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Our investment process

Our Amity funds are a range of retail and charity funds with a difference. We apply both positive and negative screening to each of these funds to ensure we not only deliver profit over the medium to long term but we invest in socially responsible enterprises.

Our profit with principles approach is one we’re immensely proud of and we’d like to share it with you. Find out how we’re currently investing the £2.5bn* we have under management in a responsible way.
Our investment process
Our investment process

What we look for

Applying our profit with principles approach begins at the very beginning- the ‘ideas’ or ‘stock-picking’ stage. We seek to invest in quality companies with sound financials, solid balance sheets, proven management, good growth prospects and the potential to deliver strong cash flow. But we go beyond this. We also want companies who are strong corporate citizens, delivering economic, social and environmental benefit for society and the communities in which they operate. 

How we work

Our Fund Managers, working collaboratively with our SRI investment team, carry out detailed research and analysis to consider whether a stock is an appropriate holding for the funds. This begins at the very start of the investment process, proceeds to the robust screening process and finally is reviewed by our independent Amity Panel.

The EdenTree SRI process is reviewed by an external independent panel of senior financial, environmental and business figures, appointed for their knowledge and expertise. The Amity Panel has been monitoring the operation of our ethical Amity funds for over 20 years. Panel members may advise but not mandate a course of action. They receive all EIM Fund and responsible investment research reports and play a key role in ensuring we comply with the Funds' socially responsible investment criteria.

Our Fund Managers also take many steps to construct the ideal fund portfolio. In order to do so we:

  • Keep well diversified portfolios – typically around 100 stocks. This helps reduce overall investment risk, protect against localised dips in the market and create a stable portfolio that will increase in value over the longer-terms
  • Maintain low portfolio turnover – in keeping with our longer-term view. We know that funds with lower turnover can perform better – plus transaction costs are reduced
  • Spread the counterparties – to reduce the risk involved in financial transactions
  • Conduct regular performance reviews for each fund – our attribution analysis compares a fund with a benchmark. It shows the impact of the Fund Manager’s investment decision in relation to the overall investment strategy, asset allocation, securities, selection and activity. We use this information to maximize the returns
  • Avoid stock lending – although certain investors use stock lending to create additional income from their portfolios, we believe the risks outweigh the potential advantages

Additionally, we use tools to maintain good governance and provide a thorough investment process, as demonstrated below.

Our screening process

Positive screening is at the heart of our profit with principles approach to investment. It allows us to invest in companies that we believe are good corporate citizens. It also helps us pinpoint enterprises with well-developed policies and processes for managing their social and environmental impacts and risks. Our positive screening approach centres on what we define as the ‘Nine Pillars’ of responsible investing.

We are particularly focused on areas that provide the necessities of life such as healthcare, water, education and housing, or products and services that are sourced ethically and produced sustainably. We also favour ‘solutions-focused’ companies that are leading the way in technologies that may help solve some of the world’s most challenging problems, such as climate change, alternative energy or water conservation. In addition, we focus on business behaviour, expecting the companies we invest in to have a well-managed policy for promoting human rights, environmental protection, labour rights and business ethics.

We also apply negative screening to eliminate businesses involved in the manufacture or sale of certain products. We apply a 10% turnover or pre-tax profit threshold for the purpose of all our negative screens.

Below are the criteria we use. 

 

Sustainalytics

Sustainalytics

Company meetings

Company meetings

International law and protocols

International law and protocols

NGOs

NGOs

Market news

Market news

Broker research

Broker research

Company reports

Company reports

Government organisations

Government organisations

SRI initiatives

SRI initiatives

Positive screening

In order to ensure that the businesses we invest in are themselves investing in a positive future, we utilize a positive screening process. Not only does it allow us to avoid businesses that will likely become problematic in the future, it also allows us to offer high-quality, long-term investment opportunities.

Our nine positive pillars comprise siz business areas and three market themes. Our screening process considers a range of ’positives‘ across these pillars, including:

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Business Ethics

Business Codes of Conduct
Product Quality & Safety
Ethical Business Conduct
Culture & Behaviours
Financial Conduct
Ethical Sourcing
Supply Chain Relationships
Taxation Policy Disclosure
Farm Animal Welfare
Lobbying Policies

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Community

Community Liaison
License to Operate
Project Finance Risk
Resettlement Policies
Giving Programmes
Health Education & Welfare
Access to Medicine
Training & Apprenticeships

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Corporate Governance

Code Compliance
Independent NEDs
Pay for Performance
Board Diversity & Policy
Anti-Bribery Policies
Whistleblowing Programme
Cyber Security
Audit and Non-Audit Fees
Related Party Transactions
Political Donations

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Employment & Labour

ILO Protocols
Equal Opportunities
Diversity Policy
Anti-Discrimination
Fair Reward Structures
Freedom of Association
Collective Bargaining
Training & Development
Health & Safety
Occupational Wellbeing

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Environment Management

Climate Change
GHG Emissions
Resource Depletion
Water
Pollution
Natural Capital Policies
Waste & Recycling
Energy
Soil & Forestry
Sustainable Products

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Human Rights

Human Rights Policies
Support for UDHR
UN Guiding Principles
Child Labour
Bonded & Forced Labour
Trafficking & Slavery
Indigenous People
Land Rights
Sanctions & Conflict Risk
Conflict Minerals

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Education

Businesses focused on
Education
Training
Human Development
Promoting Girls Education
Student Housing & Support

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Health & Wellbeing

Businesses focused on
Affordable Healthcare
Access to Medicine
Pharmaceuticals R&D
Biotechnology
Clinical Care
Nutrition & Wellbeing

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Urban Regeneration

Businesses focused on
Social Housing
Affordable Housing
Green Building
Inner City Development
Brownfield Development
Natural Capital

Negative screening

We hold a policy of not investing in companies that earn more than 10% of their pre-tax profits or turnover from alcohol production, gambling operations, pornographic or violent material or weapon production. We also consider animal testing, oppressive regimes and intensive farming in our criteria when evaluating a company.

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Alcohol Production

Manufacturers of alcoholic beverages, but not retailers (except dedicated pub companies).

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Gambling Operations

Includes betting shops, internet sites, bingo and casino, racing venues, lotteries and the supply of gaming machines.

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Tobacco Production

The manufacture of tobacco products, but not tobacco retailers.

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Weapon Production

The manufacture of weapons and weapons systems or goods and services specifically to support those systems.

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Pornographic & Violent Material

Includes print, digital and broadcast media plus companies operating dedicated licensed sex premises showing live shows.

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Oppressive Regimes

Companies operating in oppressive regimes (as defined by Transparency International, Amnesty International and Freedom House) are reviewed on a case-by-case basis.

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Intensive Farming

We avoid companies involved in intensive farming in the beef, dairy, poultry or fish sectors.

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Animal Testing

We will not invest in companies that use animals to test cosmetic or household products. We do invest in pharmaceutical companies that may use animals to test but we encourage them to use alternatives.

Engaging for change

We believe that the way we engage with businesses enables us to make sound, responsible investment decisions and act as a powerful force for change. We form constructive relationships with the companies we are considering investing in and continue to engage with them after we are invested as part of our monitoring program. We meet the companies on a one to one basis at our offices, particularly where controversies or concerns after investing become apparent. 

We’re active members of the UK Sustainable Investment and Finance Association (UKSIF) and have developed key partnerships with other bodies in this field. These include the Carbon Disclosure Project (CDP), UK Stewardship Code and UNPRI. You can find the full list on our Partnerships section, and a few of our latest thematic research reports. For literature, please view the Engagement section of our Literature page.

*EdenTree as at 31 March 2017

 

EdenTree Investment Management Limited (EdenTree) Reg. No. 2519319. Registered in England at Beaufort House, Brunswick Road, Gloucester, GL1 1JZ, UK. EdenTree is authorised and regulated by the Financial Conduct Authority and is a member of the Investment Association.