Fundsmith Stewardship Fund

SRI Style:

Sustainability Tilt

SDR Labelling:

Unlabelled with sustainable characteristics

Product:

OEIC

Fund Region:

Global

Fund Asset Type:

Equity

Launch Date:

01/11/2017

Last Amended:

Sep 2023

Dialshifter ():

Fund Size:

£650.29m

(as at: 30/09/2024)

Total Screened Themed SRI Assets:

£1122.00m

(as at: 31/07/2023)

Total Responsible Ownership Assets:

£32940.00m

(as at: 31/07/0003)

Total Assets Under Management:

£36836.00m

(as at: 31/07/2023)

ISIN:

GB00BF0V6Q57, GB00BF0V6P41, GB00BK5MT475, GB00BK5MT582, GB00BF0V6P41, GB00BF0V6Q57, GB00B4M93C53, GB00B4LPDJ14, GB00B4QBRK32, GB00B41YBW71, GB00B4MR8G82

Objectives:

The Company will invest in equities on a global basis. The Company’s approach is to be a long term investor in its chosen stocks.  It will not adopt short-term trading strategies. The Company has stringent investment criteria which the ACD and Investment Manager adhere to in selecting securities for the Company’s investment portfolio.  These criteria aim to ensure that the Company invests in high quality businesses which in the opinion of the ACD and Investment Manager are those:

  • high quality businesses that can sustain a high return on operating capital employed;
  • businesses whose advantages are difficult to replicate;
  • businesses which do not require significant leverage to generate returns;
  • businesses with a high degree of certainty of growth from reinvestment of their cash flows at high rates of return;
  • businesses that are resilient to change, particularly technological innovation;
  • businesses whose valuation is considered to be attractive.

 

The Company will not invest in businesses which have substantial interests in any of the following sectors:

  • Aerospace and Defence
  • Brewers, Distillers and Vintners
  • Casinos and Gaming
  • Gas and Electric Utilities
  • Metals & Mining
  • Oil, Gas and Consumable Fuels
  • Pornography
  • Tobacco

In addition, the ACD and the Investment Manager apply further criteria to screen investments in accordance with the ACD's sustainable investment policy. The ACD evaluates sustainability in the widest sense, taking account not only the companies handling of environmental, social and governance policies and practices but also their policies and practices on research and development, new product innovation, dividend policy and the adequacy of capital investment.

 

 

Sustainable, Responsible
&/or ESG Overview:

No response when requested update from manager (August 2024)

 

As long-term investors, ESG has always been an integral part of our investment process. We want to invest in companies that will be around forever and be able to maintain a return on capital well in excess of its cost of capital across this period. If a company were to have a significant negative impact on the environment, communities or other stakeholders in the business then it would be less capable of maintaining its excess return. Hence, we have also incorporated ESG factors in the widest possible sense in our investment process.

 

Our approach is to be a long-term investor in our chosen stocks and our investment strategy is built around a simple 3 step strategy: buy good companies, don’t overpay, and do nothing. We will invest in equities on a global basis and will not adopt short-term trading strategies.

 

For the interests of time and completeness a full description of how we incorporate ESG factors into our investment process please see our Responsible Investment Policy (https://www.fundsmith.co.uk/media/swxplrtk/responsible-investment-policy.pdf) and our Stewardship Report (https://www.fundsmith.co.uk/media/ixubdiog/fundsmith-stewardship-report-2022.pdf).

Primary fund last amended:

Sep 2023

Information directly from fund manager.

Fund Filters

Sustainability - 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

Encourage more sustainable practices through stewardship

A core element of these funds aim to encourage higher sustainability standards across business practices through responsible ownership / stewardship / engagement / voting activity

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.

Limits exposure to carbon intensive industries

Funds that limit or 'reduce' their exposure to carbon intensive industries (ie sectors which are major contributors to climate change. Funds vary - some funds may be 'underweight' in this area which means they may have some investment in highly carbon intensive areas. Funds of this kind may choose companies they consider to be 'best in sector' and encourage ever higher standards. Strategies vary. See fund information for further details.

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
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.

Arctic drilling exclusion

Funds that avoid companies that are involved in extracting oil from the Arctic regions. See fund literature for further details.

Fossil fuel reserves exclusion

Funds that avoid investing in companies with coal, oil and gas reserves. See fund information for further 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)

Fossil fuel exploration exclusion – indirect involvement

The fund manager excludes companies with indirect involvement in fossil fuel exploration. For example they would be expected to exclude banks and insurance companies that are effectively enabling new coal, oil and or gas reserves to be discovered and in due course extracted through the provision of necessary finance or services.

Ethical Values Led Exclusions
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.

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.

Gilts & Sovereigns
Gilts / government bonds - exclude some

Find funds that avoid investing in 'some' gilts or government bonds. Strategies vary, but this may relate to avoiding specific countries or particular reasons for bond issuance. 'Green gilts' for example would be likely to be acceptable. See fund literature for further information.

Gilts / government bonds - exclude all

Find funds that do not invest in, or exclude, gilts and/or government bonds.

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

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.

ESG factors included in Assessment of Value (AoV) report

Environmental, social and governance issues are part of this fund’s reporting of their ‘value’ to clients. AoV reporting is a statutory requirement. Including ESG factors in its calculation is not.

Asset Size
Over 50% large cap companies

Find funds that invests more than half of their money into what are commonly regarded as 'large companies'. This will typically mean that the market capitalisation (or value) of the companies they hold is in excess of £5 to £10 billion.

Invests mostly in large cap companies / assets

Find funds that have SRI strategies and focus their investment stock selection on larger companies. (e.g. over circa £5-£10bn)

How The Fund Works
Negative selection bias

Find funds where their main 'ethical approach' is to avoid companies by using negative screening criteria. Read fund literature for further information.

Limited / few ethical exclusions

Find funds with few exclusions - typically for example exclude tobacco or companies that breach commonly adopted standards or norms such as the UN Global Compact.

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.

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).

Unscreened Assets & Cash
All assets (except cash) meet published sustainability criteria

All assets held in the fund - except cash - meet the sustainability criteria published in fund documentation.

Intended Clients & Product Options
Intended for investors interested in sustainability

Finds funds designed to meet the needs of individual investors with an interest in sustainability issues.

Available via an ISA (OEIC only)

Find funds that are available via a tax efficient ISA product wrapper.

Fund Management Company Information

About The Business
Boutique / specialist fund management company

Find fund management companies that are smaller or specialise in particular areas - notably, ideally ESG related. Strategies vary.

Responsible ownership / stewardship policy or strategy (AFM company wide)

Finds fund management companies that have a published company wide stewardship, engagement and / or responsible ownership policy or strategy that covers all investments. Stewardship typically involves encouraging higher ESG standards through voting and dialogue.

ESG / SRI engagement (AFM company wide)

Find fund management companies that actively encourage higher 'environmental, social and governance' and/or 'sustainable and responsible investment' practices across investee companies - typically where the aim is to encourage positive change that is aligned with the best interests of investors. Strategies vary. See additional information and options.

Vote all* shares at AGMs / EGMs (AFM company wide)

Find fund managers that vote all* the shares they own at Annual General Meetings and Extraordinary General Meetings. A commitment to voting shares is a key indicator of 'responsible share ownership' demonstrating their support for or disagreement with management policy. (*situations can legitimately, occasionally occur where voting proves impossible, but in principle all shares should be voted.)

Responsible ownership policy for non SRI funds (AFM company wide)

Find funds run by fund managers that apply Responsible ownership or 'Stewardship' policies to all or most of their investment assets. This means active involvement (e.g. voting, dialogue) with the companies they invest in across funds (not normally limited to ethical or SRI options.) Read fund literature for further information.

Integrates ESG factors into all / most (AFM) fund research

Find fund management companies that consider environmental, social and governance (ESG) issues when deciding whether or not to invest in a company for all / almost all of their funds and other assets. This is increasingly seen as part of sound risk management.

Diversity, equality & inclusion engagement policy (AFM company wide)

Find fund management companies that encourage the companies they invest in to have strong diversity, race, gender and other equality policies across all assets held, not simply screened or themed SRI/ESG funds. (ie Asset Management company wide).

Collaborations & Affiliations
PRI signatory

Find fund management companies that have signed up to the UN backed 'Principles of Responsible Investment'.

Investment Association (IA) member

Fund management entity is a member of the Investment Association https://www.theia.org/

Resources
In-house responsible ownership / voting expertise

Find fund management companies that employ people to steer and support fund managers in voting shares at company AGM's and EGMs in ways that are consistent with encouraging higher ESG/sustainability standards.

Employ specialist ESG / SRI / sustainability researchers

Find a fund management company that directly employs specialist ESG/SRI/sustainability researchers or analysts. This allows asset managers to discuss environmental, social and governance risks and opportunities directly with companies.

Use specialist ESG / SRI / sustainability research companies

Find fund management companies that makes use of expert external research companies. This can help deliver specialist expertise and means resources are pooled with other investors.

Accreditations
UK Stewardship Code signatory (AFM company wide)

Find fund managers that are signatories to the FRC UK Stewardship Code, which sets out a framework for constructive investor / investee relations where fund managers are encouraged to behave like responsible, typically longer term 'company owners'.

Engagement Approach
Engaging on climate change issues

Fund manager has stewardship /responsible ownership strategy that is focused on addressing climate change with investee assets.

Engaging on labour / employment issues

Asset manager has responsible ownership / stewardship strategy in place that aims to improve labour standards for the benefit of employees in investee companies (and potentially their suppliers)

Engaging on governance issues

Fund managers have stewardship strategies in place that focus on improving governance standards across investee assets

Engaging on responsible supply chain issues

Has a stewardship / responsible ownership strategy that encourages responsible supply chain - ie the managers will discuss environmental, social and governance issues with investee companies with the aim of raising standards

Company Wide Exclusions
Controversial weapons avoidance policy (AFM company wide)

Find fund management companies (not funds) that avoid investment in 'controversial weapons' across all of their funds and other investment vehicles.

Transparency
Publish responsible ownership / stewardship report (AFM company wide)

Find fund management companies that publish a report detailing their responsible investment ownership - also known as 'Stewardship' - activity.

Full SRI / responsible ownership policy information on company website

Find companies that publish information about their sustainable and responsible investment strategies on their company website.

Publish full voting record (AFM company wide)

Fund management companies that publish a full record of how they vote their shares at AGMs (annual general meetings) and EGMs (extraordinary general meetings). Voting strategies have an important role to play encouraging higher environmental, social and governance standards.

Sustainable, Responsible &/or ESG Policy:

The Fundsmith Sustainable Equity Fund (FSEF) will not invest in businesses which have substantial interests in any of the following sectors:

  • Aerospace and Defence
  • Brewers, Distillers and Vintners
  • Casinos and Gaming
  • Gas and Electric Utilities
  • Metals and Mining
  • Oil, Gas and Consumable Fuels
  • Pornography
  • Tobacco

 

In addition, we apply further criteria to screen investments in accordance with our . We evaluate sustainability in the widest sense, taking account not only the companies handling of environmental, social and governance policies and practices but also their policies and practices on research and development, new product innovation, dividend policy and the adequacy of capital investment.

 

All research is done in-house using data from Bloomberg or reported by the company. We collect any positive or negative qualitative ESG and innovation information and store it in our ESG and innovation Database. We use RepRisk alongside this as a proxy for public sentiment towards companies and absolute impact, and to catch any coverage we may have missed. We record key quantitative ESG data, such as greenhouse gas emissions, employee diversity, board diversity in a separate database and use this as a look-through for our portfolios against a comparable index.

Process:

See SRI / Ethical policy

 

Resources, Affiliations & Corporate Strategies:

All of our research is done in-house, and we are signatories of the UN PRI and the UK Stewardship code.

We monitor company news on a daily basis in the morning news, which has pretty detailed coverage of daily news flow. This covers much of the qualitative news. On a monthly basis we look the weighted environmental impact stats and the RepRisk of the portfolio. The RepRisk score, which is a measure of reputational risk from ESG factors, acts as a proxy for absolute impact and covers any news we may have missed.

 

Tom Boles is Head of Sustainability. The analysts on the Fundsmith Equity Fund and Fundsmith Sustainable Equity Fund are Daniel Washburn, Tom Boles and Frank Diebold who each integrate ESG considerations when analysing a company. As long-term shareholders, we consider this to be an important factor in selecting companies that can sustain a high return on capital.

 

Julian Robins also does analytic work on the Fundsmith Equity Fund and the Fundsmith Sustainable Equity, while he is also the Head of Research.

 

Terry Smith is the fund manager and makes all final decisions.

The firm-wide Responsible Investment policy can be reviewed at: https://www.fundsmith.co.uk/docs/default-source/responsible-investment-policy/responsible-investment-policy.pdf

 

SDR Labelling:

Unlabelled with sustainable characteristics

Voting Record

Disclaimer

Disclaimer

An English language prospectus for the Fundsmith Sustainable Equity Fund is available on request and via the Fundsmith website and investors should consult this document before purchasing shares in the fund. Past performance is not necessarily a guide to future performance. The value of investments and the income from them may fall as well as rise and be affected by changes in exchange rates, and you may not get back the amount of your original investment. Fundsmith LLP does not offer investment advice or make any recommendations regarding the suitability of its product. This financial promotion is intended for UK residents only and is communicated by Fundsmith LLP which is authorised and regulated by the Financial Conduct Authority.

Fund Name SRI Style SDR Labelling Product Region Asset Type Launch Date Last Amended

Fundsmith Stewardship Fund

Sustainability Tilt Unlabelled with sustainable characteristics OEIC Global Equity 01/11/2017 Sep 2023

Objectives

The Company will invest in equities on a global basis. The Company’s approach is to be a long term investor in its chosen stocks.  It will not adopt short-term trading strategies. The Company has stringent investment criteria which the ACD and Investment Manager adhere to in selecting securities for the Company’s investment portfolio.  These criteria aim to ensure that the Company invests in high quality businesses which in the opinion of the ACD and Investment Manager are those:

  • high quality businesses that can sustain a high return on operating capital employed;
  • businesses whose advantages are difficult to replicate;
  • businesses which do not require significant leverage to generate returns;
  • businesses with a high degree of certainty of growth from reinvestment of their cash flows at high rates of return;
  • businesses that are resilient to change, particularly technological innovation;
  • businesses whose valuation is considered to be attractive.

 

The Company will not invest in businesses which have substantial interests in any of the following sectors:

  • Aerospace and Defence
  • Brewers, Distillers and Vintners
  • Casinos and Gaming
  • Gas and Electric Utilities
  • Metals & Mining
  • Oil, Gas and Consumable Fuels
  • Pornography
  • Tobacco

In addition, the ACD and the Investment Manager apply further criteria to screen investments in accordance with the ACD's sustainable investment policy. The ACD evaluates sustainability in the widest sense, taking account not only the companies handling of environmental, social and governance policies and practices but also their policies and practices on research and development, new product innovation, dividend policy and the adequacy of capital investment.

 

 

Fund Size: £650.29m

(as at: 30/09/2024)

Total Screened Themed SRI Assets: £1122.00m

(as at: 31/07/2023)

Total Responsible Ownership Assets: £32940.00m

(as at: 31/07/0003)

Total Assets Under Management: £36836.00m

(as at: 31/07/2023)

ISIN: GB00BF0V6Q57, GB00BF0V6P41, GB00BK5MT475, GB00BK5MT582, GB00BF0V6P41, GB00BF0V6Q57, GB00B4M93C53, GB00B4LPDJ14, GB00B4QBRK32, GB00B41YBW71, GB00B4MR8G82

Contact Us: ir@fundsmith.co.uk

Sustainable, Responsible &/or ESG Overview

No response when requested update from manager (August 2024)

 

As long-term investors, ESG has always been an integral part of our investment process. We want to invest in companies that will be around forever and be able to maintain a return on capital well in excess of its cost of capital across this period. If a company were to have a significant negative impact on the environment, communities or other stakeholders in the business then it would be less capable of maintaining its excess return. Hence, we have also incorporated ESG factors in the widest possible sense in our investment process.

 

Our approach is to be a long-term investor in our chosen stocks and our investment strategy is built around a simple 3 step strategy: buy good companies, don’t overpay, and do nothing. We will invest in equities on a global basis and will not adopt short-term trading strategies.

 

For the interests of time and completeness a full description of how we incorporate ESG factors into our investment process please see our Responsible Investment Policy (https://www.fundsmith.co.uk/media/swxplrtk/responsible-investment-policy.pdf) and our Stewardship Report (https://www.fundsmith.co.uk/media/ixubdiog/fundsmith-stewardship-report-2022.pdf).

Primary fund last amended: Sep 2023

Information received directly from Fund Manager

Please select what you would like to read:

Fund Filters

Sustainability - 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

Encourage more sustainable practices through stewardship

A core element of these funds aim to encourage higher sustainability standards across business practices through responsible ownership / stewardship / engagement / voting activity

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.

Limits exposure to carbon intensive industries

Funds that limit or 'reduce' their exposure to carbon intensive industries (ie sectors which are major contributors to climate change. Funds vary - some funds may be 'underweight' in this area which means they may have some investment in highly carbon intensive areas. Funds of this kind may choose companies they consider to be 'best in sector' and encourage ever higher standards. Strategies vary. See fund information for further details.

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
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.

Arctic drilling exclusion

Funds that avoid companies that are involved in extracting oil from the Arctic regions. See fund literature for further details.

Fossil fuel reserves exclusion

Funds that avoid investing in companies with coal, oil and gas reserves. See fund information for further 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)

Fossil fuel exploration exclusion – indirect involvement

The fund manager excludes companies with indirect involvement in fossil fuel exploration. For example they would be expected to exclude banks and insurance companies that are effectively enabling new coal, oil and or gas reserves to be discovered and in due course extracted through the provision of necessary finance or services.

Ethical Values Led Exclusions
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.

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.

Gilts & Sovereigns
Gilts / government bonds - exclude some

Find funds that avoid investing in 'some' gilts or government bonds. Strategies vary, but this may relate to avoiding specific countries or particular reasons for bond issuance. 'Green gilts' for example would be likely to be acceptable. See fund literature for further information.

Gilts / government bonds - exclude all

Find funds that do not invest in, or exclude, gilts and/or government bonds.

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

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.

ESG factors included in Assessment of Value (AoV) report

Environmental, social and governance issues are part of this fund’s reporting of their ‘value’ to clients. AoV reporting is a statutory requirement. Including ESG factors in its calculation is not.

Asset Size
Over 50% large cap companies

Find funds that invests more than half of their money into what are commonly regarded as 'large companies'. This will typically mean that the market capitalisation (or value) of the companies they hold is in excess of £5 to £10 billion.

Invests mostly in large cap companies / assets

Find funds that have SRI strategies and focus their investment stock selection on larger companies. (e.g. over circa £5-£10bn)

How The Fund Works
Negative selection bias

Find funds where their main 'ethical approach' is to avoid companies by using negative screening criteria. Read fund literature for further information.

Limited / few ethical exclusions

Find funds with few exclusions - typically for example exclude tobacco or companies that breach commonly adopted standards or norms such as the UN Global Compact.

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.

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).

Unscreened Assets & Cash
All assets (except cash) meet published sustainability criteria

All assets held in the fund - except cash - meet the sustainability criteria published in fund documentation.

Intended Clients & Product Options
Intended for investors interested in sustainability

Finds funds designed to meet the needs of individual investors with an interest in sustainability issues.

Available via an ISA (OEIC only)

Find funds that are available via a tax efficient ISA product wrapper.

Fund Management Company Information

About The Business
Boutique / specialist fund management company

Find fund management companies that are smaller or specialise in particular areas - notably, ideally ESG related. Strategies vary.

Responsible ownership / stewardship policy or strategy (AFM company wide)

Finds fund management companies that have a published company wide stewardship, engagement and / or responsible ownership policy or strategy that covers all investments. Stewardship typically involves encouraging higher ESG standards through voting and dialogue.

ESG / SRI engagement (AFM company wide)

Find fund management companies that actively encourage higher 'environmental, social and governance' and/or 'sustainable and responsible investment' practices across investee companies - typically where the aim is to encourage positive change that is aligned with the best interests of investors. Strategies vary. See additional information and options.

Vote all* shares at AGMs / EGMs (AFM company wide)

Find fund managers that vote all* the shares they own at Annual General Meetings and Extraordinary General Meetings. A commitment to voting shares is a key indicator of 'responsible share ownership' demonstrating their support for or disagreement with management policy. (*situations can legitimately, occasionally occur where voting proves impossible, but in principle all shares should be voted.)

Responsible ownership policy for non SRI funds (AFM company wide)

Find funds run by fund managers that apply Responsible ownership or 'Stewardship' policies to all or most of their investment assets. This means active involvement (e.g. voting, dialogue) with the companies they invest in across funds (not normally limited to ethical or SRI options.) Read fund literature for further information.

Integrates ESG factors into all / most (AFM) fund research

Find fund management companies that consider environmental, social and governance (ESG) issues when deciding whether or not to invest in a company for all / almost all of their funds and other assets. This is increasingly seen as part of sound risk management.

Diversity, equality & inclusion engagement policy (AFM company wide)

Find fund management companies that encourage the companies they invest in to have strong diversity, race, gender and other equality policies across all assets held, not simply screened or themed SRI/ESG funds. (ie Asset Management company wide).

Collaborations & Affiliations
PRI signatory

Find fund management companies that have signed up to the UN backed 'Principles of Responsible Investment'.

Investment Association (IA) member

Fund management entity is a member of the Investment Association https://www.theia.org/

Resources
In-house responsible ownership / voting expertise

Find fund management companies that employ people to steer and support fund managers in voting shares at company AGM's and EGMs in ways that are consistent with encouraging higher ESG/sustainability standards.

Employ specialist ESG / SRI / sustainability researchers

Find a fund management company that directly employs specialist ESG/SRI/sustainability researchers or analysts. This allows asset managers to discuss environmental, social and governance risks and opportunities directly with companies.

Use specialist ESG / SRI / sustainability research companies

Find fund management companies that makes use of expert external research companies. This can help deliver specialist expertise and means resources are pooled with other investors.

Accreditations
UK Stewardship Code signatory (AFM company wide)

Find fund managers that are signatories to the FRC UK Stewardship Code, which sets out a framework for constructive investor / investee relations where fund managers are encouraged to behave like responsible, typically longer term 'company owners'.

Engagement Approach
Engaging on climate change issues

Fund manager has stewardship /responsible ownership strategy that is focused on addressing climate change with investee assets.

Engaging on labour / employment issues

Asset manager has responsible ownership / stewardship strategy in place that aims to improve labour standards for the benefit of employees in investee companies (and potentially their suppliers)

Engaging on governance issues

Fund managers have stewardship strategies in place that focus on improving governance standards across investee assets

Engaging on responsible supply chain issues

Has a stewardship / responsible ownership strategy that encourages responsible supply chain - ie the managers will discuss environmental, social and governance issues with investee companies with the aim of raising standards

Company Wide Exclusions
Controversial weapons avoidance policy (AFM company wide)

Find fund management companies (not funds) that avoid investment in 'controversial weapons' across all of their funds and other investment vehicles.

Transparency
Publish responsible ownership / stewardship report (AFM company wide)

Find fund management companies that publish a report detailing their responsible investment ownership - also known as 'Stewardship' - activity.

Full SRI / responsible ownership policy information on company website

Find companies that publish information about their sustainable and responsible investment strategies on their company website.

Publish full voting record (AFM company wide)

Fund management companies that publish a full record of how they vote their shares at AGMs (annual general meetings) and EGMs (extraordinary general meetings). Voting strategies have an important role to play encouraging higher environmental, social and governance standards.

Sustainable, Responsible &/or ESG Policy:

The Fundsmith Sustainable Equity Fund (FSEF) will not invest in businesses which have substantial interests in any of the following sectors:

  • Aerospace and Defence
  • Brewers, Distillers and Vintners
  • Casinos and Gaming
  • Gas and Electric Utilities
  • Metals and Mining
  • Oil, Gas and Consumable Fuels
  • Pornography
  • Tobacco

 

In addition, we apply further criteria to screen investments in accordance with our . We evaluate sustainability in the widest sense, taking account not only the companies handling of environmental, social and governance policies and practices but also their policies and practices on research and development, new product innovation, dividend policy and the adequacy of capital investment.

 

All research is done in-house using data from Bloomberg or reported by the company. We collect any positive or negative qualitative ESG and innovation information and store it in our ESG and innovation Database. We use RepRisk alongside this as a proxy for public sentiment towards companies and absolute impact, and to catch any coverage we may have missed. We record key quantitative ESG data, such as greenhouse gas emissions, employee diversity, board diversity in a separate database and use this as a look-through for our portfolios against a comparable index.

Process:

See SRI / Ethical policy

 

Resources, Affiliations & Corporate Strategies:

All of our research is done in-house, and we are signatories of the UN PRI and the UK Stewardship code.

We monitor company news on a daily basis in the morning news, which has pretty detailed coverage of daily news flow. This covers much of the qualitative news. On a monthly basis we look the weighted environmental impact stats and the RepRisk of the portfolio. The RepRisk score, which is a measure of reputational risk from ESG factors, acts as a proxy for absolute impact and covers any news we may have missed.

 

Tom Boles is Head of Sustainability. The analysts on the Fundsmith Equity Fund and Fundsmith Sustainable Equity Fund are Daniel Washburn, Tom Boles and Frank Diebold who each integrate ESG considerations when analysing a company. As long-term shareholders, we consider this to be an important factor in selecting companies that can sustain a high return on capital.

 

Julian Robins also does analytic work on the Fundsmith Equity Fund and the Fundsmith Sustainable Equity, while he is also the Head of Research.

 

Terry Smith is the fund manager and makes all final decisions.

The firm-wide Responsible Investment policy can be reviewed at: https://www.fundsmith.co.uk/docs/default-source/responsible-investment-policy/responsible-investment-policy.pdf

 

SDR Labelling:

Unlabelled with sustainable characteristics

Voting Record

Disclaimer

Disclaimer

An English language prospectus for the Fundsmith Sustainable Equity Fund is available on request and via the Fundsmith website and investors should consult this document before purchasing shares in the fund. Past performance is not necessarily a guide to future performance. The value of investments and the income from them may fall as well as rise and be affected by changes in exchange rates, and you may not get back the amount of your original investment. Fundsmith LLP does not offer investment advice or make any recommendations regarding the suitability of its product. This financial promotion is intended for UK residents only and is communicated by Fundsmith LLP which is authorised and regulated by the Financial Conduct Authority.