Fund/Portfolio Size: £24.41m

Total screened & themed / SRI assets: £9.76

Total Responsible Ownership assets: £107.26

Total assets under management: £107.26

As at: 30/06/25

Contact: suresh.mistry@alquity.com

Overview

Filters

Fund information

Policy

ESG analysis is a critical component of Alquity. There are certain practices we believe are inconsistent with long-term financial returns and an overall positive societal impact. Firstly, we will apply our negative screening. We will exclude companies within sectors that are not consistent with our process and either are detrimental to or provide no environmental or societal benefits. This includes companies with over 5% of revenues or profits in their most recent financial report attributed to:

• Tobacco
• Liquor
• Gambling
• Narcotics
• Adult entertainment
• Armaments
• Fossil Fuels (exploration and production)
• Nuclear Power
• Coal mining
• Non-renewable power utilities
• Fur Trade
• Hydrogen power (unless green hydrogen)
• Financial institutions engaging in abusive lending practices*

*Such as excessively high interest rates, excessive penalty fees, misleading marketing, and illegal debt collection practices should be excluded. Excessive interest rates are defined as rates that exceed fair compensation taking into account the target borrower’s risk profile as well as the lenders funding costs and operational expenses.

We will then apply positive screening criteria, selecting companies that demonstrate best practices in Emerging Markets and are free from ongoing scandals.

• Companies with independently audited accounts
• Companies that are accessible and arrange regular open-access calls
• Company that provide transparency on identity of majority shareholders
• For high-risk industries we only select companies that publicly disclose Health and Safety policies
• For non-pharmaceutical companies, we only select those that ban animal testing (unless it is required by law and must be a substantial minority (<20%) of overall sales)
• For companies that use significant amounts of water in their operations or production processes, we only select companies that discloses usage and/or conservation levels
• For high-risk industries we only select companies that publicly provide or disclose when requested GHG emissions data
• Only companies with a clean bill of health and without ongoing ESG controversies and unresolved scandals that have the potential to seriously impact shareholder returns over the investment horizon

These two result in excluding around 30% of the investable universe.

The decision to integrate ESG considerations into our investment process was driven by a combination of ethical commitment and a strategic approach to risk management. From the outset, we recognised that environmental, social, and governance factors are not only relevant from a values-based perspective, but are also materially significant in identifying potential risks and opportunities that traditional financial analysis may overlook - so we have our proprietary ESG scores which have an impact on our DCF models.  For example, we evaluate factors such as corporate culture, governance standards, and the treatment of minority shareholders, which we view as critical indicators of long-term value creation and mitigating risks, especially in Emerging Markets. In addition, this is also particularly true in what we define as "high-risk" industries - sectors where ESG-related risks are more acute and can materially affect valuation (e.g. regulatory issues and stakeholder trust). We always review behaviours and practices across the firm in the context of global or regional best practice. As a discipline, and for comparability, we then assign a rating to each institution, which captures risk, and the quality of management judgement and decision making. Only those companies rated C or better can be included in the portfolio, which means that we will only invest in firms where there is satisfactory quality and alignment of management. We never invest in a company before we speak to management.

Process

All stocks that have met our themes are reviewed against our exclusions and green flags, through a combination of Google checks and/or a review of corporate information disclosure. If there are companies that are not excluded explicitly, but where we are not confident that management’s value are aligned with Alquity’s, then we will err on the side of caution and exclude the company.

A deeper ESG analysis takes place in the stage 2 of our investment process. We carry-out forward-looking, qualitative ESG assessment and rating conducted through significant engagement with management teams. Specifically, we look at behaviours and practices across the firm in the context of global and regional best practice. As a discipline, and for comparability, we then assign a rating to each institution, which captures risk and the quality of judgement and decision making. DCF valuations are influenced by the ESG scoring, via an increase or decrease of the equity risk premium: a 50bps reduction in for an “A” rating or a 50bps increase for a “C” rating. We include any changes in the ESG rating of the holding as part of the investment case review.

Only those companies rated C or better can be included in the portfolio. To be clear, this means that we will only invest in firms where there is satisfactory quality and alignment of management.

Moreover, we are interested not only in the absolute standard of “ESG quality”, but also the ability of a firm to improve its judgement, communication and efficiency over time.

Voting is exercised by the investment team in accordance with our Principles of Governance, which can be found on our website.

Almost all the research is carried-out in-house by the investment team. This allows a consistency of approach and a degree of rigor we do not believe we could achieve elsewhere. Moreover, ESG analysis is an integral part of our investment strategy (as opposed to a screening or secondary consideration) and therefore, occurs alongside traditional financial and business analysis, ensuring we avoid companies where governance/sustainability risks can quietly accumulate and ultimately erode shareholder value.

Resources, Affiliations & Corporate Strategies

All the research is done in-house. The responsibilities of the investment team cover all aspects of company fundamental research (ESG and Financial). The team are interchangeable as they cover a range of stocks and sectors. We do not create sector or country specialists but rather focus on the consistent implementation of the investment process, shared understanding and constructive challenge during company reviews. Whilst led by Mike Sell (Head of Global Emerging Markets), Daniel Billis is an Associate Portfolio Manager and Kieron Kader is Associate Portfolio Manager, so provide back up as well as the ability to execute trades as required. Francisco Gala, business analyst, supports the team with ESG analysis and the engagement activity.

The responsibilities of the investment team cover all aspects of the research. Additionally, to ensure that our investment team follows a robust and consistent approach to ESG investing, we have governance in place to monitor, evaluate and support the team’s investment process and our ESG ratings. This governance mechanism is chaired by our Head of Quantitative Risk (Marnie Aragon-Uy), and includes the entire investment team (Mike Sell, Kieron Kader and Daniel Billis) and our CEO (Paul Robinson).

We place a high priority on keeping our staff current on sustainability issues and follow the strict requirements that is imposed on us via the ISR Label which we are required to validate: 1) Training in ESG analysis (internal and externally) and time spent by the management company on continuous training; 2) Internal communication (funds managers, salespeople, etc.) of the extra-financial analyses conducted.

Furthermore, Alquity disseminates current industry issues on a regular basis to all our employees and also holds mandatory CPD sessions on relevant industry issues.

We are actively involved at a strategic level in encouraging companies to improve their ESG disclosure practices. This includes support not only for the UN Principles for Responsible Investment (UNPRI), of which we are signatories since our foundation in 2010. We are also members of the FAIRR Initiative, the Plastic Solutions Investor Alliance and other collaborative initiatives. In addition, we are signatories of the Tobacco Free Portfolios’ pledge, among other initiatives.

Dialshifter

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

...Using a combination of Red flags, ESG ratings, KPI driven engagement and transforming lives donations the fund drives the transition from brown to green across Emerging Markets with a focus on encouraging environmental disclosure and action towards implementation of tangible low carbon technologies and processes.

Literature

• Fund overview & literature (including factsheet)
• Alquity Investment Process
• Alquity Impact report

The Alquity Future World Fund is a sub-fund of the Alquity SICAV (the “Fund”), which is a UCITS-compliant investment vehicle and a recognised collective investment scheme under the Financial Services and Markets Act 2000 (FSMA) in the United Kingdom.

The Alquity SICAV is an open-ended investment company managed by Limestone Platform incorporated under the laws of Luxembourg and authorised by the Commission de Surveillance du Secteur Financier (CSSF). The Fund is authorised under the UCITS Directive (Directive 2009/65/EC). Sub-funds may not be registered for distribution in all jurisdictions. Alquity Investment Management Limited (AIML) acts as the investment manager to the SICAV. AIML is incorporated in England and Wales (Company No. 07992381) and is authorised and regulated by the Financial Conduct Authority (FRN 463991). Its registered office is Audrey House, Ely Place, London, EC1N 6SN.

Prospective investors should read and understand the terms of the Prospectus (including the risk factors) prior to purchasing units in any of the funds. There can be no assurance that the fund’s investment objectives will be achieved and investment results may vary substantially over time. We do not provide financial, tax or legal advice and we recommend that you obtain your own independent advice tailored to your individual circumstances prior to investing. Prospective investors should be aware that the value of investments can go down as well as up and past performance is not an indicator of future performance. Investors should be aware that by investing in the fund, they risk losing all or part of the capital invested. 

Investments in emerging markets, including Asia, involve greater risks, including political, currency, and liquidity risks.

The Fund’s investment approach is long-term, investors must expect to be committed to the Fund for an extended period of time (3-5 years) in order for it to have an optimal chance of achieving its investment objectives.

Last amended: 09/04/24 06:32