Fund Name | SRI Style | Product | Region | Asset Type | Launch Date | |
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Alquity Future World Fund | Socially Focused | SICAV/Offshore* | Global | Equity | 05/06/2014 | |
Fund Size: £34.73m Total screened & themed / SRI assets: £94.11 Total assets under management: £94.11 As at: 31/03/23 Contact: suresh.mistry@alquity.com |
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OverviewAlquity is an asset management business that connects investors to their investments and to social progress in order to deliver better returns for all. ESG is therefore central to what we do. Our approach emphasizes not only financial analysis, but also material but also material non-financial factors, which incorporates forward-looking ESG analysis to assess management capability and values. This delivers a portfolio that is responsible by construction, targeting consistent out-performance and lower environmental impact (e.g. much lower GHG emissions and water usage than the index) through companies delivering long term, inclusive growth. We also measure and track the ESG performance and evolution of our companies (through our KPIs) as well as we engage consistently with all the companies we own. However, we believe ESG integration alone is not enough and so we go further, donating a minimum of 10% of our management fees to transforming lives projects (both societal and environmental) in the regions in which we invest.
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FiltersFund informationSustainabilityEnvironmental policy Sustainability policy Limits exposure to carbon intensive industries Resource efficiency policy or theme Environmental damage and pollution policy Favours cleaner, greener companies Waste management policy or theme UN Global Compact linked exclusion policy Sustainability focus UN Sustainable Development Goals (SDG) focus Report against sustainability objectives Encourage more sustainable practices through stewardship Nature & BiodiversityDeforestation / palm oil policy Unsustainable / illegal deforestation exclusion policy Biodiversity / nature policy Responsible palm oil policy Sustainable fisheries policy Nature / biodiversity protection policy Water stewardship policy Climate Change & EnergyNuclear exclusion policy Coal, oil & / or gas majors excluded Climate change / greenhouse gas emissions policy Fracking and tar sands excluded Arctic drilling exclusion Fossil fuel reserves exclusion Paris aligned fund strategy Encourage transition to low carbon through stewardship activity Fossil fuel exploration exclusion - direct involvement Fossil fuel exploration exclusion – indirect involvement Human RightsHuman rights policy Child labour exclusion Responsible supply chain policy or theme Modern slavery exclusion policy Social / EmploymentSocial policy Health & wellbeing policies or theme Diversity, equality & inclusion Policy (fund level) Labour standards policy Fast fashion exclusion Favours companies with strong social policies Responsible mining policy Meeting Peoples' Basic NeedsWater / sanitation policy or theme Demographic / ageing population theme Antimicrobial resistance policy Ethical Values Led ExclusionsEthical policies Animal welfare policy Tobacco and related product manufacturers excluded Armaments manufacturers avoided Alcohol production excluded Gambling avoidance policy Pornography avoidance policy Animal testing - excluded except if for medical purposes Civilian firearms production exclusion Banking & FinancialsPredatory lending exclusion Exclude banks with significant fossil fuel investments Exclude banks that finance fossil fuels extraction Governance & ManagementGovernance policy Anti-bribery and corruption policy Avoids companies with poor governance Encourage board diversity e.g. gender Encourage TCFD alignment for banks & insurance companies UN sanctions exclusion Encourage higher ESG standards through stewardship activity Fund GovernanceESG integration strategy Asset Size & MetricsInvests in small, mid and large cap companies How The Fund WorksBalances company 'pros and cons' / best in sector Strictly screened ethical fund Combines norms based exclusions with other SRI criteria Combines ESG strategy with other SRI criteria ESG weighted / tilt Data led strategy Focus on ESG risk mitigation Selection criteria / strategy may alter in adverse markets Significant harm exclusion SRI / ESG / Ethical policies explained on website All assets (except cash) meet published sustain'y criteria Impact MethodologiesAims to generate positive impacts (or 'outcomes') Measures positive impacts Positive environmental impact theme Positive social impact theme Aim to deliver positive impacts through engagement Labels & AccreditationsEurosif Transparency SFDR Article 8 fund / product (EU) Intended Clients & Product OptionsIntended for investors interested in sustainability Intended for clients who want to have a positive impact Fund management company informationAbout The BusinessESG / SRI engagement (AFM company wide) Responsible ownership / stewardship policy or strategy (AFM company wide) Responsible ownership / ESG a key differentiator (AFM company wide) Vote all* shares at AGMs / EGMs (AFM company wide) Diversity, equality & inclusion engagement policy (AFM company wide) Specialist positive impact fund management company Boutique / specialist fund management company Integrates ESG factors into all / most fund research SDG aligned aims / objectives (AFM company wide) Senior management KPIs include environmental goals (AFM company wide) Just Transition policy on website (AFM company wide) ResourcesIn-house responsible ownership / voting expertise Use specialist ESG / SRI / sustainability research companies Collaborations & AffiliationsPRI signatory Climate Action 100+ or IIGCC member UN Net Zero Asset Owners / Managers Alliance member GFANZ member (AFM company wide) AccreditationsUK Stewardship Code signatory (AFM company wide) PRI A+ rated (AFM company wide) Engagement ApproachRegularly lead collaborative ESG initiatives (AFM company wide) Engaging on climate change issues Engaging to reduce plastics pollution / waste Engaging to encourage responsible mining practices Engaging on biodiversity / nature issues Engaging to encourage a Just Transition Engaging on human rights issues Engaging on labour / employment issues Engaging on diversity, equality and / or inclusion issues Engaging on governance issues Engaging on responsible supply chain issues Company Wide ExclusionsCoal exclusion policy (group wide coal mining exclusion policy) Controversial weapons avoidance policy (AFM company wide) Tobacco avoidance policy (AFM company wide) Fossil fuel exclusion policy (AFM company wide) Do not invest in companies with fossil fuel reserves Climate & Net Zero TransitionEncourage carbon / greenhouse gas reduction (AFM company wide) Net Zero commitment (AFM company wide) Working towards a ‘Net Zero’ commitment (AFM company wide) Carbon offsetting - offset carbon as part of our net zero plan (AFM company wide) In-house carbon / GHG reduction policy (AFM company wide) Net Zero - have set a Net Zero target date (AFM company wide) Voting policy includes net zero targets (AFM company wide) TransparencyPublish full voting record (AFM company wide) Publish responsible ownership / stewardship report (AFM company wide) Full SRI policy information on company website Paris Alignment plan publicly available (AFM company wide) |
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PolicyESG 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. Our Red Flags are exclusions for 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:
*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.
Here are our ESG green flags. We will consider companies that meet the following criteria:
We believe that the increase in Greenhouse gas emissions generated by the extraction and burning of fossil fuels and deforestation have directly led to the warming of the Earth’s climate. We believe that if these activities are not dramatically reduced the world faces a rise in global temperatures that will lead to catastrophic consequences for the planet’s natural ecosystem and its ability to sustain the growing human population. We also believe that the transition to a net zero emission global economy must be a fair transition, and go hand in hand with ensuring a more sustainable and equitable society for all. The portfolio is aligned with our climate declaration as follows:
The Alquity Future World Fund portfolio is also intended to deliver a significantly smaller environmental footprint than its benchmark (at least, around half GHG emissions and 90% less water usage). The fund has set a GHG intensity reduction target aligned to the Paris 1.5 degree scenario and these commitments are disclosed publicly via the Net Zero Asset Managers initiative.
Where there may be divergence, we ensure that the reason is understood and transparently communicated to our clients through our reporting. The impact measurement supports our stewardship and engagement activities. Several of our companies specifically have a positive impact, through business models which aid decarbonisation, healthcare or energy efficiency. However, this is not a specific target.
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ProcessAll 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. We track the impact of each of our portfolios against key metrics aligned to the United Nations Sustainable Development Goals (UNSDGs). This impact analysis is provided by Impact Cubed, an independent third-party who assess each fund against its relevant index. The outcomes of the portfolio assessment are analyzed by the investment team so that they can understand at both a stock and portfolio level the environmental, social and governance footprint of our funds and engage with companies to improve these outcomes over time. Points we would like to see improved over time, and commitments made by management to enhance their ESG practices, are recorded on the “Engagement” section of our stock notes. These areas of improvement and commitment are reviewed on a regular basis when the investment team engage with the management of these companies. These notes can be made available upon request. Exercising our voting rights is also an important aspect of Alquity’s investment process, as we must ensure our interests as minority shareholders are well represented. Voting is exercised by the investment team on a weekly basis and conducted 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. |
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Resources, Affiliations & Corporate StrategiesAs explained in the Process section, almost 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 a Senior Analyst 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 the engagement activity.
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, Daniel Billis, Cynthia Cano and Keith Gyles) and our CEO (Brad Crombie).
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. Further Alquity disseminates current industry issues on a regular basis to our all 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, but also the Global Reporting Initiative (GRI) and the EUROSIF Transparency Code. We are also members of the Net Zero Asset Managers initiative. We also signed the Plastic Solutions Investor Alliance statement, which calls for urgent action to reduce plastics from intensive users of plastic packaging. We make use of Impact Cubed, who provides an assessment of the impact of the portfolio versus its most relevant index. We do not use external ESG ratings agencies for the fund. We use a variety of external resources that provide more in-depth sector expertise such as FAIRR (experts in protein production which provide a detail annual assessment of the key companies involved in protein production) and the Emerging Markets Investors Alliance. We also make use of Bloomberg and publicly available data, as well we use ISS for voting recommendations. These external sources are used as means to cross-reference our own research but as previously stated, the vast majority of our team’s research is generated internally, making the most of their expertise and long-term investments in the regions.
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DialshifterThis 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.
Our organisation is helping to support the Paris Climate Agreement and the Race to Net Zero: As members of NZAM, Alquity has committed to reducing the GHG intensity of its funds by 60% relative to the 2019 intensity by 2030. This is in line with the Paris Climate Agreement and recognizes that the current global trajectory needs to be steeper than that predicted by NDCs.
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LiteratureLast amended: 09/04/24 06:32 |
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05/05/2024