Screening a company’s green credentials
David Harrison, a fund manager on the Rathbone Global Sustainability fund, says: “We only want to own companies that can walk-the-walk in terms of sustainability.
“We use the UN sustainable development goals as part of our framework to achieve this, but also have a very detailed process in place, and work with our colleagues at Rathbone Greenbank Investments to screen securities.”
He says Rathbones looks at data, but also engages with management teams to understand a company’s sustainability credentials.
“Are financial goals linked back to sustainability ambitions? How is management compensated – is there a clear link to sustainability? How does a company manage its workforce, its supply chain and how does it contribute to wider society?,” he asks.
Mr Harrison says the team spends a significant amount of time finding answers to each of these questions and there needs to be a “very clear sustainability investment process in place – in our case, Rathbone Greenbank Investments has the final say on whether we can buy a company or not.”
He adds: “The fund manager has the investment input, but is not the ultimate decision-maker in terms of sustainability credentials.”
Michael Crawford, chief investment officer at Chawton Global Investors, says a company should be sustainable as a business if it does not need to borrow excessively, while if it is to have a sustainable impact on the wider world, it must not deplete natural resources.
He says those goals are complementary, rather than mutually exclusive.
Mr Crawford says: “These objectives are often mutually supportive; for example, companies that damage the environment often deploy heavy fixed assets such as fossil fuel extraction, auto and aerospace factories.
“The asset intensity leads to lower returns on capital. In practice, we end up with a portfolio that, in aggregate, is asset-light where high returns are underpinned by the competitive advantage from brands, patents, engineering innovation, digital networks and scientific innovation.”
David Thorpe is special projects editor at FTAdviser and Financial Adviser
