Ethical Investing, Sustainability and Engagement
Ask yourself this question: “to reach your objective, would you be prepared to kill a child?”
Apply this to various familiar scenarios:
- Getting the shopping done
- Cleaning the house
- Driving to work
- Ordering a takeaway
- Reaching your retirement goals
- Investing for the future
Take driving to work as an example. If this required you to run over a child, or any person for that matter, would you not find an alternative means to achieve the objective? Similarly, if you could reach your investment objectives without killing or maiming another human being, or without seriously damaging the environment, then it seems likely that you would do so.
Ethical considerations such as these can are factored into our investment processes and will form a part of our dialogue with fund managers, investing on our behalf in a wide range of listed companies. By holding our fund mangers to account for their investment decisions we are able to encourage them to engage more robustly with their investee companies on subjects such as child labour and other human rights abuses, pollution and corruption.
The UN Sustainable Development Goals (SDG’s) set a framework within which companies are expected to operate globally. Many multinational household names have signed up to the UN Compact on sustainable development and use this to their advantage in marketing their products as SDG compliant. Where a fund manager supports these aims in their marketing literature and in their investment philosophy, we expect them to hold their investee companies to account.
As part of our engagement process, and through our controversy-screening project, we will highlight issues that we have discovered and ask fund managers to explain the rationale for investment in companies that appear to be failing in these areas.
Sustainability and ethics are linked in this way. However it is important to understand that personal ethical values cannot always be fully aligned with sustainability. We are not applying ethical screens to our model portfolios. What we do, is to support the UN SGD’s as a way of achieving sustainable investment outcomes, which lead to superior risk return characteristics for our model portfolios.