Schroder Global Alternative Energy Fund
SRI Style:
Environmental Style
SDR Labelling:
Sustainability Focus label
Product:
OEIC
Fund Region:
Global
Fund Asset Type:
Equity
Launch Date:
08/12/2020
Last Amended:
Jan 2024
Dialshifter (
):
Fund Size:
£246.93m
(as at: 31/12/2024)
Total Screened Themed SRI Assets:
£58000.00m
(as at: 31/12/2022)
Total Responsible Ownership Assets:
£737573.00m
(as at: 31/12/2022)
Total Assets Under Management:
£737573.00m
(as at: 31/12/2022)
ISIN:
GB00BF781J77, GB00BF781K82, GB00BF781H53, GB00BF781F30, GB00BF781D16, GB00BF781G47, GB00BF781C09, GB00BF781B91
Contact Us:
Objectives:
Fund Objectives
The fund aims to provide capital growth by investing in equity and equity related securities of companies worldwide that are associated with the global transition towards lower carbon sources of energy and which meet the investment manager's environmental, social and governance (ESG) criteria.
Investment Policy
The fund is actively managed and invests at least 80% of its assets in a concentrated range of equity and equity related securities of companies worldwide that contribute to the global transition towards lower carbon sources of energy, such as lower carbon energy production, distribution, storage, transport and associated supply chain material providers and technology companies. The fund will only invest in companies that generate at least 50% of their revenue from activities contributing to the transition, or those which play critical roles in the transition and are increasing their exposure to such activities.
The fund typically holds 30 to 60 companies.
The fund does not directly invest in certain activities, industries or groups of issuers above certain limits listed under “Sustainability Information” on the fund's webpage, accessed via www.schroders.com/en/uk/private-investor/gfc.
The fund will only invest in companies that do not cause significant environmental or social harm and have good governance procedures, as determined by the investment manager's ESG rating (please see the fund characteristics section of the prospectus for more information). These may include companies that the investment manager actively engages with to challenge identified areas of weakness in ESG performance, where it is confident that they will improve their ESG practices within a reasonable timeframe, which will typically be six month to two years, depending on the specific engagement topic.
More details on the investment manager's approach to sustainability and its engagement with companies are available on the internet site https://www.schroders.com/en/uk/private-investor/strategiccapabilities/sustainability/
The fund may also invest directly or indirectly in other securities (including in other asset classes), countries, regions, industries or currencies, collective investment schemes (including Schroder funds), warrants and money market instruments, and hold cash.
The fund may use derivatives with the aim of reducing risk or managing the Fund more efficiently (for more information please refer to section 10 of appendix III of the prospectus).
Sustainable, Responsible
&/or ESG Overview:
The fund will aim to provide investors with a focused thematic exposure to the best performing companies involved in new clean energy systems, as the world transitions to lower-carbon energy. It will target emerging technologies and strategic industries integral to the global shift to cleaner energy, seeking opportunities across key value chains, including renewable energy, energy storage and electric vehicles. It will also selectively offer exposure to the underlying materials and technologies required for the transformation to take place. The fund will not invest in companies principally involved in fossil fuels or nuclear energy.
Crucially, the focus will be kept on the energy system and the associated technologies needed to enable its change. This means the fund will only invest in companies involved in the production and distribution of clean energy, the management of energy consumption, or the production of materials and technologies required to facilitate these activities.
Primary fund last amended:
Jan 2024
Information directly from fund manager.
Fund Filters
Sustainability - General
Funds that have policies that consider (environmental and social) sustainability issues. Strategies vary but are likely to consider environmental issues like climate change, carbon emissions, biodiversity loss, resource management, environmental impacts; and social issues like equal opportunities, human rights, labour standards, diversity and adherence to internationally recognised codes. See fund information.
Find funds which substantially focus on sustainability issues
Find funds where there is a significant emphasis on (environmental and social) sustainability. Funds with a 'sustainability theme' typically place more emphasis on the area than funds with a 'sustainability policy' - meaning that it is more likely to drive investment selection. Strategies vary. See fund information for further detail.
Find funds that use the UN Global Compact to inform or help direct where they can or cannot invest and will typically not invest in companies with significant breaches (low standards) - although strategies vary. (The UNGC covers a wide range of issues - search 'UNGC'). See https://unglobalcompact.org/
The delivery of the shift to a sustainable future is a core feature of this fund and its investment strategy. See eg https://www.transitionpathwayinitiative.org/
Find funds that publicly report their performance against specifically named sustainability objectives (in addition to reporting their financial performance)
Environmental - General
Funds that have policies which relate to environmental issues. These will typically set out the fund's stance on issues such as pollution, climate change, resource management, biodiversity loss, carbon emissions, plastics and/or additional environmental impacts. Strategies vary. See fund information for further information.
Find funds that have a policy or theme that relates to managing natural resources more efficiently. Funds with this policy will be likely to favour companies that make (or enable the) more efficient use of resources - and either avoid or encourage change amongst companies with lower standards. Strategies vary. See fund information for further detail.
Funds that aim to invest in companies with strong or market leading environmental policies and practices. Strategies vary - in particular the balance between 'financial' aspects and environmental benefits. Some may invest substantially in solutions or 'positive impact' companies - others may invest in more conventional companies providing certain environmental criteria are met. See fund information for further detail.
Climate Change & Energy
Funds that have policies (documented strategies that explain their position on) climate change related issues such as greenhouse gas/carbon emissions, net zero, transitioning to lower carbon. Strategies vary. Read fund details for further information.
Funds that avoid investing in major coal, oil and/or gas (extraction) companies. Funds vary: some may exclude all companies that extract oil. Others may have exposure to oil extraction via more diversified energy companies. See fund literature to confirm details.
Funds that avoid companies involved in fracking and tar sands - which are widely regarded as controversial methods of oil and gas extraction. Strategies vary. See fund information for further information.
Funds that avoid investing in companies with coal, oil and gas reserves. See fund information for further details.
Find funds where investment in clean / renewable energy companies an other assets is central to their investment selection strategy. The proportion of the fund that is directly or indirectly invested in renewable energy varies between funds and over time. See fund information for further details.
A core element of these funds will aim to encourage the transition to lower carbon activities through responsible ownership / stewardship / engagement / voting activity
Funds that hold companies in the clean energy and renewable energy sectors (at the time research was supplied). Fund strategies vary, in particular the proportion of investment in these areas may vary significantly. Check fund literature for details.
Find funds that have policies which say they avoid or limit their investment in the nuclear industry. Strategies vary. See fund information for further detail.
The fund manager excludes companies with direct involvement in fossil fuel exploration (eg coal, oil and gas companies)
Social / Employment
All mining companies excluded
Ethical Values Led Exclusions
Find funds that have policies that set out their position on ethical or 'personal values' based issues. Strategies vary. See fund information for further detail.
Companies are excluded if they are involved in any aspect of the production chain for tobacco products, including cigarettes, vaping, e-cigarettes, chewing tobacco and cigars.
Find funds that avoid companies that manufacture products intended specifically for military use. Fund strategies vary - particularly with regard to non-strategic military products. See fund literature for fund specific details.
Find funds that avoid investment in companies involved in the production of alcohol. Strategies vary; some funds allow a small proportion of profits to come from this area. See fund literature for further information.
Find funds that avoid companies with significant involvement in the gambling industry. Some funds may allow a small proportion of profits to come from this area. See fund policy for further details.
Find funds that avoid companies that derive significant income from pornography and related areas. Strategies vary. See fund details for further information.
Human Rights
Find funds that have policies relating to human rights issues. Funds of this kind typically require companies to demonstrate higher standards, although some fund managers work to encourage improvements. Investee companies are often judged against internationally agreed norms or standards. Strategies vary. See fund information for further detail.
Governance & Management
Find fund options that have policies that relate to corporate governance issues such as board structure, executive remuneration, bribery and/or corporate corruption. These funds will typically avoid companies with poor practices. Strategies vary. See fund literature for further information.
Find funds that aim to avoid investing in companies with poor governance practices.(e.g. board structure, management practices etc.) Views may however vary on what counts as 'poor' practices - and funds may not immediately divest as they may prefer to work to encourage higher standards. See fund literature for further information.
Exclude companies that are subject to United Nations sanctions. See eg https://main.un.org/securitycouncil/en/content/un-sc-consolidated-list
Find funds that have policies explaining how managers will respond to assets / companies that do not comply with relevant anti-bribery and anti-corruption standards or laws. Strategies vary; options include stewardship/ engagement and divestment - or a combination. See fund literature for further information.
Fund managers encourage the companies they invest in to have more diverse board structures (e.g. more women on boards)
Find fund managers that encourage the banks and insurance companies they invest in to publish climate change related financial information - as set out by the Task Force on Climate Related Financial Disclosures (with the aim of helping investors measure and respond to climate risk).
A core element of these funds will aim to encourage higher ESG standards through responsible ownership / stewardship / engagement /voting activity
Fund Governance
Find funds that factor in 'environmental, social and governance' issues as part of their investment decision making process. A focus on 'ESG' typically means a fund is carrying out additional research to help reduce ESG related risks. It does not necessarily mean a focus on sustainability. Strategies vary. See fund literature.
Asset Size
Find a fund that invests in a combination of small, medium and larger (potentially multinational)companies.
Targeted Positive Investments
Find funds that invest >25% of their capital towards companies where a major part of their business is focused on helping to address environmental or social challenges.
Find funds that invest >50% of their capital in companies where a major part of their business is focused on helping to address environmental or social challenges.
Impact Methodologies
Funds that aim to measure the positive real world environmental and / or social benefits that are associated with their investment strategy. Funds that aim to deliver positive impacts and measure those impacts may be referred to as 'impact funds' - although impact measurement is not restricted to impact funds. Strategies vary. See fund information.
Find funds that specifically set out to help deliver positive environmental impacts, benefits or 'real world' outcomes.
Find funds that direct investment towards companies where a major part of their business is about solving environmental challenges. e.g. companies helping to address climate change.
Fund aims to deliver positive environmental and or social impacts (real world benefits) through its engagement with investee assets
How The Fund Works
Find funds that focus on finding and investing in companies with positive / beneficial attributes. This strategy can be applied in addition to exclusion criteria and engagement/stewardship activity.
Single resource themed funds focus their investment strategy on a single natural 'resource' eg water. See fund information for further detail.
Aims to avoid companies that do significant harm. This originates from the EU’s sustainable finance ‘DNSH’ (do no significant harm) work, which is not necessarily used by UK investors.
Find funds that have 'mapped' (reviewed) their investment selection and management strategies to identify which of the UN Sustainable Development Goals (SDGs) the fund is helping to address.
Find funds that have an ESG strategy (which is typically focused on avoiding companies that pose environmental, social or governance related risks) with additional criteria such as positive and/or negative screens, themes and stewardship strategies.
Find funds that consider both the 'positive' and 'negative' aspects of company behaviour and make balanced, considered decisions as part of their investment approach. May apply to a range of different issues and policy areas.
A major focus of these funds is the careful management of environmental, social and governance (ESG) related risks - typically by avoiding or being underweight in companies seen as posing major risks in these areas (i.e. not necessarily by using themes, exclusions etc).
Find funds that have published explanations of their ethical, social and/or environmental policies online (i.e. fund decision making strategies/ buy/sell &/or asset management strategies).
Intended Clients & Product Options
Find funds that are available via a tax efficient ISA product wrapper.
Labels & Accreditations
Finds funds classified under Article 9 of the EU’s SFDR (Sustainable Finance Disclosure Requirements). Article 9 of the SFDR applies to financial products that have sustainable investment 'objectives' - including emissions reduction objectives. (These may currently be referred to as 'impact' funds or aiming to deliver clear, specific positive outcomes.) These rules do not currently apply in the UK so fund managers may leave this field blank.
Find funds that have chosen to adopt one of the Financial Conduct Authority (FCA) SDR labels. Please note: there are a range of reasons why potentially relevant funds may not use an SDR label eg. adopting a label may be work in progress, the manager may not yet be allowed to do so because of the product type, a manager may feel their fund is insufficiently aligned to SDR requirements. Read fund literature and / or our blogs for further information.
Sustainable, Responsible &/or ESG Policy:
Global Energy Transition has the principal goal of finding companies within the energy transition universe that, at reasonable value, have the potential to deliver long-term structural real earnings and cash flow growth. The team believe that companies operating in more sustainable industries, with more sustainable business practices have the greatest ability to deliver real earnings and cash flow growth over the long-run.
Sustainability is a cornerstone of the Global Energy Transition investment process, with ESG incorporated at each stage of this process, including: (1) universe creation, (2) idea generation, and (3) portfolio construction and reporting. Therefore, we do not think about ESG as a separate investment discipline, but rather as an integral component to the way in which we evaluate and appraise every stock that is under consideration for the fund. It is a core component of our modelling and analysis and is central to the investment decisions we make.
We believe that ESG factors have a material bearing on both the alpha potential of a stock and the risks associated with owning the stock. Our analysis seeks to understand the strength of a company’s ability to operate and pressures that could be exerted on the company which might affect future returns and we look to incorporate these risks and opportunities into our financial models and investment decisions.
Process:
At the heart of the Global Energy Transition investment process is stock-level research and a ‘focus list’ of companies for which the team maintain detailed financial models and notes. A central part of the investment analysis is the sustainability classification. This classification directly impacts investment decisions by influencing the assumptions we make in our financial models (such as the long-term growth rate and equity risk premium applied) and therefore the fair value we believe a company has. In this way, our ESG analysis is fully integrated into our investment process.
By influencing the assumptions we make in our financial models, our sustainability classification directly impacts portfolio construction. The team also has an additional, direct bias towards ‘best-in-class’ companies in portfolio construction. We believe that companies with ‘best-in-class’ characteristics will be best-placed to deliver sustained earnings and cash flow growth over time, and ultimately the greatest shareholder returns.
As a general rule the team does not invest in ‘lagging’ companies. But in certain cases where the team feel the upside return potential from ‘lagging’ companies is still hugely attractive, the team will seek to engage with the company to encourage improvement in their business practices and get assurance that this improvement will take place. Where the team are confident that there is a clear path to improved practices, they will then be able to invest in these companies, subject to agreement with Schroders’ Sustainable Investment team. In such instances, practices will be carefully monitored to ensure that improvements are being made. If no improvement is observed over an appropriate time period (six months to two years), the team will reconsider the investment position.
Actively engaging with management is a core part of the investment process and our discussions with companies feed directly back into company sustainability scores in an iterative manner. In this way, the team’s view of the sustainability of a particular company can evolve over time. On average we try to meet or speak with company management once every six months. During these meetings we regularly discuss sustainability topics alongside underlying business trends, with these discussions used to inform our sustainability score and influence business practices. When making requests for change, the team use a similar approach to that used when engaging with a company on a particular controversy.
The team analyse the sustainability of all companies in the fund’s focus list.
The team use a range of resources to analyse companies. Where appropriate the team look to collaborate with the Schroders’ Sustainability Team and leverage the internal research and investment tools (including CONTEXT™) that the team has produced. But equally important are meetings with management and stock-specific analysis from the team itself to ensure that the relevant ESG information is being incorporated into the investment process. This involves taking data direct from company reports and other external sources. In this sense, the team do not rely one single source of information, but pull together various sources to help classify each company in a thoughtful manner.
Some of the metrics and questions the team will consider when assessing the sustainability of companies are shown below (many reflect those used in CONTEXT™ (Table 1). Where widely reported metrics exist that are specific and unique to individual industries and sub-sectors, the team will also consider these (alongside the metrics outlined below). For example, within the renewable energy generation sector the average length of purchase power agreement (PPA) agreed and the diversity of generating assets are useful measure of revenue stability and sustainability over time. Within the equipment industry, technological patents are important to ensure that certain technology strengths cannot be copied. In transmission and distribution, relationships with regulators are crucial, as is a history of supportive and stable policies on regulated returns.
Table 1: Key metrics that Global Energy Transition will use to assess company sustainability
- High-quality management: Does the company have a strong track record of value enhancement (historic ROE, ROIC, ROCE, CROCI). Does management have a clear understanding of sustainability issues and make clear linkages between how issues impact financial performance?
- Robust corporate governance: Are the board and sub-committees independent and diverse (% independent board members, % women on board, average age of directors). Is management remunerated fairly (LTIP linked to TSR or other return metrics). Does the ownership structure create risks for minority shareholders (majority ownership over key levels).
- Strong and flexible balance sheets: Does the company have a robust balance sheet to manage market shocks and business cycles or a clear path to improving balance sheet strength (current net-debt to equity, net-debt to EBITDA, bond maturity schedule). Does the company have the balance sheet flexibility and cash position to allow for strategic investment (net and absolute cash levels).
- Clear awareness and management of ESG concerns: Is the company able to attract high quality employees to allow greater innovation and best execution (lost time injury rate, gender diversity, employee satisfaction data, compensation relative to regional average). Does the company effectively manage its supply chain, customer base and regulatory relationships (supplier days payable, supplier auditing, brand value, customer satisfaction data). Does the company effectively manage its environmental footprint (emissions intensity, waste recycling, water usage).
Table 2: Key macro questions that the team examine when assessing business model sustainability
- Pricing Dynamics: Is the industry exposed to potential rapidly falling pricing for the goods and services it sells? Is there any indication of pricing dynamics improving or weakening? How important is pricing to top-line revenues and margins?
- Technology Trends: How exposed is the industry to disruption from other technologies? How important is technology quality to success or is success driven by cost? How important is having patents in the industry?
- Existing Infrastructure: Does the existing infrastructure in certain geographies inhibit the growth of new markets? Are their certain supply chain bottlenecks that will slow down long-term technology adoption?
- Policy Influence: How important is policy in driving demand for goods and services or is industry growth now being driven by other dynamics (price, consumer demand, etc.). How volatile has policy been over the history of the industry and are policy dynamics starting to change? What is the risk of negative policy disruption and what is the risk of improved policy support.
- Industry Structure: How competitive is the industry? How many companies are operating below the cost curve in the industry? How high are the barriers to entry in the market? Is the market over supplied from a production capacity perspective?
At a macro level, the team will also examine key industry data points, including the technology pricing, technology costs, industry structure, and changing policy (Table 2). It is important that the specific actions company’s are taking at the company level reflect wider industry risks and opportunities.
SDR Labelling: Sustainability Focus label
Fund Holdings
Disclaimer
Risk Considerations – Schroder Global Energy Transition Fund
The following risks may affect fund performance:
- Concentration risk: The fund may be concentrated in a limited number of geographical regions, industry sectors, markets and/or individual positions. This may result in large changes in the value of the fund, both up or down.
- Counterparty risk: The fund may have contractual agreements with counterparties. If a counterparty is unable to fulfil their obligations, the sum that they owe to the fund may be lost in part or in whole.
- Currency risk: The fund may lose value as a result of movements in foreign exchange rates.
- Currency risk / hedged share class: The hedging of the share class may not be fully effective and residual currency exposure may remain. The cost associated with hedging may impact performance and potential gains may be more limited than for unhedged share classes.
- Higher volatility risk: The price of this fund may be volatile as it may take higher risks in search of higher rewards.
- IBOR risk: The transition of the financial markets away from the use of interbank offered rates (IBORs) to alternative reference rates may impact the valuation of certain holdings and disrupt liquidity in certain instruments. This may impact the investment performance of the fund.
- Liquidity risk: In difficult market conditions, the fund may not be able to sell a security for full value or at all. This could affect performance and could cause the fund to defer or suspend redemptions of its shares.
- Market risk: The value of investments can go up and down and an investor may not get back the amount initially invested.
- Operational risk: Operational processes, including those related to the safekeeping of assets, may fail. This may result in losses to the fund.
- Performance risk: Investment objectives express an intended result but there is no guarantee that such a result will be achieved. Depending on market conditions and the macro economic environment, investment objectives may become more difficult to achieve.
- Sustainability risk: The fund has the objective of sustainable investment. This means it may have limited exposure to some companies, industries or sectors and may forego certain investment opportunities, or dispose of certain holdings, that do not align with its sustainability criteria chosen by the investment manager. The fund may invest in companies that do not reflect the beliefs and values of any particular investor.
| Fund Name | SRI Style | SDR Labelling | Product | Region | Asset Type | Launch Date | Last Amended |
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|---|---|---|---|---|---|---|---|---|
Schroder Global Alternative Energy Fund |
Environmental Style | Sustainability Focus label | OEIC | Global | Equity | 08/12/2020 | Jan 2024 | |
ObjectivesFund Objectives The fund aims to provide capital growth by investing in equity and equity related securities of companies worldwide that are associated with the global transition towards lower carbon sources of energy and which meet the investment manager's environmental, social and governance (ESG) criteria. Investment Policy The fund is actively managed and invests at least 80% of its assets in a concentrated range of equity and equity related securities of companies worldwide that contribute to the global transition towards lower carbon sources of energy, such as lower carbon energy production, distribution, storage, transport and associated supply chain material providers and technology companies. The fund will only invest in companies that generate at least 50% of their revenue from activities contributing to the transition, or those which play critical roles in the transition and are increasing their exposure to such activities. The fund typically holds 30 to 60 companies. The fund does not directly invest in certain activities, industries or groups of issuers above certain limits listed under “Sustainability Information” on the fund's webpage, accessed via www.schroders.com/en/uk/private-investor/gfc. The fund will only invest in companies that do not cause significant environmental or social harm and have good governance procedures, as determined by the investment manager's ESG rating (please see the fund characteristics section of the prospectus for more information). These may include companies that the investment manager actively engages with to challenge identified areas of weakness in ESG performance, where it is confident that they will improve their ESG practices within a reasonable timeframe, which will typically be six month to two years, depending on the specific engagement topic. More details on the investment manager's approach to sustainability and its engagement with companies are available on the internet site https://www.schroders.com/en/uk/private-investor/strategiccapabilities/sustainability/ The fund may also invest directly or indirectly in other securities (including in other asset classes), countries, regions, industries or currencies, collective investment schemes (including Schroder funds), warrants and money market instruments, and hold cash. The fund may use derivatives with the aim of reducing risk or managing the Fund more efficiently (for more information please refer to section 10 of appendix III of the prospectus).
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Fund Size: £246.93m (as at: 31/12/2024) Total Screened Themed SRI Assets: £58000.00m (as at: 31/12/2022) Total Responsible Ownership Assets: £737573.00m (as at: 31/12/2022) Total Assets Under Management: £737573.00m (as at: 31/12/2022) ISIN: GB00BF781J77, GB00BF781K82, GB00BF781H53, GB00BF781F30, GB00BF781D16, GB00BF781G47, GB00BF781C09, GB00BF781B91 Contact Us: sami.arouche@schroders.com |
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Sustainable, Responsible &/or ESG OverviewThe fund will aim to provide investors with a focused thematic exposure to the best performing companies involved in new clean energy systems, as the world transitions to lower-carbon energy. It will target emerging technologies and strategic industries integral to the global shift to cleaner energy, seeking opportunities across key value chains, including renewable energy, energy storage and electric vehicles. It will also selectively offer exposure to the underlying materials and technologies required for the transformation to take place. The fund will not invest in companies principally involved in fossil fuels or nuclear energy. Crucially, the focus will be kept on the energy system and the associated technologies needed to enable its change. This means the fund will only invest in companies involved in the production and distribution of clean energy, the management of energy consumption, or the production of materials and technologies required to facilitate these activities. |
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Primary fund last amended: Jan 2024 |
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Information received directly from Fund Manager |
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Fund FiltersSustainability - General
Sustainability policy
Funds that have policies that consider (environmental and social) sustainability issues. Strategies vary but are likely to consider environmental issues like climate change, carbon emissions, biodiversity loss, resource management, environmental impacts; and social issues like equal opportunities, human rights, labour standards, diversity and adherence to internationally recognised codes. See fund information.
Sustainability focus
Find funds which substantially focus on sustainability issues
Sustainability theme or focus
Find funds where there is a significant emphasis on (environmental and social) sustainability. Funds with a 'sustainability theme' typically place more emphasis on the area than funds with a 'sustainability policy' - meaning that it is more likely to drive investment selection. Strategies vary. See fund information for further detail.
UN Global Compact linked exclusion policy
Find funds that use the UN Global Compact to inform or help direct where they can or cannot invest and will typically not invest in companies with significant breaches (low standards) - although strategies vary. (The UNGC covers a wide range of issues - search 'UNGC'). See https://unglobalcompact.org/
Transition focus
The delivery of the shift to a sustainable future is a core feature of this fund and its investment strategy. See eg https://www.transitionpathwayinitiative.org/
Report against sustainability objectives
Find funds that publicly report their performance against specifically named sustainability objectives (in addition to reporting their financial performance) Environmental - General
Environmental policy
Funds that have policies which relate to environmental issues. These will typically set out the fund's stance on issues such as pollution, climate change, resource management, biodiversity loss, carbon emissions, plastics and/or additional environmental impacts. Strategies vary. See fund information for further information.
Resource efficiency policy or theme
Find funds that have a policy or theme that relates to managing natural resources more efficiently. Funds with this policy will be likely to favour companies that make (or enable the) more efficient use of resources - and either avoid or encourage change amongst companies with lower standards. Strategies vary. See fund information for further detail.
Favours cleaner, greener companies
Funds that aim to invest in companies with strong or market leading environmental policies and practices. Strategies vary - in particular the balance between 'financial' aspects and environmental benefits. Some may invest substantially in solutions or 'positive impact' companies - others may invest in more conventional companies providing certain environmental criteria are met. See fund information for further detail. Climate Change & Energy
Climate change / greenhouse gas emissions policy
Funds that have policies (documented strategies that explain their position on) climate change related issues such as greenhouse gas/carbon emissions, net zero, transitioning to lower carbon. Strategies vary. Read fund details for further information.
Coal, oil & / or gas majors excluded
Funds that avoid investing in major coal, oil and/or gas (extraction) companies. Funds vary: some may exclude all companies that extract oil. Others may have exposure to oil extraction via more diversified energy companies. See fund literature to confirm details.
Fracking and tar sands excluded
Funds that avoid companies involved in fracking and tar sands - which are widely regarded as controversial methods of oil and gas extraction. Strategies vary. See fund information for further information.
Fossil fuel reserves exclusion
Funds that avoid investing in companies with coal, oil and gas reserves. See fund information for further details.
Clean / renewable energy theme or focus
Find funds where investment in clean / renewable energy companies an other assets is central to their investment selection strategy. The proportion of the fund that is directly or indirectly invested in renewable energy varies between funds and over time. See fund information for further details.
Encourage transition to low carbon through stewardship activity
A core element of these funds will aim to encourage the transition to lower carbon activities through responsible ownership / stewardship / engagement / voting activity
Invests in clean energy / renewables
Funds that hold companies in the clean energy and renewable energy sectors (at the time research was supplied). Fund strategies vary, in particular the proportion of investment in these areas may vary significantly. Check fund literature for details.
Nuclear exclusion policy
Find funds that have policies which say they avoid or limit their investment in the nuclear industry. Strategies vary. See fund information for further detail.
Fossil fuel exploration exclusion - direct involvement
The fund manager excludes companies with direct involvement in fossil fuel exploration (eg coal, oil and gas companies) Social / Employment
Mining exclusion
All mining companies excluded Ethical Values Led Exclusions
Ethical policies
Find funds that have policies that set out their position on ethical or 'personal values' based issues. Strategies vary. See fund information for further detail.
Tobacco and related product manufacturers excluded
Companies are excluded if they are involved in any aspect of the production chain for tobacco products, including cigarettes, vaping, e-cigarettes, chewing tobacco and cigars.
Armaments manufacturers avoided
Find funds that avoid companies that manufacture products intended specifically for military use. Fund strategies vary - particularly with regard to non-strategic military products. See fund literature for fund specific details.
Alcohol production excluded
Find funds that avoid investment in companies involved in the production of alcohol. Strategies vary; some funds allow a small proportion of profits to come from this area. See fund literature for further information.
Gambling avoidance policy
Find funds that avoid companies with significant involvement in the gambling industry. Some funds may allow a small proportion of profits to come from this area. See fund policy for further details.
Pornography avoidance policy
Find funds that avoid companies that derive significant income from pornography and related areas. Strategies vary. See fund details for further information. Human Rights
Human rights policy
Find funds that have policies relating to human rights issues. Funds of this kind typically require companies to demonstrate higher standards, although some fund managers work to encourage improvements. Investee companies are often judged against internationally agreed norms or standards. Strategies vary. See fund information for further detail. Governance & Management
Governance policy
Find fund options that have policies that relate to corporate governance issues such as board structure, executive remuneration, bribery and/or corporate corruption. These funds will typically avoid companies with poor practices. Strategies vary. See fund literature for further information.
Avoids companies with poor governance
Find funds that aim to avoid investing in companies with poor governance practices.(e.g. board structure, management practices etc.) Views may however vary on what counts as 'poor' practices - and funds may not immediately divest as they may prefer to work to encourage higher standards. See fund literature for further information.
UN sanctions exclusion
Exclude companies that are subject to United Nations sanctions. See eg https://main.un.org/securitycouncil/en/content/un-sc-consolidated-list
Anti-bribery and corruption policy
Find funds that have policies explaining how managers will respond to assets / companies that do not comply with relevant anti-bribery and anti-corruption standards or laws. Strategies vary; options include stewardship/ engagement and divestment - or a combination. See fund literature for further information.
Encourage board diversity e.g. gender
Fund managers encourage the companies they invest in to have more diverse board structures (e.g. more women on boards)
Encourage TCFD alignment for banks & insurance companies
Find fund managers that encourage the banks and insurance companies they invest in to publish climate change related financial information - as set out by the Task Force on Climate Related Financial Disclosures (with the aim of helping investors measure and respond to climate risk).
Encourage higher ESG standards through stewardship activity
A core element of these funds will aim to encourage higher ESG standards through responsible ownership / stewardship / engagement /voting activity Fund Governance
ESG integration strategy
Find funds that factor in 'environmental, social and governance' issues as part of their investment decision making process. A focus on 'ESG' typically means a fund is carrying out additional research to help reduce ESG related risks. It does not necessarily mean a focus on sustainability. Strategies vary. See fund literature. Asset Size
Invests in small, mid and large cap companies / assets
Find a fund that invests in a combination of small, medium and larger (potentially multinational)companies. Targeted Positive Investments
Invests >25% of fund in environmental/social solutions companies
Find funds that invest >25% of their capital towards companies where a major part of their business is focused on helping to address environmental or social challenges.
Invests >50% of fund in environmental/social solutions companies
Find funds that invest >50% of their capital in companies where a major part of their business is focused on helping to address environmental or social challenges. Impact Methodologies
Measures positive impacts
Funds that aim to measure the positive real world environmental and / or social benefits that are associated with their investment strategy. Funds that aim to deliver positive impacts and measure those impacts may be referred to as 'impact funds' - although impact measurement is not restricted to impact funds. Strategies vary. See fund information.
Positive environmental impact theme
Find funds that specifically set out to help deliver positive environmental impacts, benefits or 'real world' outcomes.
Invests in environmental solutions companies
Find funds that direct investment towards companies where a major part of their business is about solving environmental challenges. e.g. companies helping to address climate change.
Aim to deliver positive impacts through engagement
Fund aims to deliver positive environmental and or social impacts (real world benefits) through its engagement with investee assets How The Fund Works
Positive selection bias
Find funds that focus on finding and investing in companies with positive / beneficial attributes. This strategy can be applied in addition to exclusion criteria and engagement/stewardship activity.
Single resource theme or focus
Single resource themed funds focus their investment strategy on a single natural 'resource' eg water. See fund information for further detail.
Significant harm exclusion
Aims to avoid companies that do significant harm. This originates from the EU’s sustainable finance ‘DNSH’ (do no significant harm) work, which is not necessarily used by UK investors.
Assets mapped to SDGs
Find funds that have 'mapped' (reviewed) their investment selection and management strategies to identify which of the UN Sustainable Development Goals (SDGs) the fund is helping to address.
Combines ESG strategy with other SRI criteria
Find funds that have an ESG strategy (which is typically focused on avoiding companies that pose environmental, social or governance related risks) with additional criteria such as positive and/or negative screens, themes and stewardship strategies.
Balances company 'pros and cons' / best in sector
Find funds that consider both the 'positive' and 'negative' aspects of company behaviour and make balanced, considered decisions as part of their investment approach. May apply to a range of different issues and policy areas.
Focus on ESG risk mitigation
A major focus of these funds is the careful management of environmental, social and governance (ESG) related risks - typically by avoiding or being underweight in companies seen as posing major risks in these areas (i.e. not necessarily by using themes, exclusions etc).
SRI / ESG / Ethical policies explained on website
Find funds that have published explanations of their ethical, social and/or environmental policies online (i.e. fund decision making strategies/ buy/sell &/or asset management strategies). Intended Clients & Product Options
Available via an ISA (OEIC only)
Find funds that are available via a tax efficient ISA product wrapper. Labels & Accreditations
SFDR Article 9 fund / product (EU)
Finds funds classified under Article 9 of the EU’s SFDR (Sustainable Finance Disclosure Requirements). Article 9 of the SFDR applies to financial products that have sustainable investment 'objectives' - including emissions reduction objectives. (These may currently be referred to as 'impact' funds or aiming to deliver clear, specific positive outcomes.) These rules do not currently apply in the UK so fund managers may leave this field blank.
SDR Labelled
Find funds that have chosen to adopt one of the Financial Conduct Authority (FCA) SDR labels. Please note: there are a range of reasons why potentially relevant funds may not use an SDR label eg. adopting a label may be work in progress, the manager may not yet be allowed to do so because of the product type, a manager may feel their fund is insufficiently aligned to SDR requirements. Read fund literature and / or our blogs for further information. Sustainable, Responsible &/or ESG Policy:Global Energy Transition has the principal goal of finding companies within the energy transition universe that, at reasonable value, have the potential to deliver long-term structural real earnings and cash flow growth. The team believe that companies operating in more sustainable industries, with more sustainable business practices have the greatest ability to deliver real earnings and cash flow growth over the long-run. Sustainability is a cornerstone of the Global Energy Transition investment process, with ESG incorporated at each stage of this process, including: (1) universe creation, (2) idea generation, and (3) portfolio construction and reporting. Therefore, we do not think about ESG as a separate investment discipline, but rather as an integral component to the way in which we evaluate and appraise every stock that is under consideration for the fund. It is a core component of our modelling and analysis and is central to the investment decisions we make. We believe that ESG factors have a material bearing on both the alpha potential of a stock and the risks associated with owning the stock. Our analysis seeks to understand the strength of a company’s ability to operate and pressures that could be exerted on the company which might affect future returns and we look to incorporate these risks and opportunities into our financial models and investment decisions. Process:At the heart of the Global Energy Transition investment process is stock-level research and a ‘focus list’ of companies for which the team maintain detailed financial models and notes. A central part of the investment analysis is the sustainability classification. This classification directly impacts investment decisions by influencing the assumptions we make in our financial models (such as the long-term growth rate and equity risk premium applied) and therefore the fair value we believe a company has. In this way, our ESG analysis is fully integrated into our investment process. By influencing the assumptions we make in our financial models, our sustainability classification directly impacts portfolio construction. The team also has an additional, direct bias towards ‘best-in-class’ companies in portfolio construction. We believe that companies with ‘best-in-class’ characteristics will be best-placed to deliver sustained earnings and cash flow growth over time, and ultimately the greatest shareholder returns. As a general rule the team does not invest in ‘lagging’ companies. But in certain cases where the team feel the upside return potential from ‘lagging’ companies is still hugely attractive, the team will seek to engage with the company to encourage improvement in their business practices and get assurance that this improvement will take place. Where the team are confident that there is a clear path to improved practices, they will then be able to invest in these companies, subject to agreement with Schroders’ Sustainable Investment team. In such instances, practices will be carefully monitored to ensure that improvements are being made. If no improvement is observed over an appropriate time period (six months to two years), the team will reconsider the investment position. Actively engaging with management is a core part of the investment process and our discussions with companies feed directly back into company sustainability scores in an iterative manner. In this way, the team’s view of the sustainability of a particular company can evolve over time. On average we try to meet or speak with company management once every six months. During these meetings we regularly discuss sustainability topics alongside underlying business trends, with these discussions used to inform our sustainability score and influence business practices. When making requests for change, the team use a similar approach to that used when engaging with a company on a particular controversy.
The team analyse the sustainability of all companies in the fund’s focus list. The team use a range of resources to analyse companies. Where appropriate the team look to collaborate with the Schroders’ Sustainability Team and leverage the internal research and investment tools (including CONTEXT™) that the team has produced. But equally important are meetings with management and stock-specific analysis from the team itself to ensure that the relevant ESG information is being incorporated into the investment process. This involves taking data direct from company reports and other external sources. In this sense, the team do not rely one single source of information, but pull together various sources to help classify each company in a thoughtful manner. Some of the metrics and questions the team will consider when assessing the sustainability of companies are shown below (many reflect those used in CONTEXT™ (Table 1). Where widely reported metrics exist that are specific and unique to individual industries and sub-sectors, the team will also consider these (alongside the metrics outlined below). For example, within the renewable energy generation sector the average length of purchase power agreement (PPA) agreed and the diversity of generating assets are useful measure of revenue stability and sustainability over time. Within the equipment industry, technological patents are important to ensure that certain technology strengths cannot be copied. In transmission and distribution, relationships with regulators are crucial, as is a history of supportive and stable policies on regulated returns.
Table 1: Key metrics that Global Energy Transition will use to assess company sustainability
Table 2: Key macro questions that the team examine when assessing business model sustainability
At a macro level, the team will also examine key industry data points, including the technology pricing, technology costs, industry structure, and changing policy (Table 2). It is important that the specific actions company’s are taking at the company level reflect wider industry risks and opportunities.
SDR Labelling: Sustainability Focus label Fund HoldingsDisclaimerRisk Considerations – Schroder Global Energy Transition Fund The following risks may affect fund performance:
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