Stage one: Excluding controversial industries
We exclude alcohol, armaments, adult entertainment, gambling, tobacco and fossil fuels businesses from our strategy.
Is it best to engage or divest in controversial businesses?
We find complete divestment often sits more comfortably with our clients. Trying to pivot a company’s business model can often be unsuccessful. We believe our energy and expertise is better used in identifying companies that already exhibit leading sustainability characteristics. That’s not to say that we don’t engage with the businesses that we do invest in. As long-term investors, we often have the opportunity to discuss strategy and Environmental, Social & Governance (ESG) risks that could impact future cash generation with the management of our companies.
Our portfolio skews away from the more commoditised industries within the market that often require large regular investment. These industries tend to have a high carbon footprint for their economic value (known as carbon intensity), so avoiding them naturally lowers the carbon risk of our portfolio.
But the exclusion of these commoditised industries is not the only factor driving the relatively low carbon risk of the portfolio. By focusing on high quality, knowledge-based businesses, our investments typically add value through their intellectual property, rather than the number of products they produce. As a result, the companies we hold have a much lower carbon intensity than each sector average.
The weighted average carbon intensity chart shows the greenhouse gas emissions of a portfolio, relative to its sales. It’s calculated using the total ‘scope one’ (all direct emissions from an organisation) plus ‘scope two’ (all indirect emissions) of greenhouse gas emissions of the portfolio – using public company documents and the Carbon Disclosure Project data.
88%
lower weighted average carbon intensity than the MSCI All Country World Index
£294,000,000
strategy assets under management (31 Dec 19)
36,162
carbon saving vs. MSCI All Country World Index (t CO2e)
Source: MSCI ESG Research LLC, as of 31 December 2019
Sources and references
Investments can fall as well as rise in value. Your capital or the income generated from your investment may be at risk.
You could get back less than you invest. Adding leverage to your portfolio may amplify returns in a rising market, but will amplify losses in a falling market
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