Fund Size: £1144.52m

Total screened & themed / SRI assets: £17170.00

Total assets under management: £169250.00

As at: 31/03/24

Overview

Filters

Fund information

Policy

RLAM’s ethical framework combines the avoidance of companies involved in excluded activities with the identification of best of breed companies in permitted sectors. Companies that generate over 10% of their turnover from either one or a combination of the following categories are excluded:

• Armaments -  manufacturing armaments or nuclear weapons, or associated strategic products.
• Tobacco -  growing, processing or selling tobacco products.

If a company breaches this threshold, then it is likely that that company’s involvement in that excluded sector is a noteworthy part of their business and strategy.

Also, this threshold is deemed to be realistic and appropriate in terms of assessing a company, given that it may not be possible to always pinpoint the exact turnover derived from an excluded activity. This threshold ensures that a minimum of 90% of each holding meets the ethical criteria.

Process

RLAM’s investment team of fund managers and analysts work in a close and highly collegiate environment designed to encourage the free flow of thoughts and ideas across the team. The nature and size of the team enables new ideas and opportunities to be discussed freely. The close proximity of all members of the team allows agreed decisions to be implemented quickly, ensuring that all portfolios benefit from relevant new ideas with minimal delay. The individual fund managers consult with other team members and credit analysts in on-desk discussions. The Cash and Rates team and the rest of the Fixed Income team are central to the research process.

The decisions to trade individual securities are made by the lead fund managers. This process ensures quick implementation of all buy/sell decisions. In addition, individual stocks are reviewed during the weekly off-desk team meeting. All investment decisions must fit within the team’s overall views.

Portfolio construction

Cash
The portfolios only invest in straightforward, highly liquid instruments issued by a wide range of highly rated banks. This diversification spreads the credit risk and provides greater security for investors in the funds. All banks have the minimum of an A1, P1 or F1 rating from the major ratings agencies. We monitor the ratings of all of the institutions we lend to on a real-time basis by subscribing to Standard & Poor’s, Moody’s and Fitch’s online ratings services. Any credit changes are notified to us immediately, ensuring the funds maintain the highest credit quality.

Government Bonds
The portfolios may invest in UK government bonds (gilts and index linked gilts). Investment in short and medium-dated government bonds allows the managers to take advantage of opportunities to capture short-term movements in the government bond yield curve and bond prices, in order to achieve higher overall returns.
Management of gilts follows a top-down process, but we believe significant value can be added through stock selection. Our investment approach for UK government bonds encompasses two elements:

• An assessment of the market drivers and their behaviour in a way that allows us to define the sources of incremental return; and
• Ensuring that portfolio construction and risk allocation remain consistent with the portfolio objectives.

Covered Bonds

The funds may invest in covered bonds when thought appropriate by the managers. Issued by financial institutions, these bonds are asset backed, most often by a pool of mortgages. These highly liquid securities are regulated in the UK by the FCA and are exempt from being bailed-in.

Corporate Bonds, Sovereigns and Supranationals
The funds may also invest in Floating Rate Notes (FRNs) and short-dated bonds issued by banks and building societies with a minimum credit rating of AA- for the Cash Plus Fund and investment grade for Enhance Cash Plus. Sovereign and supranational bonds may be held and would be rated AA or above for the Cash Plus Fund.

Our credit analysis process is characterised by a focused team of experienced investors working together by utilising an efficient and disciplined approach to analysing the investment universe. We separate portfolios into four issuer categories, each requiring a different analytical approach depending on the degree of operational and financial volatility the issuer exhibits, and the extensiveness of external research coverage the issue receives. Our philosophy leads us to place a higher degree of emphasis (relative to our peers) on analysing the covenants and security that protect our investors in a default scenario. Only then can we be fully confident that we are being well compensated for taking credit risk. There is high degree of interaction and cohesiveness within the Credit team in analysing credit bonds. Our size allows decision making to be efficient, informal, and dynamic.

Asset allocation
Allocation across the permitted asset classes is largely driven by the risk/return profile of the funds in relation to their Fitch Rating. This rating reflects high quality debt in the underlying holdings, and a low volatility to market risk.

Recent process changes
Our overall investment process and philosophy has remained unchanged over time, and continues to deliver strong returns for our clients. We believe that volatility in government bond markets is likely to persist and that, as an active manager, RLAM can take advantage of pricing anomalies.

The Cash funds conducts quarterly ESG reviews with the RI team, which have focused on a number of key ESG areas, including reviewing the worst performing stocks in the funds.

Additionally, Fund Managers also monitor credit rating provider reviews and scores on companies' ESG performance and integrate this into their ongoing investment decision making practices. This process was reviewed at most recent quarterly ESG reviews. Given the more short-term nature of the cash funds, material ESG factors that tend to be governance and social factors (e.g. business ethics).

Ethical overlay
Our ethical investment process begins with screening for eligible investments, which is conducted by specialist independent consultancy MSCI, a leading provider of research into the environmental, social and governance (ESG) and ethical performance of companies.

RLAM’s ethical framework combines the avoidance of companies involved in excluded activities with the identification of best of breed companies in permitted sectors. Companies that generate over 10% of their turnover from either one or a combination of the following categories are excluded:

• Armaments -  manufacturing armaments or nuclear weapons, or associated strategic products.
• Tobacco  - growing, processing or selling tobacco products.

If a company breaches this threshold, then it is likely that that company’s involvement in that excluded sector is a noteworthy part of their business and strategy.

Also, this threshold is deemed to be realistic and appropriate in terms of assessing a company, given that it may not be possible to always pinpoint the exact turnover derived from an excluded activity. This threshold ensures that a minimum of 90% of each holding meets the ethical criteria.

Resources, Affiliations & Corporate Strategies

Please note, the following is for informational purposes only and does not necessarily reflect our response to SDR reporting.

Royal London Asset Management’s in-house Responsible Investment (RI) team of 17 professionals is led by Head of Responsible Investment, Ashley Hamilton-Claxton. The RI team works with the investment teams to monitor, assess and analyse ESG factors, vote our shares and engage with companies to encourage better social and environmental outcomes, or better risk management. This team is also responsible for helping to set out our approach and policies around systemic issues such as climate change, providing guidance, feedback and coaching to fund managers and analysts on the latest data, research, policy and industry practices.

Governance of Responsible Investment at Royal London Asset Management is integrated at varying levels of the organisation however is led by senior leadership. The Board has ultimate responsibility for setting Royal London Asset Management’s risk appetite and reviewing our strategic risks. Our Chief Investment Officer (CIO) is a regulated Senior Management Function (SMF) and is the Executive team member that is accountable for setting the investment strategy, and overseeing our Responsible Investment function, including our approach to stewardship and climate investment risk. The CIO, with support from the investment teams, updates the Board and monitors responsible investment in line with Royal London Asset Management’s risk tolerance threshold. The CIO is also responsible for ensuring responsible investment, stewardship and climate change risk management is embedded across Royal London Asset Management’s investment strategies. The CIO is a member of Royal London Asset Management’s Executive Committee and also chairs the Investment Committee.

Royal London Asset Management is a member of the following initiatives:

• United Nations Principles For Responsible Investment (UNPRI) (2008)
• Global Real Estate Sustainability Benchmark (GRESB) (2013)
• 30% Club Investor Group 2016 UK Stewardship Code (2016)
• UK Sustainable Investment and Finance Association (UKSIF) (2016)
• Carbon Disclosure Project (CDP) (2018)
• Interfaith Center on Corporate Responsibility (ICCR) (2018)
• Climate Action 100+ (2019)
• Institutional Investor Group on Climate Change (IIGCC) (2019)
• Investment Association (IA) (2019)
• Sustainability Accounting Standards Board (SASB) (2019)
• Task Force on Climate-related Financial Disclosures (TCFD) (2020)
• Climate Financial Risk Forum - FCA and PRA (CFRF) (2020)
• Financing the Just Transition Alliance (FJTA) (2020)
• Ceres (2020)
• Investor Alliance for Human Rights (2020)
• Better Buildings Partnership (2020)
• UK Green Building Council 2020 Better Buildings Partnership Climate Commitment (2021)
• Net Zero Asset Manager initiative (NZAM) (2022)
• FAIRR Initiative (2022)
• Workplace Mental Health Benchmark (CCLA) (2022)
• FCA Vote Disclosure Forum (2022)
• FCA Disclosures & Labelling Advisory Committee (2022)
• Church of England Pensions Board - Executive Pay (2022)
• International Labour Organisation (ILO) (2022)
• International Labour Organisation (ILO) - United Nations Environment Programme - Finance (UNEP-Fi) (2022)
• The Investor Agenda (2022)
• International Sustainability Standard Board (ISSB)(2022)
• Transition Plan Taskforce (TPT) (2022)
• World Benchmarking Alliance (WBA) (2022)
• Access to Medicine Foundation (2023)
• Net Zero Engagement Initiative (NZEI) organised by Institutional Investment Group on Climate Change (IIGCC) (2023)
• Swedish Council of Ethics - Human Rights in Technology (2023)
• Nature Action 100 (NA100) (2023)

Source: Royal London Asset Management, correct as of 31 March 2024, Year in brackets indicates date joined.

Dialshifter

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

...committing to reduce financed emissions across our in-scope AUM* by 50%, against a 2020 baseline, by 2030, and net zero across our in-scope AUM by 2050. While we continue to develop our Climate Transition Plan, in line with the IIGCC Net Zero Investment Framework, we seek to mitigate climate investment risks in three ways:

• Ensuring climate risk is integrated into our risk framework and is governed appropriately,
• Utilising our proprietary climate score and integrating other material ESG issues into our investment decision-making; i.e. Just Transition
• Serving as active stewards of our clients’ capital, using proxy voting/engagement as tools to address climate risks and opportunities.

*Our in-scope assets are those in funds managed and controlled by Royal London Asset Management, excluding segregated mandates on behalf of external clients. We are actively working to support our external clients with assets in segregated mandates where they have made an explicit commitment to achieving net zero, as disclosed to the Net Zero Asset Managers Initiative (NZAM).

Literature

• Fund overview & literature (including factsheet)
• Responsible Investment at RLAM

Important Information

For further information, please contact:

Royal London Asset Management Limited
80 Fenchurch Street
London, EC3M 4BY
Telephone: 020 3272 5594
E-mail: alice.bennett@rlam.co.uk
Telephone Calls may be recorded

For professional clients only. This document may not be distributed to any unauthorised persons and is not suitable for retail clients.

This document is for information purposes only and it is not intended as promotional material in any respect. The views expressed are the author’s own and do not constitute investment advice. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It does not provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations.

Past performance is not a reliable indicator of future results. The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. Portfolio characteristics and holdings are subject to change without notice. For more information concerning the risks of investing, please refer to the Prospectus or Key Investor Information Document (KIID), available via the relevant Fund Price page on www.rlam.co.uk

All confidential information relating to any Royal London Group company must be treated by you in the strictest confidence. It may only be used for the purposes of assessing the proposal to engage Royal London Asset Management Limited (RLAM). Confidential information should not be disclosed to any third party and should only be disclosed to those of your employees and professional advisers who are required to see such information for the purpose set out above. You should ensure that these persons are made aware of the confidential nature of such information and treat it accordingly. You agree to return and/ or destroy all confidential information on receipt of our written request to do so.

Issued in June 2024 by Royal London Asset Management Limited, 80 Fenchurch Street, London EC3M 4BY. Authorised and regulated by the Financial Conduct Authority, firm reference number 141665. A subsidiary of The Royal London Mutual Insurance Society Limited.

The Royal London Mutual Insurance Society Limited is registered in England and Wales number 99064. Registered Office: 80 Fenchurch Street, London EC3M 4BY. The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The Royal London Mutual Insurance Society Limited is on the Financial Services Register, registration number 117672. Registered in England and Wales number 99064. Our ref: Q RLAM EM 2051.

Last amended: 06/01/24 02:36