them is fundamental to our approach as ethical investors and ensures our clients have confidence that we are investing only in those areas deemed investible under the client/fund’s ethical policy. Output from the provider systems in the form of a security list is fed into NIM’s OMS and therefore any attempt to buy a stock that is unacceptable, or where an existing portfolio position becomes un-investible, a warning is triggered, alerting the portfolio manager (PM), the client team and NIM’s investment control (IC) team to this fact.

IC will raise the alert with the PM and NIM’s investment relationship management (IRM) team and will ask the PM to take the appropriate action:

• Selling the security - the PM has three months (in practice this is done immediately) to investigate the issue fully before selling. This time period also helps to ensure that the portfolio does not become a forced seller.
• Retaining the security – if NIM believes it to be in the client’s best interest, it may seek to discuss the company with the client with a view to obtaining permission to continue to hold the security (whereby a detailed file note would be recorded and retained).

The PM will then notify IC which action will be taken. Where the position is to be sold, the three-month time limit will be monitored by IC and the IRM team. Where the client agrees to retaining the security, the IRM team will ensure a file note capturing the client instruction is recorded.

* Where material and relevant information exists. Analysis may vary depending on the type of security, investment rationale and investment strategy. Newton does not currently view certain types of investments as presenting ESG risks, opportunities and/or issues, and believes it is not practicable to evaluate such risks, opportunities and/or issues for certain other investments. In addition, Newton will make investment decisions that are not based solely on ESG considerations. In some cases therefore, Newton may conclude that other attributes of an investment outweigh ESG considerations when making investment decisions.

Resources, Affiliations & Corporate Strategies

RI Team

Newton has a centralised responsible investment team (RI) headed by Therese Niklasson, global head of sustainable investment. This team is the centre of excellence for all matters related to RI , and with its deep functional knowledge of the RI space and how it is evolving, it provides guidance, support and subject-matter expertise to our wider investment team. The RI teamis global in its footprint and diverse in its employee base. The team is organised into three pillars of expertise – stewardship, research and analytics: these specialisations under the RI umbrella allow us to bring further depth and expertise to each of these activities. The team’s compact size enables it to work cohesively and operate as one team.

Stewardship: Oversees the firm’s engagement framework and advocacy initiatives, focusing its efforts on meaningful outcomes for clients, and also undertakes the firm’s proxy voting activities. Provides subject-matter expertise to the investment team on governance risks and evolving expectations.

Sustainability research: Subject-matter experts consulting the investment and research teams, driving deep insights on sustainability-related subjects. The team manages Newton’s sustainability standards, definitions and frameworks.

RI : Has strong quantitative and RI data expertise and owns the data ecosystem, creating and managing RI data models, frameworks and tools that support ESG integration and sustainable investing. The team has built an innovative suite of building blocks that can be leveraged to develop scalable solutions to meet specific client requirements.

The role of the RI team is to be a support function to the investment teams, to set standards around sustainable investment, and to coordinate and ensure effectiveness around our stewardship efforts. It guides the business around policies and direction of travel for sustainability and stewardship more broadly. The RI team also owns and manages the overall governance systems to ensure we deliver against key codes and commitments including stewardship codes, industry principles such as the UN Principles for Responsible Investment, and industry pledges such as the Net Zero Asset Managers Initiative (NZAMi).
Supporting the team, and the wider business, are various external organisations and vendors including ESG service providers, memberships, and internal systems for monitoring and reporting.

Please see page 16 of the linked report for full RI team details
https://www.newtonim.com/uk-institutional/special-document/responsible-investment-and-stewardship-annual-report/

ESG Governance

Management oversight

The Board has ultimate responsibility for ESG governance. They are supported by the following committees and working groups:

• Newton Executive Management Committee. The purpose of the Newton Executive Management Committee (NEMC) is to ensure the effective operational and strategic management of Newton. Newton’s Global Head of Sustainable Investment, Therese Niklasson, is a member of this committee and submits a formal update each month to the committee. Membership includes the CEO and Chief Risk Officer, and the committee provides formal approval of Newton’s annual sustainability and stewardship report. Reporting to the Board and the NEMC are Newton’s operating committees, some of which play varying roles in relation to Newton’s sustainability efforts, as described below.
• Newton Sustainability Committee. The Sustainability Committee (SC) meets on a quarterly basis and oversees all aspects relating to sustainability at Newton, including Newton’s sustainable framework, sustainable investments, direct impacts and engagement with communities, and engagement with financial markets (advocacy) regarding sustainability and stewardship matters. The SC review’s Newton’s investment universe from an ESG risk perspective, including climate and net-zero efforts. The committee was formed in 2022 and seeks to oversee the wider sustainability strategy, including climate and risk management, and ensure that it is delivered by Newton. It also reviews our strategy and progress around diversity, equity and inclusion (DE&I). The SC is chaired by Newton’s Global Head of Sustainable Investment and includes members of the NEMC as well as representatives from the investment team and risk and compliance.
• Newton Risk and Compliance Committee. This committee is supported by the Newton Conflicts of Interest Committee. These committees deal with various stewardship and responsible investment aspects on an ad-hoc basis, including any relevant internal audit findings and actions as well as climate risk updates from internal groups such as the Emerging Risks Working Group.

We have an oversight group, the Newton Sustainable Investment Forum (SIF), to provide support and challenge in relation to investments held in our sustainable strategies. Please note that the Newton SRI Fund for Charities is not a sustainable strategy.

Memberships and Affiliations

Newton is a signatory to or a supporter of the following industry principles and pledges:

• Net Zero Asset Managers initiative
• Principles for Responsible Investment - NIM has been a PRI signatory since February 2007, ten months after the PRI’s inception.
• Taskforce for Climate-related Financial Disclosures
• UK Stewardship Code
• UK Financial Reporting Council’s principles for stewardship expectations of UK investors.

As investors and an intermediary in the financial system we play an important role in providing investors with access to investment solutions, and that with this comes an inherent responsibility to do what is right on behalf of our clients, as well as wider asset owners and stakeholders in the financial system. Our advocacy focus involves supporting or seeking to influence various issues and areas for the long-term interest of our clients and Newton.

Organisations and initiatives related to ESG matters in which Newton played a formal role in 2023:

• 30% Club – Investor Group
• Member of Race Equity Working Group
• Farm Animal Investment Risk and Return (FAIRR)
• Institutional Investors Group on Climate Change
• Member of Proxy Advisory Working Group (from 2022)
• Investment Association
• Member of Green Gilts Working Group
• World Benchmarking Alliance
• Member of Just Transition Coalition Impact Committee
• Asian Corporate Governance Association
• Education, research and policy influencer across Asian markets on governance matters.
• Global Investor Commission on Mining 2030
• CDP
• Climate Action 100+
• Council of Institutional Investors
• ShareAction Good Work Coalition
• ShareAction coalition focused on quality work, including a specific living wage campaign.
• ShareAction Investor Decarbonisation Initiative
• Investor Alliance for Human Rights
• Investor Coalition on Food Policy
• Taskforce for Nature-related Financial Disclosure Forum
• Investor Stewardship Group
• Transition Pathway Initiative

Dialshifter

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

NIM became a signatory to the Net Zero Asset Managers Initiative in March 2021. We have published details of our approach here: https://www.newtonim.com/uk-institutional/insights/net-zero/.
We have aligned ourselves with an independent methodology produced by the Science Based Targets initiative (SBTi). We are committing to having 50% of our financial emissions covered by credible net-zero plans by 2030, with the aim of reaching 100% by 2040.

We seek to meet these headline targets via a range of transparent measures around investments in climate ‘solution providers’, engagement with fossil-fuel to support their energy transition and advocating for supportive government and industry regulation.

Literature

• Fund overview (including factsheet)
• Prospectus

INFORMATION

Past performance is not a guide to future performance.
The value of investments can fall. Investors may not get back the amount invested. Income from investments
may vary and is not guaranteed.
For Professional Clients only.
Provided solely for use by Fund EcoMarket.

The Newton SRI Fund for Charities is an authorised unit trust. BNY Mellon Fund Managers Limited (BNY MFM) is the Manager. BNY MFM, BNY Mellon Centre, 160 Queen Victoria Street, London EC4V 4LA. Registered in England No. 1998251. Authorised and regulated by the Financial Conduct Authority.
Any views and opinions are those of the Investment Manager unless otherwise noted and is not investment advice.

Portfolio holdings are subject to change, for information only and are not investment recommendations.

BNY, BNY Mellon and Bank of New York Mellon are the corporate brands of The Bank of New York Mellon Corporation and may be used to reference the corporation as a whole and/or its various subsidiaries generally.

Issued in the UK by BNY Mellon Investment Management EMEA Limited, BNY Mellon Centre, 160 Queen Victoria Street, London EC4V 4LA. Registered in England No. 1118580. Authorised and regulated by the Financial Conduct Authority.

Assets under management (AUM) relates to the combined assets managed by the Newton Investment Management group. From 1 September 2021, Newton group of companies includes Newton Investment Management Limited (NIM) and Newton Investment Management North America LLC (NIMNA).

Returns may increase or decrease as a result of currency fluctuations.

Costs incurred when purchasing, holding, converting or selling any investment, will impact returns. Costs may increase or decrease as a result of currency and exchange rate fluctuations.

Benchmark: From 1 October 2021, the Fund’s benchmark changed from a blended index comprising 37.5% FTSE All-Share TR Index, 37.5% FTSE World ex UK TR Index, 20% FTSE Actuaries UK Conventional Gilts All Stocks TR Index and 5% LIBID GBP 7 Day to a blended index comprising 37.5% FTSE All-Share TR Index, 37.5% FTSE World ex UK TR Index, 20% FTSE Actuaries UK Conventional Gilts All Stocks TR Index and 5% 7 day compounded SONIA. The Fund will use the Benchmark as an appropriate comparator because it includes a broad representation of the asset classes, sectors and geographical areas in which the Fund predominantly invests. The Fund is actively managed, which means the Investment Manager has absolute discretion to invest outside the Benchmark subject to the investment objective and policies disclosed in the Prospectus. While the Fund's holdings may include constituents of the Benchmark, the selection of investments and their weightings in the portfolio are not influenced by the Benchmark. The investment strategy does not restrict the extent to which the Investment Manager may deviate from the Benchmark.

RISK WARNINGS

For a full list of risks applicable to this fund, please refer to the Prospectus or other offering documents.

You should read the Prospectus and the Key Investor Information Document (KIID) for each fund in which you want to invest. The Prospectus and KIID can be found at www.newtonim.com.

• Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Newton is not a tax expert and independent tax and/or legal advice should be sought.
• Where the Fund is invested in sub-investment-grade bonds, which typically have a low credit rating and carry a high degree of default risk, please be aware that this may affect the capital value of your investment.
• The value of overseas securities will be influenced by fluctuations in exchange rates.
• The Fund may hold derivatives. An investment in derivatives may be volatile, but the volatility of the Fund is not expected to be any greater than that of the underlying stock and fixed-income markets.
• Where the Fund has exposure to hedge funds, gold, private equity, and property via publicly quoted transferable securities, there are additional risks associated with these sectors.
• Compared to more established economies, the value of investments in Emerging Markets may be subject to greater volatility due to differences in generally accepted accounting principles or from economic, political instability or less developed market practices.

Last amended: 08/08/23 10:37