Team and process


Our sustainable investment team is an integral part of our wider equities and fixed income capabilities and draws on expertise across the business. We have a disciplined approach to investing, based around clear principles and a framework which aims to ensure that individually and as a team we make consistently high quality investment decisions on behalf of our clients.

Our capabilities

RLAM’s suite of five sustainable funds seek to invest in companies that are well positioned to benefit from products and services that help solve major environmental and social challenges and manage their Environmental, Social and Governance (ESG) risks better than average.

Our process

In pursuit of sustainable returns, these funds will avoid investing in certain companies. For example, the sustainable funds will not invest in any company that:

  • Manufactures armaments 
  • Manufactures tobacco
  • Generates nuclear power
  • Has unacceptable corporate governance

In addition, the sustainable funds will also normally avoid companies that derive a material proportion of its business (typically 10% or more of revenues or comparable measure) from, for example:

  • Military applications or weaponry
  • Animal fur products
  • Pornography 
  • Gambling 

The funds will also avoid companies testing products on animals other than for human health where legal alternatives are available. The funds avoid companies in sectors with extremely high environmental impacts, including fossil fuels and mining, unless there are strong mitigating factors. Consequently, our sustainable funds have much lower carbon intensity than the funds tracking the FTSE All-Share.

In addition to our range of sustainable funds, RLAM’s product range includes a number of straightforward ethical investment solutions focused on applying negative screens:

Screening

The screening of securities for the sustainable funds is conducted by RLAM’s Responsible Investment Team and is applied to both equities and fixed income investments within the range. In addition to the negative screen criteria, a positive screen is also conducted. The positive screen requires an assessment of whether the company, through its products and services, provides a net benefit to society and/or whether it is a sector leader in terms of its ESG management. Sectors considered more favourably for the funds include healthcare and technology, whereas areas such as commodities are generally avoided.

The corporate governance of a company is considered to be fundamental in the decision to invest and as such forms part of the negative screen. The funds will not invest in a company where corporate governance is below the required standard. Analysis is conducted according to regional governance standards as well as a range of metrics including; board composition; remuneration; audit practices and disclosure. Our governance requirements are stringent for both equities and fixed income and requirements are adapted depending on the type of entity being considered and the inherent investment risk.

The screening process also considers the reputation of the company and the risk that this could pose to the credibility of the funds. As described below, an experienced Internal Advisory Committee assesses the suitability of each company proposed for investment. RLAM also has an External Advisory Committee which provides independent oversight of the Sustainable funds and expertise in sustainability issues. Find out more about our external advisory committee here.

We believe that the parent company to subsidiaries or special purpose vehicles is the ultimate owner through which risk permeates and as such screening firstly relates to the parent company. Engagement can form an important part of the process, in particular if the publically available information is not sufficient to make an informed recommendation for inclusion or exclusion.  In addition, analysts will also draw on research from external providers, such as MSCI, Manifest and RepRisk.

Investment Approach

Our distinctive approach integrates the consideration of ESG issues alongside financial analysis throughout the investment process. We also actively engage with the companies in which we invest to champion best practice on behalf of our clients, challenging companies on issues such as environmental policy and corporate governance standards. 

Governance of the Sustainable Funds

Our sustainable fund managers and Head of Responsible Investment consider the analysis on whether each security passes or fails.

Where there is not consensus, the security is referred to our External Advisory Committee on responsible investment. The Committee members are independent and have extensive expertise in responsible business matters. Continued suitability of approved securities is monitored on an ongoing basis by the Responsible Investment Team and all securities are formally reviewed on average every two years.