Our approach to responsible and sustainable investing
Despite their ESG labels, these instruments are just as susceptible to ‘impact/greenwashing’ as their equity counterparts. Therefore, we believe it is equally important to conduct thorough due diligence into these vehicles, as would be done with equities. Such analysis should consider issuing entities’ corporate practises, cultures, as well as their strategic vision from a responsible perspective, instead of relying solely on ESG labels.
It can also be argued that while green bonds often have clear, quantifiable and almost universal target metrics, such as a reduction in C02 emissions, the same is not always true for social bonds. In fact, the sheer breadth of societal issues that social bonds support introduces an added layer of complexity – particularly for those lacking a robust responsible and sustainable investment framework.
At EdenTree, we apply a ‘profit with principles’ ethos to our investment approach. This means our portfolios not only seek to meet clients’ financial objectives, via diversified portfolios of high quality debt instruments, but they also set out to ensure their underlying holdings represent suitable entities as determined by our screening criteria. The latter is values-based, to enforce absence of harm via exclusions, as well as being ‘responsible’ in nature by including pillars such as Environmental Management, Corporate Governance and Human Rights. Where sustainability can be integrated under the themes of Education, Health & Wellbeing, Social Infrastructure and Sustainable solutions, investment opportunities are routinely sought and seized upon.
Our six ESG / Responsibility criteria and four Sustainability themes can also be mapped to the UN’s 17 Sustainable Development Goals:
This means our ongoing monitoring of investments also goes beyond financial performance to incorporate periodic reviews that gauge companies’ direction of travel with respect to our responsible and sustainable investment objectives. Where necessary, we will engage with companies to better understand material risks, encourage best practice and spark positive change.
At EdenTree, our responsible and sustainable investment framework determines whether securities are suitable for portfolio inclusion by screening the issuers against our mandatory values. As a consequence, EdenTree’s Fixed Interest fund range actively invests in green, social and sustainable bonds whose proceeds are deployed towards projects with clear and verifiable positive environmental impacts (green), funding initiatives that target specific societal issues or segments of the population (social) and /or sustainability-led undertakings combining both green and social elements along with other themes such as education. In short, our primary focus is the attainment of quantifiable ESG benefits alongside financial returns.
A fuller overview of our responsible and sustainable investment framework can be accessed here.