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Our position on harmful and
controversial products and services

Stewart Investors Sustainable Funds Group invests in the shares of high quality companies that are well positioned to benefit from and contribute to the sustainable development of the countries in which they operate.

We believe that fully incorporating sustainability considerations into our investment process is the best way to protect and grow capital for clients. As an output of our bottom-up investment process, we do not invest in companies with material exposure to harmful products and services, or that fail to discharge their environmental stewardship and human rights responsibilities.

All members of Stewart Investor’s investment team sign our Hippocratic Oath, which includes the commitment that we will not pursue risk-adjusted returns to the extent that our actions will knowingly harm others. In accordance with our investment philosophy and strategy, the investment team is responsible for avoiding the allocation of client capital to harmful activities.

Thresholds

We do not use quantitative thresholds in the quality assessment of companies in our investment process. For example, we prefer companies to manage their balance sheets conservatively but do not set specific debt thresholds. Our analysts and portfolio managers must be able to justify, and are accountable for, the decisions they make.

However, for harmful products and controversial industries, we appreciate that our clients reasonably expect clarity on what exposures they may have to negative activities. The table beginning on page two includes information on the activities and practices we find inconsistent with our investment philosophy. We have set a materiality threshold for direct involvement in the relevant activities of 5% of revenue.

Transparency and exceptions

We will be transparent about our portfolio holdings. In rare instances, we may make investments where exposure is above the 5% threshold, but in those cases we will disclose our reasoning for maintaining that holding.

As our focus is on companies well-positioned for sustainable development, the reasons for such holdings could include indirect involvement, for example, a company which provides safety products to a wide range of industries also providing those products to the fossil fuel or defence industry. Exceptions may also relate to legacy activities which are being wound down. In those cases we will engage with the company and encourage them to exit those activities.

Monitoring

We employ the services of an external environmental, social and corporate governance (ESG) research provider that reviews our portfolios and provides six-monthly reporting on company involvement in harmful industries and breaches of social norms, like those found in the UN Global Compact. These reports are reviewed by the investment team. We also receive regular updates from controversy monitoring service Reprisk.

While for some of these activities revenue thresholds are possible, in others like environmental stewardship, ethical conduct and tax practices, judgement and knowledge of the company are required. We believe that in many cases engagement can be an effective lever for change. Where we agree with issues raised by our external ESG research providers, we will endeavour to engage with the company in question. However if the issue is verified and engagement shows no prospect of change, we will divest to ensure the portfolio continues to meet the principles which sit at the heart of our
investment philosophy.

Glossary

Bottom-up: analysis of a company focused principally on its management, franchise and financials rather than the broader industry in which it operates, or macroeconomic factors, such as economic growth.

Important Information

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