Stewart Investors Sustainable Funds Group invests in the shares of high quality companies that are well positioned to benefit from and contribute to sustainable development.
We believe that fully incorporating sustainability considerations into our investment process is the best way to protect and grow capital for clients. As an output of our bottom-up investment process, we do not invest in companies with material exposure to harmful products and services, or who fail to discharge their environmental stewardship and human rights responsibilities.
All members of Stewart Investor’s investment team sign our Hippocratic Oath, which includes the commitment that we will not pursue risk-adjusted returns to the extent that our actions will knowingly harm others. In accordance with our investment philosophy and strategy, the investment team is responsible for avoiding the allocation of client capital to harmful activities.
We do not use quantitative thresholds in the quality assessment of companies in our investment process. For example, we prefer companies to manage their balance sheets conservatively but do not set specific debt thresholds. Our analysts and portfolio managers must be able to justify, and are accountable for, the decisions they make.
However, for harmful products and controversial industries, we appreciate that our clients reasonably expect clarity on what exposures they may have to negative activities. The table beginning on page two includes information on the activities and practices we find inconsistent with our investment philosophy. We have set a materiality threshold for direct involvement in the relevant activities of 5% of revenue.
Transparency and exceptions
We will be transparent about our portfolio holdings. In rare instances, we may make investments where exposure is above the 5% threshold, but in those cases we will disclose our reasoning for maintaining that holding.
As our focus is on companies well-positioned for sustainable development, the reasons for such holdings could include indirect involvement, for example, a company which provides safety products to a wide range of industries also providing those products to the fossil fuel or defence industry. Exceptions may also relate to legacy activities which are being wound down. In those cases we will engage with the company and encourage them to exit those activities.
We employ the services of an external environmental, social and corporate governance (ESG) research provider who reviews our portfolios and provides six-monthly reporting on company involvement in harmful industries and breaches of social norms, like those found in the UN Global Compact. These reports are reviewed by the investment team. We also receive regular updates from controversy monitoring service RepRisk.
While for some of these activities revenue thresholds are possible, in others like environmental stewardship, ethical conduct and tax practices, judgement and knowledge of the company are required. We believe that in many cases engagement can be an effective lever for change. Where we agree with issues raised by our external ESG research providers, we will endeavour to engage with the company in question. However if the issue is verified and engagement shows no prospect of change, we will divest to ensure the portfolio continues to meet the principles which sit at the heart of our investment philosophy.
This document has been prepared for general information purposes only and is intended to provide a summary of the subject matter covered. It does not purport to be comprehensive or to give advice. The views expressed are the views of the writer at the time of issue and may change over time. This is not an offer document, and does not constitute an offer, invitation, investment recommendation or inducement to distribute or purchase securities, shares, units or other interests or to enter into an investment agreement. No person should rely on the content and/or act on the basis of any matter contained in this document.
This document is confidential and must not be copied, reproduced, circulated or transmitted, in whole or in part, and in any form or by any means without our prior written consent. The information contained within this document has been obtained from sources that we believe to be reliable and accurate at the time of issue but no representation or warranty, express or implied, is made as to the fairness, accuracy or completeness of the information. We do not accept any liability for any loss arising whether directly or indirectly from any use of this document.
References to “we” or “us” are references to Stewart Investors. Stewart Investors is a trading name of First Sentier Investors (UK) Funds Limited, First Sentier Investors International IM Limited and First Sentier Investors (Ireland) Limited. First Sentier Investors entities referred to in this document are part of First Sentier Investors, a member of MUFG, a global financial group. First Sentier Investors includes a number of entities in different jurisdictions. MUFG and its subsidiaries do not guarantee the performance of any investment or entity referred to in this document or the repayment of capital. Any investments referred to are not deposits or other liabilities of MUFG or its subsidiaries, and are subject to investment risk including loss of income and capital invested.
Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed as a recommendation to buy or sell. Reference to the names of any company is merely to explain the investment strategy and should not be construed as investment advice or a recommendation to invest in any of those companies.
Hong Kong and Singapore
In Hong Kong, this document is issued by First Sentier Investors (Hong Kong) Limited and has not been reviewed by the Securities & Futures Commission in Hong Kong. In Singapore, this document is issued by First Sentier Investors (Singapore) whose company registration number is 196900420D. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore. Stewart Investors is a business name of First Sentier Investors (Hong Kong) Limited. Stewart Investors (registration number 53310114W) is a business division of First Sentier Investors (Singapore).
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United States of America
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In other jurisdictions where this document may lawfully be issued, this document is issued by First Sentier Investors International IM Limited which is authorised and regulated in the UK by the Financial Conduct Authority (registration number 122512). Registered office 23 St. Andrew Square, Edinburgh, EH2 1BB number SC079063.