liverpool, 22 nd may 2014
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Liverpool, 22nd May 2014
Accentuate the Positive(s)
Presented by Neville White – Head of SRI Policy & Research
Ecclesiastical Investment Management Ltd
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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)
Positive criteria emerge after 2000 following changes to UK pensions legislation
Negative criteria ‘ethical’ adopted by faith investors applying a moral dimension to investing
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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?
Applying Negative Criteria to a Portfolio
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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
Advantages of Applying Positive Criteria to a Portfolio
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Negative Screen
10% Threshold:
Alcohol Production Gambling Operations Pornographic or Violent Material Strategic Armaments Tobacco Production
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
Positive criteria may serve as a brake on investment; e.g. no oil or mining
Our SRI Process – an Integrated Approach
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Positive Screen
Business Practices Community Relations Corporate Governance Human Rights Labour Relations Environmental Management Healthcare Education Urban Regeneration
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?
Our Nine Positive Investment Pillars
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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
Unlike negative criteria, positives can be subjective and challenging
Materiality, and risk weighted factors of primary importance
Evaluating Environmental, Social and Governance (ESG) Positives
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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
Research, Research, Research
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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
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
Business Practices Community Governance
Education Environmental Healthcare
n/a n/a Human Rights Labour Relations Urban Regeneration
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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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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
Investing in Bullion – is it Ethical?
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The rise and rise of Gold ETFs
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Unique Characteristics of Gold
Investment
Store of Value 50% Jewellery
10% Industrial
Fuelling Conflict
Dirty Gold
Multiple Participants
15% Artisanal Mines
Mainstream Mines
Traceable
Toxicity
Human Rights
Corruption
Waste
Pollution
Parallel Currency
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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
Gold – Accentuating the Positive
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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.
Gold – Accentuating the Positive
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Thank You!
Questions and Answers
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Support Team Tel: 0845 604 4056Email: ifa@ecclesiastical.com www.ecclesiastical.com/ifa
Chris King – Regional Sales Manager+44 (0)7767 343 916chris.king@ecclesiastical.com
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).
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.
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