Rathbone Greenbank Global Sustainability

This is a high-conviction global equity fund that can invest in companies of any size, but will have a bias towards mid-caps. Manager David Harrison focuses on selecting stocks with strong cash generation, but will actively avoid businesses involved in unethical or unsustainable practices. The exclusion criteria included are alcohol, animal testing, armaments, extraction of fossil fuels, gambling, nuclear power, pornography, tobacco and poor employment, environment and/or human rights practices. Each holding will also have to have at least one positive environmental, social or governance attribute.

Our opinion

Since joining Rathbones, David has worked closely with Carl Stick, manager of the Rathbone Income fund, whom we rate very highly. The investment process for this fund will be very similar to that used by Carl's income team and, in addition, will engage the help of Rathbone Greenbank Investments - a dedicated ethical and sustainable investment division that already provides screening services for Rathbone Ethical Bond fund. Given the process is used by two Elite Rated funds and should be transferable, and the manager has extensive experience in sustainable investing, we think this fund, launched in July 2018, is one to watch.

Fund manager

David joined Rathbones in June 2014 and is the lead fund manager of the Rathbone Greenbank Global Sustainability Fund. He has more than 20 years’ experience in equity analysis and fund management, including positions at Hermes and Goldman Sachs. David holds the Investment Management Certificate and a BSc (Hons) in Economics and Politics from the University of Southampton. He is a CFA charter-holder.

You can aim to not only invest profitably over the years, but to do so in a way that minimises costs to the planet and society.

David HarrisonFund manager

Investment process

The process aims to highlight cash generative companies with durable franchises. David will start by reviewing quality and value screens, as well as gathering ideas from company meetings with current and prospective holdings. From these ideas, David will perform fundamental analysis on a company's financials to assess where cash flow returns come from, how capital is allocated and provide a valuation.

He will be helped by Rathbone Greenbank Investments, a dedicated ethical and sustainable investment division that provides screening services. David will give them his stock ideas and they will test the company to see if it passes muster. This process has worked exceptionally well with the Rathbone Ethical bond fund and the company believe this can be successfully replicated in an equity fund. Companies in areas such as alcohol, oil and gas extraction, tobacco and gambling will be excluded, and positive factors, including good employment practices, or a product or service that solves environmental challenges, will be identified.

These positive factors are linked to the UN's Sustainable Development Goals and at least one will need to be met to allow a prospective holding to be purchased. The ultimate portfolio will invest in around 30-50 stocks. Approximately a quarter is likely to be invested in medium-sized companies, which David believes to be a ‘sweet spot’. This is because company management are more engaged and you can find lots of previously undiscovered ideas.

While there is no income target for this new fund, its investment approach is likely to produce a natural yield of around 2%.

ESG

ESG - Explicit
This fund aims to identify corporate management teams that truly believe in sustainable development so, in this endeavour, the fund manager will always meet management and engage with them two or three times before investing. The team will start with a screening process to identify viable investment opportunities, before running them past Rathbone Greenbank Investments, a dedicated ethical, sustainable and impact team of Rathbones, that works with the fund manager, for a deeper dive into the potential stocks.

Companies are assessed against a number of positive and negative social and environmental criteria. Negative screening excludes organisations involved in activities such as animal testing, alcohol manufacturing, fossil fuel exploration and production, arms dealing and gambling. Issuers involved in any negative criteria will be discounted. Positive practices include community investment, management of environmental impacts and provision of products or services that offer social or environmental benefits. Those demonstrating well-developed policies and practices in at least one positive area will be considered for investment. There can be engagement on this, between the fund manager and Greenbank, if there is some ambiguity, but it cannot be overridden.

Risk

Due to the negative screening undertaken in the process, the fund will avoid entire sectors, which means its performance can differ quite significantly from its benchmark. Its bias to medium-sized companies could also increase volatility at times.

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Read more about this fund

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