Sue Round, head of investments at Ecclesiastical Investment Management, discusses socially responsible investment and the changes experienced by the industry.
1. Ecclesiastical have been at the forefront of ethically or social responsible investing for over 20 years, how has this area changed in that time?
In simple terms ethical investing is now a well understood and accepted option for the individual and institutional investor. There are now over 100 fund products available in the UK alone for the retail investor that cover almost every aspect of sustainable investing, from classic “avoidance funds” to themed funds investing around clean technology, renewable energy, timber, water and healthcare.
Sustainability is also the language of business – global companies now accept as read that corporate responsibility and sustainable operations are corporate priorities. That is a significant difference to the position 20 years ago, when ethical investment was a niche option, and businesses barely published so much as an environment policy.
2. Have the concerns and approaches pioneered by the ethical investment industry started to become part of the mainstream, with developments like the support for the Financial Reporting Council UK Stewardship Code?
The socially responsible investment (SRI) community can take some pride in spearheading the concept of focused engagement to improve business performance; the Stewardship Code is the latest example of attempting to harness the responsibilities of equity ownership which SRI investors have been doing for some years.
The Stewardship Code interestingly also enshrines the idea of collaborative partnerships to achieve results, which again the SRI community has long pioneered. There is still more than can be done, not least in persuading short term investors and analysts that business invests for the long-term and takes a holistic view of its entire operational impacts, financial and non-financial.
3. How do the teams working in the Amity fund range ensure funds are investing in socially responsible activities?
We like companies with business models attuned to an integrated, prominent sustainable agenda and whose managements understand that responsible business practices are not indivisible from business as usual.
Those sensibly managing and reducing their environmental and community impacts are likely to be the more successful over time. Tesco is held quite widely in the Amity range, and the achievement in the UK of its target to divert all waste from landfill (a year early) sets an inspiring example of what can be achieved at scale.
We conduct all of our due diligence at the ideas stage so that client capital is only placed when we are sure each company meets our required ethical criteria.
4. What skills or approaches have you found most useful for your work in socially responsible investment (SRI)?
Our investment style, based on a contrarian and well diversified bias has served us well over time. As mentioned, the funds are clear in the integration of an economic and SRI critique at the idea stage. Not only do companies have to clear the hurdle of our well developed negative screen, but also have to demonstrate social positives against our relevant nine positive screens.
As a small team we have also been able to bring a consistent style of investing over many years which has earned us a strong reputation for delivering consistent performance of profit with principles. The team brings a wealth of individual and collective experience in the analysis and selection of companies, which has delivered great performance and investment integrity over the long-term.
© Fair Investment Company Ltd