Working with the advisory committee, we formulated a policy to address each of those areas. The outcome is that fossil fuel extraction is straightforward – we don’t own any oil, gas or coal-mining companies. However, we will consider power generation utilities with a bias towards renewables and with a clear strategy to increase this share over time.
The new global sustainable equity fund
We felt a global sustainable equity fund couldn’t really exclude China, South Korea, India or the leading countries in South America. It seemed odd to exclude emerging markets. So we asked the committee to help with a framework around sustainable investing in emerging markets.
Chinese technology was an interesting area. I may have invested here, but the committee thought otherwise. They cited state censorship and corporate governance, and the latter proved to be an insurmountable barrier. Corporate governance is always our first consideration, whether for an individual company or at a national level. Their rationale made good sense. Although it’s an ‘advisory’ committee, in 17 years since I joined, we haven’t gone against their advice.
We’ve also discussed the issue of relative and absolute sustainability standards. There is a view that these standards must be lower in emerging markets. They can be, of course, but they can also be higher – look at how South Korea has dealt with the coronavirus outbreak.
It helps to understand that different standards apply between all countries, even within developed markets – consider the diversity of Japanese company boards, for example. The point is how much flexibility can you accept without compromising the values of the fund? Such subjective questions illustrate perfectly why we have an external advisory committee.
Find out more about our range of sustainable funds – including the recently-launched RL Global Sustainable Equity Fund – at rlam.co.uk/sustainable
For professional clients only, not suitable for retail investors. The views expressed are the author’s own and do not constitute investment advice. The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. For more information on the fund or the risks of investing, please refer to the fund factsheet, Prospectus or Key Investor Information Document (KIID), available via the relevant Fund Price page on www.rlam.co.uk
All information is correct at 1 May 2020 unless otherwise stated. Issued by Royal London Asset Management Limited, Firm Registration Number: 141665, registered in England and Wales number 2244297; Royal London Unit Trust Managers Limited, Firm Registration Number: 144037, registered in England and Wales number 2372439; RLUM Limited, Firm Registration Number: 144032, registered in England and Wales number 2369965. All of these companies are authorised and regulated by the Financial Conduct Authority. Royal London Asset Management Bond Funds Plc, an umbrella company with segregated liability between sub-funds, authorised and regulated by the Central Bank of Ireland, registered in Ireland number 364259. Registered office: 70 Sir John Rogerson’s Quay, Dublin 2, Ireland. All of these companies are subsidiaries of The Royal London Mutual Insurance Society Limited, registered in England and Wales number 99064. Registered Office: 55 Gracechurch Street, London EC3V 0RL. The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The Royal London Mutual Insurance Society Limited is on the Financial Services Register, registration number 117672. Registered in England and Wales number 99064. Our ref: AL RLAM P 0014