As at: 31/01/24

Overview

Filters

Fund information

Policy

We manage the Fund in partnership with Big Issue Invest, our external social advisory partner. The Fund aims to deliver both financial and social performance and as such we have a thematic focus on social issues. These issues are defined by our social assessment methodology; produced by Big Issue Invest in collaboration with our firm, this includes seven specific social themes and one theme which encompasses environmental elements.

The eight outcome areas comprise:

• Housing and Property
• Transport and Communication Infrastructure
• Financial Inclusion
• Health and Social Care
• Education Learning and Skills
• Community Services
• Employment and Training
• Utilities and the Environment

The Fund takes a positive inclusion, rather than a negative exclusion, approach. For an investment to qualify for the Fund, we need to find a clear link between the issuer and one of the eight social outcome areas (including a ‘utilities and the environment’ outcome, which can have a specific environmental element, in recognition of the importance of sustainable infrastructure and energy in creating the right conditions for societal development). The social case needs to be made in the initial research phase, and further confirmed by the Social Advisory Committee (see further under resources and affiliations below).

One consequence of this is that investment in issuers with a negative social impact is out of scope. A clear example of this is with the tobacco industry which not only does not align with one of our outcome areas but also clashes with the health and social care outcome. Other areas which we do not see as aligning with positive social outcomes, along similar lines, are companies whose primary business relates to alcohol production, weapons manufactures, gambling or pornography. Hence, although there is no specific exclusionary screen for these types of companies, the Fund has never had any exposure to them, nor do we expect this to be the case.

One area of hard exclusion, however, relates to controversial weapons. This has been in place for all our strategies since 2011 and recognises our support for widely ratified treaties prohibiting their production (see page 3 of our RI policy attached, or via the link https://www.columbiathreadneedle.co.uk/investment-capabilities/governance-and-responsible-investment).

ESG performance is assessed for each issuer as part of our social review. This is not the core driver of the review, but can contribute to a social rating change (e.g. from Medium to Low), or even suggest that an investment may not qualify for the Fund if it undermines our confidence that an issuer is aligned with a social outcome, is overly exposed to social risk, or might materially compromise the reputation of the Fund. As such our ESG analysis is risk focused, and centres on governance and social issues.

Engagement is core to the Fund’s philosophy. Part of Big Issue Invest’s mandate to Columbia Threadneedle Investments was for the Fund to help establish a market for charities and non-profit organisations to raise finance themselves through issuing bonds. In addition, they were keen to promote the reestablishment of the local authority sector of the market. In some cases, this required an educational process about issuing their own bonds, which can potentially reduce cost of funding and diversify the investor base.

As part of this mission, there has been a lot of work undertaken behind the scenes in order to try to establish a leadership role in developing the market. Some tangible successes of this policy have been the establishment of the Retail Charity Bonds Platform and the subsequent issues of charity bonds. Additionally, committee work has taken place to extend the Green Bond Principles from environmental to social outcomes, as well as the publication of the Guidance for Issuers of Social Bonds in June 2016, together with the first issue to conform to these policies, from BNG, a Dutch agency bank for social housing.

Process

Resources, Affiliations & Corporate Strategies

External partner

“A hand up, not a hand out,” was the ethos which inspired the launch of the Big Issue Foundation in 1991, a trailblazing organisation which kick-started the philosophy of offering business-led solutions to social problems.

More than two decades on, Columbia Threadneedle Investments partnered with Big Issue Invest, the social investment arm of The Big Issue magazine, in 2013 to bring this concept to life with the Threadneedle UK Social Bond Fund. We brought together the simple but powerful principles of achieving positive social outcomes while generating a financial return for investors.

Big Issue Invest (BII) developed a unique Social Assessment Methodology for the Fund, with input from Columbia Threadneedle Investments’ Responsible Investment team. The Methodology provides ‘filters’ for portfolio investment decisions that identify the “social performance” of investments and channels the Fund’s capital to organisations whose activities produce clearly identifiable social outcomes and help create a more balanced and inclusive UK economy.

Big Issue Invest also acts as Social Advisor to the Fund, via the Fund’s independent Social Advisory Committee. All reviews are circulated to our Social Advisory Committee, comprised of an independent Chair as well as BII members, and two of our representatives. The role of the SAC is to advise, review and challenge individual bond social assessments (and therefore the overall social performance of the Fund) and to support further development of the methodology.

Research resources

Research is undertaken in-house by our Responsible Investment team, regarding the social assessment, whilst financial analysis is undertaken by our Investment Grade team.

We draw on a number of sources in making our assessment: Prospectus and roadshow material, ESG research (MSCI ESG Research being a main data provider, broker research, and engagement in some cases. Other inputs specific to the nature of the Fund include UK-based indices of deprivation (e.g. the Multiple Deprivation Index), and theme specific sources: such as Ofsted reports and HESA (Higher Education Statistics Agency) data for the education theme.

Fund manager

Simon Bond manages the Threadneedle UK Social Bond Fund, as well as a newly launched European Social Bond Fund (May 2017).  Previously Simon managed a wide range of retail, institutional and wholesale credit bond funds at Columbia Threadneedle, but undertook a specific Responsible Investment Portfolio Management position in 2016. Simon has taken a keen interest in the social investment space, having analysed and invested in this space for many years.

Process and Roles

In applying the methodology, first, the fund manager, Simon Bond, proactively identifies bonds that deliver positive outcomes across eight fields of social development, alongside liquidity and yield characteristics.

Second, individual bonds are reviewed by the Responsible Investment (RI) team across five dimensions to assess their overall “social intensity”. These are: the degree to which the bond will deliver positive primary and secondary social outcomes; the geographical focus on deprived areas (with an aim to have 80% of outcomes domestically focused); the level of social development; the nature of financing; and an ESG assessment of the issuer.

All reviews are circulated to our Social Advisory Committee, who review and challenge individual bond social assessments. Further discussion of key issues takes place at the Committee’s quarterly meetings.

Each year the Social Advisory Committee, which meets each quarter, hold a forward looking meeting. The aim is to identify any new social developments, or potential enhancements to our review process. In so doing, rather than seeking to forecast out on a 3-5 year basis, we aim to be alive to the most relevant, current and emerging issues.

General corporate affiliations

We were a founding member of the UN PRI and remain actively involved in the organisation. In our last assessment from the PRI we received an A+ (the highest rating) for our overall approach to responsible investment, a score that has been maintained for the last four years.

Other key memberships are those of: the United Kingdom Sustainable Investments and Finance Association (UKSIF), the European Sustainable Investment Forum (EUROSIF), the UK’s Investment Association, the UK’s Investor Forum, the UK Taskforce on Growing a Culture of Social Impact Investing and the Global Impact Investing Network.  These memberships reflect our commitment to RI and impact investing across a range of markets, reflecting the geographic diversity of our investments.

Our Chief Investment Officer sits on the board of the Investor Forum, which seeks to contribute to long-term investment performance by promoting cultural change and enhancing shareholder stewardship in the UK. Similarly, we are also an active member of the UK Corporate Governance Forum, an investor network made up of asset managers and owners to discuss individual companies, industry and ESG developments, UKSIF, the Investment Association and the Investor Forum, and are signatories to the UK Stewardship Code.

We are also signatories to the CDP (formerly the Carbon Disclosure Project), including their forestry and water programmes.

We are in the process of reviewing carbon / fossil fuel exposure for all funds and have SDG aligned aims/objectives for certain funds.

Literature

• Fund overview including factsheet
• Fund policy details
• Opportunities in social investment
• Annual impact report

Last amended: 14/02/24 03:05