Royal London Sustainable Leaders fund

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Negative screen restrictions

The fund will not invest in companies who derive over 10% of revenues from sin-stock activities

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Positive Screening

This fund also focuses on positive screening, meaning firms in the portfolio contribute to systems or products that have a positive impact on society

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Experienced Manager

Managed by one of the most experienced managers in the ESG field, having been in charge since 2003

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Strong performance

Has outperformed the sector in every time period in 5 years and also ranks well when accounting for risk measures

The Fund

The strategy has been run by Mike Fox since November 2003. Having spent the majority of his career assessing ESG issues and how they influence investment decisions, Mike brings a huge wealth of experience and knowledge, and is one of the few fund managers in this area with such a long tenure. By investing at least 80% in the shares of UK companies that are deemed to make a positive contribution to society, the fund aims to achieve capital appreciation over the medium to long-term. The manager is able to draw on the long-established and well-resourced sustainable investment team, as well as wider equity teams within the company.

Sin Stock Exclusion

The investment process begins by identifying the broad investable areas using a combination of in-house knowledge and information from third-party information providers. The process is generally one of positive screening; however, the team will avoid typical sin stocks – or those which generate over 10% of their revenues from certain defined categories. After mapping these out, the team conducts bespoke analysis to determine the suitability of an investment. For each company this is broken out into four distinct areas:

  • Corporate governance
  • Environmental and social benefit
  • Company/industry/economic
  • Valuation

The scoring process gives them an aggregate score, and those companies not meeting guidelines in either the sustainable or financial score are not taken forward.

In general, the team is looking for solutions to problems. They seek out companies and themes that support the transition to a cleaner, safer, healthier and more inclusive society, as well as making above average returns for investors. The themes are not set in stone, with the idea being that it’s more effective to allow them to evolve over time. Some examples of the themes within the portfolio are:

  • AI & cloud computing
  • Electronic/autonomous vehicles
  • Energy transition
  • Social infrastructure

Stock analysis will determine the extent of the investment opportunity and, therefore, the role the theme plays in the strategy. The process is overseen by an External Advisory Committee consisting of a range of industry experts who provide independent challenge and insight into the ESG analysis conducted by the sustainable team.

Example holdings

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What they do
Prudential Following their de-merger from M&G, Prudential is now an Asian led business keen to promote competitive insurance markets. The fund believes this service spreads risk for individuals and businesses, helping to sustain healthy economies, particularly in emerging regions
Astra-Zeneca A large UK healthcare business with a large degree of international diversification. The company engages in the research, development and manufacturing of pharmaceutical products and is set to benefit from the world’s ageing demographic
Rentokil The global leader in commercial pest-control and hygiene services offering a broad range of products on an international basis. The company is continually involved in programmes to educate children and adults into the importance of good hand hygiene across places such as India, Indonesia and Malaysia.