Investment professionals

Approaches to responsible investing

There are dozens of product providers in the market and no two have exactly the same approach to responsible investing.

We believe that the most important feature of responsible investing is a process called engagement, in which fund management groups, as shareholders, use their influence over companies to encourage them to adopt higher standards of governance and corporate responsibility.

Engagement is important because it proactively facilitates positive and significant changes in businesses that would otherwise not occur. You can read more about engagement in the section 'A closer look at engagement'.

In addition, there are two common approaches to responsible investment funds:

positive selection – investing in companies because the fund supports their sector (such as clean energy), policies (such as fair trade) or products and services (such as social housing)
negative screening – avoiding investing in companies because of their sector (such as the arms trade), policies (such as sweat shop labour) or products and services (such as pornography).

Our approach

Our flagship fund, the Sustainable Leaders Trust, integrates the strongest elements of all these methods, as well as employing a 'best-in-sector' approach. First we assess how well a particular sector meshes with our values.

For example, the beverages industry may offer handsome returns – but the business can have negative social and environmental impacts that need to be factored into the investment case.

Then, we look for evidence of companies that are genuinely addressing those impacts and we will seek to invest in the very best in the sector.

In addition, we look for crossovers between sectors that express our clients' values and sectors benefiting from changes in society (such as clean energy).

Occasionally, companies still have room for improvement, although their potential positive contribution is clear. Our pragmatic approach allows us to identify and invest in exceptional cases – and actively engage with the company to improve their performance.

From this carefully constructed universe, the fund manager selects investments on the basis of future growth prospects of a company.