Transcript Document
Accentuate the Positive(s)
Presented by Neville White – Head of SRI Policy & Research
Ecclesiastical Investment Management Ltd
Liverpool, 22nd May 2014
Ecclesiastical Investment Management Ltd
Part of the Ecclesiastical Insurance Group founded 1887
Owned by All churches Trust – all distributable profits to good causes
Top 10 UK corporate donor*
Ecclesiastical launched its first retail SRI fund in 1988
Pioneer of SRI in the UK
Suite of six ethical retail and charity funds – the ‘Amity’ range
Total Assets Under Management £2.25bn**
Award winning, experienced team with a strong retail proposition
*Source: The Guide to UK Company Giving 2013, Directory of Social Change.
**Source: Ecclesiastical as at 31/12/13
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Investing Positively
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The Many Models of Socially Responsible Investing (SRI)
SRI is an umbrella term which encompasses many approaches including ethical,
responsible, sustainable, and environmental, social and governance (ESG)
Negative criteria
‘ethical’ adopted by
faith investors applying
a moral dimension to
investing
ENVIRONMENTAL
FUNDS
TRADITIONAL ETHICAL
(FAITH BASED) FUNDS
SRI
FUNDS
Positive criteria
emerge after 2000
following changes
to UK pensions
legislation
ESG FUNDS
BEST IN CLASS
THEME FUNDS
(CLIMATE CHANGE)
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Applying Negative Criteria to a Portfolio
Applying negative criteria is (relatively) straightforward
Identifies moral imperatives, but adds little value to process
Does not allow investor to work for change
Does not allow engagement to raise business standards
What would a sustainable tobacco company look like?
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Advantages of Applying Positive Criteria to a Portfolio
Supports construction of holistic, integrated investment methodology
Represents a ‘complete’ active strategy
Material ESG risks should be seen as core management issues
Adds value
Reduces long-term risk
Supports long-term investment horizons
Provides engagement platform for change
Dovetails with wider UK Stewardship Code responsibilities
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Our SRI Process – an Integrated Approach
Negative Screen
10% Threshold:
Alcohol Production
Gambling Operations
Pornographic or Violent Material
Strategic Armaments
Tobacco Production
Negative
Screen
Positive
Screen
Other Factors:
Animal Testing (cosmetics)
Intensive Farming
Positive Screen
Business Practices
Community Relations
Corporate Governance
Human Rights
Labour Relations
Environmental Management
Healthcare
Education
Urban Regeneration
Engagement
Decision
Positive criteria may serve as a
brake on investment; e.g. no oil
or mining
Monitor &
Review
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Our Nine Positive Investment Pillars
Each stock is monitored and
assessed against the nine
positive criteria
Essentially we are looking for
each stock to earn its place in
the portfolios
The investment case and the
sustainability case are given
equal weight
Six areas of business
behaviour (risk)
Three sustainable sectors
Identifies engagement need
BUT how do you assess the
environmental, social and
governance positives?
Positive Screen
Business Practices
Community Relations
Corporate Governance
Human Rights
Labour Relations
Environmental Management
Healthcare
Education
Urban Regeneration
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Evaluating Environmental, Social and Governance (ESG) Positives
Unlike negative criteria, positives can be subjective and challenging
Materiality, and risk weighted factors of primary importance
Environmental
Social/Governance
Air & Water Pollution
Access to Medicine
Biodiversity
Affordable Healthcare
Ozone-Depleting Chemicals
Equal Opportunities
Pesticides
Bribery & Corruption
Climate Change
Health & Safety
Resource Productivity
Human Rights
Environmental Management
Child Labour
Energy
Labour Standards
Transport
Supply Chain Management
Tropical Hardwood
Community Giving
Nuclear Power
Community Initiatives
Mining & Quarrying
Corporate Governance
Waste & Toxic Chemical Management
Diversity
Water Management
Executive Remuneration
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Research, Research, Research
EIM employs Sustainalytics as its principal ESG data research provider
One of several distinctive ESG providers that analyse ESG risk (EIRIS; MSCI etc.)
Quantitative and qualitative data; controversies monitor; peer group ranking; ESG ratings
Provides first stage ‘data dump; and materiality analysis
Secondary research conducted in house including engagement
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SRI Company Example – Boustead Singapore
Long established high end engineering company
Overlooked due to its complexity
Exposure to global energy and water infrastructure spending, industrial property
Attractive business model
Company and management stability
Strong balance sheet and order book
Deep value play on 12M Forward PE of 15.8X and yield of 2.7%
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Boustead Singapore – Green Tech Leader
International water & wastewater engineering specialist
800 industrial and municipal treatment plants in 58 countries
Wastewater treatment & safe return
Municipal – providing clean drinking water
Industrial – improving resource efficiency
Water treatment solutions for all processes
Disinfection
Deionisation
Membrane
Degasification
Business Practices
Community
Governance
Education
Environmental
Healthcare
Labour Relations
Urban Regeneration
n/a
Human Rights
n/a
Engineers water solutions for oil & gas, chemicals, power generation,
electronics, food & beverage and tourism sectors
Leaders & award winners in green building design and operation
Health and safety leaders and award winners
Championing H&S with suppliers and contractors
Strong sustainability play: water & treatment theme
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Monitoring the Direction of Travel - Statoil
Originally a regional oil company
Strong management, leaders in health safety & carbon capture
Low human rights and environmental risks
Business changed direction
Seeking to exploit oil sands, arctic drilling and diversify geographic exposure
across Africa
Dramatically changed risk profile of company
Whilst still a ‘best in class’ option, disinvested from Amity Funds
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Engagement Case Study
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Investing in Bullion – is it Ethical?
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Investing in Bullion – is it Ethical?
Mining and extractives avoided as part of failing positive criteria tests
Fund managers had appetite to invest in an ETF bullion fund for diversification reasons
Ethically, bullion could be viewed as ‘benign’ i.e. a store of value
But we asked – where does the gold come from and is it ethical?
c40% of supply is recycled
c15% is artisanal or illegal
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The rise and rise of Gold ETFs
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Unique Characteristics of Gold
Parallel
Currency
50% Jewellery
Store of Value
10% Industrial
Investment
Utility
Multiple
Participants
Mainstream
Mines Traceable
Fuelling Conflict
Toxicity
Traceability
Ethical
Issues
15% Artisanal
Mines
Waste
Human Rights
Corruption
Dirty Gold
Pollution
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Gold – Accentuating the Positive
We engaged intensively with the World Gold Council
The only investor to engage with the WGC on conflict free gold
Industry increasing its efforts around eliminating the worst practices
Kimberley rejected as a model as gold is not easily identifiable
Industry started from scratch on a new verification and accreditation standard
Conflict Assessment
Company Assessment
Commodity Assessment
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Gold – Accentuating the Positive
EIM led investor engagement with WGC on global conflict-gold standard
Held two seminars for investors in London to outline the Standard
Offered advice on draft Standard
Concluded Gold ETF could be held given the contribution of engaging
Engagement and informed contribution significantly added value to our investment
We, most importantly…
Ensured high levels of due diligence and research were
employed for clients investing in the Amity Funds.
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Questions and Answers
Thank
You!
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Support Team Tel: 0845 604 4056
Email: [email protected]
www.ecclesiastical.com/ifa
Chris King – Regional Sales Manager
+44 (0)7767 343 916
[email protected]
This presentation has been prepared by Ecclesiastical Investment Management Limited for
Financial Advisers, other intermediaries and other investment professionals only. It is not
suitable for private individuals.
This document has been produced for information purposes only and as such the views contained herein are not to be taken as an advice or
recommendation to buy or sell any investment or interest thereto. A full explanation of the characteristics of the investments is given in the Key
Investor Information Document (KIID). Any forecasts, figures, opinions, statements of financial market trends or investment techniques and
strategies expressed are unless otherwise stated, Ecclesiastical Investment Management own at the date of this document. They are
considered to be reliable at the time of writing, may not necessarily be all-inclusive and are not guaranteed as to accuracy. There is no
guarantee that any forecast made will come to pass. The value of any investment, and the income generated from it may fall as well as rise and
will be affected by changes in interest rates, general market conditions and other political, social and economic developments, as well as by
specific matters relating to the assets in which it invests. Past performance should not be seen as an indication of future performance.
Ecclesiastical Investment Management Limited (EIM) Reg. No. 2519319. Registered in England at Beaufort House, Brunswick Road, Gloucester, GL1 1JZ, UK. EIM
is authorised and regulated by the Financial Conduct Authority (FCA No. 527473).
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