Fund Size: £298.00m

Total screened & themed / SRI assets: £1122.00

Total Responsible Ownership assets: £10953.00

Total assets under management: £14387.00

As at: 28/02/23

Contact: Tom Brooksbank: tb@taml.co.uk

Overview

Filters

Fund information

Policy

The Trojan Ethical Income Fund employs negative screening in accordance with its published Ethical Exclusion Criteria in relation to fossil fuels, gambling, alcohol, high interest rate lending, pornography, tobacco and certain types of armaments. The Fund Manager is responsible for the implementation of the screening process by utilising Moody's ESG Solutions (previously Vigeo EIRIS) which provides us with research and analysis for monitoring the behaviour and activities of our holding companies. The negative screens are predominantly based on revenue thresholds and are not impacted by valuation or other factors.

The Ethical Exclusion Criteria is as follows:

• Armaments –
  • generates more than 10% of its total turnover from strategic military supplies relating to conventional weapons and/or
  • produces key parts of, or provides services for, cluster munitions systems, and/or
  • is alleged to have contravened the convention on anti-personnel mines in the last ten years and which has not addressed the allegations, and/or (d) manufactures products, or provides services, which are all or part of a nuclear weapons system.
• Tobacco – makes more than 10% of its total turnover from tobacco products.
• Pornography – derives more than 3% of its total turnover from pornography or adult entertainment.
• Fossil Fuels –
  • derives more than 10% of its total turnover from the refining or extraction of, or generation of power from, fossil fuels and/or
  • derives more than 10% of its turnover from coal mining activities. Companies whose listing falls within the Oil & Gas sector are also excluded.
• Alcohol – derives more than 10% of its total turnover from the sale or production of alcohol.
• Gambling – derives more than 10% of its total turnover from gambling (including spread betting).
• High Interest Rate Lending – derives more than 10% of its total turnover from high interest rate lending (high interest being defined as lending at an annual percentage rate (APR) of over 100%).

In 2022, we also published a Climate Change Mitigation Policy seeking to categorise funds as ‘Article 8’ under the Sustainable Finance Disclosure Regulations (SFDR). The asset classes within scope are equities and the Policy focusses on the impact of portfolio companies on society and environment and how Troy’s investment process can mitigate the adverse contribution to global temperature change from its portfolio companies.

Please also read our Troy Responsible & Stewardship Policy.

Process

All of Troy's mandates are populated from Troy’s central investment universe. ESG factors are integrated within our bottom-up fundamental analysis which is applied to all of Troy’s strategies. Our aim is to evaluate how these factors can either help or impede a company’s ability to generate sustainable returns and affect its revenue growth, profitability, asset value and valuation over the long term. To achieve this, we combine in-depth stock specific analysis with thematic ESG research.

Troy carries out its own in depth primary research and place significant emphasis on meeting with companies. We judge each company on its individual exposures to ESG factors, aided by third party research and our own materiality analysis. This means we are less reliant on opaque quantitative ESG scores or third party research that may be influenced by greenwashing. We do not have a prescriptive checklist for assessing ESG factors, instead our focus remains specific to each company, industry and our view of their materiality.

In practice, ESG analysis is embedded in our in-house research notes and forms part of our monitoring process during meetings and reviews, which is particularly important given the dynamic nature of materiality. Governance and climate risk are systematically reviewed as part of the annual AGM voting process. Stock specific ESG integration also informs our engagement and voting activities where we feel a company is performing inadequately on a material ESG factor.

As part of our investment research and monitoring process, ESG risks are considered alongside other types of risk such as business risk, financial risk and valuation risk. Where we believe ESG factors pose a material and probable risk to the sustainability of returns, we may choose either not to invest or to invest with a greater margin of safety by using engagement to mitigate the risks. We would seek to avoid investing in a company that is exposed to ESG risks which we consider to be intolerably high, particularly where our analysis reveals that such risks are not adequately managed and may impair our ability to generate good risk-adjusted returns for our investors. Our equity selection has remained absolutely focussed on quality companies.

We conduct thematic research on systemic ESG risks and opportunities to better understand issues that affect a number of our holdings or to explore the exposure of our portfolios to significant and material ESG themes. This is particularly useful when developing our understanding of rapidly evolving social and environmental factors. Our thematic research often allows us to identify leaders and laggards on a given ESG topic, and guides our understanding of best practice against which individual companies may fall short. Thematic research also helps direct proactive engagement activities aiming to encourage the adoption of best practice, for example in relation to plastics, supply chain labour risk and climate change.

Resources, Affiliations & Corporate Strategies

Troy does not have a centralised ESG team, rather it is the responsibility and shared effort of all members of the 14-strong Investment Team. Collectively, they are responsible for the integration of ESG into Troy’s research and analysis as well as engagement and voting activities. We believe this collaborative approach results in well-informed debate and challenge, and enhanced decision-making.

Stewardship and ESG research are deeply integrated into Troy’s investment research and decision-making and all members of the Investment Team have an understanding of the ESG risks of the businesses in which we invest. ESG analysis informs our opinions on the long-term prospects for every company we own and we do not see it as an adjunct or an overlay to our process.

We strengthened our stewardship capabilities further in 2022 by appointing an additional Investment Analyst with specific stewardship expertise.

Please see a list of the collaborative industry bodies that Troy is a member/signatory of:

• 2008 The Investment Association (IA)
• 2011 Independent Investment Management Initiative (IIMI) (previously New City Initiative)
• 2016 United Nations’ Principles for Responsible Investment (UN PRI)
• 2019 The Investor Forum
• 2019 GAIN (Girls Are Investors)
• 2020 UK Stewardship Code 2020
• 2021 Carbon Disclosure Project (CDP)
• 2021 Task Force for Climate – Related Financial Disclosures (TCFD)
• 2021 The Institutional Investors Group on Climate Change (IIGCC)
• 2021 Climate Action 100+
• 2021 Net Zero Asset Managers initiative (NZAM)
• 2022 Sponsors for Educational Opportunity (SEO)

Literature

• Trojan Ethical Fund Factsheet February 2023
• Troy Responsible Investment & Stewardship Policy
• Trojan Ethical Income Fund Exclusion Criteria
• Troy UK Stewardship Code 2021
• Troy Climate Report 2022

Last amended: 02/05/23 11:16