About us

Responsible investment

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Integral to our investment philosophy

Responsible investment (RI) has long been integral to our investment research and decisions and our approach to business more broadly. The rationale for responsible investment is clear: companies with sustainable business models that look to the future have more potential to deliver value to all stakeholders, including shareholders. As a founding signatory of the United Nations’ Principles for Responsible Investment (PRI), responsible investment has been an established pillar of our business for well over a decade.

  • At the heart of our RI approach is a strong research capability embedded within our investment process
  • Our research is supported by proprietary RI ratings that enable us to assess material Environmental, Social and Governance (ESG) risks and opportunities for over 8,000 companies worldwide
  • As active managers, engagement is key and we have a strong record in influencing positive change through stewardship and voting
  • We have a solid culture of collaboration that underpins our research and investment approach
  • We offer a range of dedicated RI strategies, including our innovative Social Bond franchise, for clients seeking to more actively promote ESG factors or achieve specific sustainable outcomes
PRI rating

We strive to be responsible stewards of our clients’ assets, allocating their capital within our framework of robust research and good governance. The integration of ESG considerations within our research builds a fuller picture of the risks and future return prospects of all investment opportunities.

Research

A deep research base

We believe responsible investment research is fundamental research. We conduct original, independent, forward-looking research that aims to drive consistent long-term returns for our clients.

Our portfolio managers consider the additive insights of ESG factors when judging the sustainability and long-term value creation of portfolio companies. Integrating these ESG factors into our investment process helps them make broader-based investment decisions.

Our proprietary RI ratings reflect our data-driven, evidence-based approach and provide our investment team with a robust responsible investment framework to assess material ESG risks and opportunities for over 8,000 companies worldwide. In addition to proprietary analytics, our RI analysts also conduct independent thematic sustainability research that provides investment insight across multiple sectors – providing a more holistic view of investment opportunities.

RI factors
Collaboration enhances decision-making

Our dedicated RI analysts are integral to our global research team and share the same reporting line. Our research culture is embedded in our equity, fixed income, real estate, macro, and data science teams who continuously collaborate and share insights throughout the firm.This collaboration makes our investment decisions and stewardship activities more informed and makes it easier to identify material opportunities and risks that protect the clients’ interests and the capital they entrust to us.

Identifying opportunities and risks: a thematic approach

In addition to the quantitative rating, our RI analysts also conduct a qualitative analysis of companies, sectors and themes concerning ESG and other sustainability considerations.  We focus on a subset of eight of the 17 UN Sustainable Development Goals (UNSDGs) that we deem the most material to investments. Our thematic research explores investor topics such as energy transition, human capital development, and carbon policy. This thematic research is always investment-focused and highlights risks and opportunities for sectors and companies from an RI perspective.

A thematic approach
View our latest Responsible Investment Quarterly report here:

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Q4 2020 RI Report (Retail)
View previous reports:

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Q3 2020 RI Report (Retail)

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Q2 2020 RI Report (Retail)

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Q1 2020 RI Report (Retail)

Proprietary Ratings

Assessing material risks and opportunities

As an active manager, we must consider factors that pose a risk to clients’ assets – or increase their value.

In operation since 2018, our proprietary ratings equip our investment team with a robust ESG framework and enhanced analysis of over 8,000 companies around the world. The ratings help identify and assess potentially material risks and opportunities beyond what can be captured by conventional analysis – making them a crucial part of our fundamental research toolkit.

Stewardship

Powering change

Our stewardship activities intensify our understanding of our exposure to risks and opportunities that bear on our ability to deliver sustainable long-term value creation for clients.

We comply with several stewardship codes around the globe, including the UK Stewardship Code, where we are a “Tier I” asset manager signatory and the Investor Stewardship Group (ISG) Principles.

Engagement: adding to investment insights across all asset classes
We engage to gain deeper research insights, build relationships with companies and influence for change. We believe engagement enhances research and investment: it detects inflection points and long-term trends; it influences companies’ standards of ESG risk management and sustainability.
When deciding whether or not to engage, we consider various factors including:
  • the material significance of an issue to the company
  • the risk to our clients
  • the size of our holding
  • our opportunity to collaborate
  • and our ability to effect change
Meeting

We set clear objectives ahead of each engagement meeting and track them on a regular basis. We disseminate globally throughout the firm the research and analysis emerging from this monitoring.

Proxy voting: making our clients’ voices heard

We vote actively at company meetings. We view this as one of the most effective ways of signalling approval (or otherwise) of a company’s governance, management, board, and strategy and an active way to drive positive change. We carry out voting for our clients in all markets, voting for all our funds and for those clients who delegate authority to us. We vote in consideration of all relevant factors to support the best economic outcome in the long-run.

Each year we cast proxy votes on approximately 6,500 shareholder meetings across 70 countries. 

Climate change

Evolving climate insights

We consider climate in both our research and our stewardship – including engagement and voting. We prioritise climate change issues that are material to our investments. For example, climate issues are financially material to the utility, fossil fuel and chemical sectors, so we appraise climate change in particular detail in these cases.

When examining climate change and material climate risks, we draw on the materiality framework developed by the Sustainability Accounting Standards Board (SASB) and the disclosure standards consistent with the Task Force on Climate-related Financial Disclosures (TCFD). We also work with the CDP (formerly Carbon Disclosure Project), a non-profit that helps companies report their environmental impact.

Climate change

Industry collaborations

Signatories and affiliations: Coalitions to promote RI

We promote the value of responsible investing by taking part in industry working groups and initiatives.
We also demonstrate our commitment to responsible investing by being signatories to various codes and groups, including:
  • The United Nations Principles for Responsible Investment (PRI). We were a founding signatory in 2006. Which means that responsible investment has been an established pillar of the business for well over a decade.
Signatory of PRI logo
  • UK Stewardship Code. This Code, maintained by the UK’s Financial Reporting Council, sets out a number of commonly agreed-upon principles for institutional investors’ stewardship of their shareholdings. Through these principles, the Code improves the quality of engagement between institutional investors and companies. Making governance more effective and efficient and increases long-term risk-adjusted returns to shareholders.
  • Investor Stewardship Group. This US network of investors and asset managers promotes good practice in stewardship and corporate governance.
ISG logo
  • UK Women in Finance Charter. We were the first asset manager signatory. Signatories support the advancement of women in financial services. They also set targets and implement strategies appropriate to their organisation and report on progress against these targets.
Initiatives: delivering benefits

We have collaborated on various thematic and policy initiatives, including:

  • The introduction of green gilts in the UK. The idea of a green gilt builds on the growing issuance of environmental and social sovereign bonds around the globe. It marks an important step forward in the development of the global green bond market by showing how the money raised can simultaneously deliver environmental benefits, reduce inequality and help us build back better.
Initiatives arrows

View our disclosures:

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Sustainable Finance Disclosure Regulation – Articles 3 & 5

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Sustainable Finance Disclosure Regulation – Article 4

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Sustainable Finance Disclosure Regulation – Article 10

Glossary

A

Adverse impact

The main, potential negative effects on sustainability factors in investments based on criteria defined by European regulators.

Aggregate sustainability risk exposure

The overall sustainability risk faced by a company or portfolio, taking account of a range of issues such as climate risk and ESG factors.

B

Best-in-class​

Best-in-class strategies try to make their portfolios better on ESG issues and/or carbon characteristics by excluding certain investments deemed negative in that respect or including certain investments deemed positive in that respect.

C

Carbon footprint

The carbon emissions and carbon intensity of a portfolio, compared with its investment universe (benchmark). The benchmark might be, for example, companies in the FTSE 100.

Carbon intensity

A company’s carbon emissions, relative to the size of the business. This allows investors to compare the company’s carbon efficiency with its competitors’.

Climate risk

The risk that an investment’s value could be harmed by climate issues such as global warming, energy transition and climate regulation. Investors normally assess climate risk by looking at carbon footprint data, climate adaptation risk, physical risk and stranded assets.

Climate adaptation risk

See Transition Risk.

Controversies

A company’s operational failures or everyday practices that have severe consequences for workers, customers, shareholders, wider society and the environment. Examples are poor employee relations, human rights abuses, failure to follow regulations, and pollution. Controversies help to indicate the quality of a company.

Corporate governance

The way that companies are organised and led. We look at how well companies are sticking to good practices set out in Corporate Governance Codes, which vary from country to country. Corporate governance is also part of the ‘G’ in ESG. In this context Governance may focus on the operational and management practices relating to social and environment aspects of the business.

Corporate Social Responsibility (CSR)

A company’s approach to (and engagement with) its stakeholders and the communities it operates in, reflecting its responsibility towards people and planet.

D

Decarbonisation

The reduction of the carbon emissions associated with a region, country, industry or organisation. It can also refer to the reduction of the carbon emissions associated with a fund’s investments.

Divestment

The opposite of investment. In other words, either reducing or exiting an investment. We divest if we think the potential risks of investing in a company outweigh the potential returns. This may be because we have lost confidence in a company’s leadership, strategy, practices or prospects .

E

Engagement

Talking to members of the board or management of a company – a two-way process that we might initiate, or the company might initiate. We use engagement to understand companies better. We also use it to give feedback, offer advice and seek changes – including change relating to ESG and climate risk. Engagement also means consulting with government and collaborating with other investors to influence policy and shape debate.

Environmental

The “E” in ESG. This covers a focus on significant environmental risks and their management. In a climate change context it is a focus on the risks associated with a business having to adapt to climate change requirements or the physical impacts of climate change. We also look at companies’ environmental opportunities due to changing consumer demands, policy changes, technology and innovation.

ESG

Short for environmental, social and governance. Investors consider companies’ ESG risks and how well they are managed. To do this, we use the Sustainability Accounting Standards Board (SASB) framework. Considering ESG gives us a different perspective on how good an investment might be.

ESG integration

Always taking account of ESG issues when assessing potential investment opportunities and monitoring the investments in a portfolio.

ESG ratings

Many investment managers use external providers, such as MSCI, to rate companies on their ESG practices. Each provider has its own way of doing things, so ESG scores can vary radically from one provider to another. We run our own ESG system to rate companies. This is based on 77 standards, each for a different industry, produced by the Sustainability Accounting Standards Board.

Ethical investing

An ethical approach excludes investments that conflict with the client values and ethics that a fund is seeking to reflect. There are many different activities or issues that people prioritise as ethical. Common examples include tobacco, adult entertainment, controversial weapons, coal or activities that contravene religious social teaching.

Exclusion

Excluding companies from a portfolio. Exclusions can also be used to set minimum standards or characteristics for inclusion of investments in portfolios. Fund managers may exclude entire industries (e.g. tobacco), companies involved in ethically questionable activities (e.g. gambling), companies that fail to meet certain ESG standards, and companies with a bad carbon intensity.

F

Fundamental analysis/research

Using research to work out the true value of an investment, rather than its current price. Many factors contribute to this, including responsible investment factors. Responsible investment helps us understand the quality of a company, its scope to develop and improve (e.g. in response to climate transition) and its prospects (through making money from responding to sustainability issues). Even if a company is good, it is unlikely to offer good investment returns if this is already reflected in the share price.

G

Green bonds

Debt issued by companies or governments, with the money raised earmarked for green initiatives such as building renewable energy facilities.

Greenwashing

Insincere approaches to climate change and other ESG issues by companies, including investment management firms. For example, an investment manager may label a fund as an ESG fund, even if it does not adopt ESG integration in practice.

I

Impact investing

Investing in companies and projects that aim to achieve a positive impact for people and the planet, as well as earning a financial return. For example, investing in affordable housing.

International Labour Organisation (ILO)

A United Nations agency, often abbreviated to “ILO”, that sets international standards for fairness and safety at work. The ILO standards are commonly used by investors to assess how serious a corporate controversy is.

M

Materiality

An ESG issue is “material” if it is likely to have a significant positive or negative effect on a company’s value or performance.

N

Norms-based screening

Screening investments for potential controversies by looking at whether a company follows recognised international standards. We consider standards including the International Labour Organisation standards, the UN Guiding Principles for Business and Human Rights and the UN Global Compact. Specialist RI funds may exclude companies that do not meet these standards.

P

Physical risk

The physical risks of climate change for businesses, such as rising sea levels, water shortages and changing weather patterns.

Portfolio tilts

Investment industry jargon for having more of something in a portfolio than the benchmark, or less of it. In responsible investment it usually means having more companies in a portfolio that have better ESG credentials or are less exposed to climate risk than there is in the benchmark. The tilt is measured as the overall exposure to a specific type of investment in a portfolio compared to that in the benchmark.

Positive inclusion/screening

Seeking companies that have good ESG practices or that help the world economy be more sustainable. Also used as an alternative to “best-in-class“. The opposite of exclusion.

Principles for Responsible Investment

Often shortened to PRI. A voluntary set of six ethical principles that many investment companies have agreed to adopt. Principle 1, for example, is: “We will incorporate ESG issues into investment analysis and decision-making processes.” The PRI was sponsored by the United Nations. Columbia Threadneedle is a founding signatory, and has attained the top A+ headline rating for its overall approach for the sixth year running.

Proxy voting

Voting on behalf of our clients at company general meetings to show support of their practices and approach – or to show our dissent. We put our voting record on our website within seven days of the vote.

R

Responsible Investment (RI)

The umbrella term for our approach towards managing our clients’ money responsibly. This includes the integration of ESG factors, controversies, sustainability opportunities and climate risks into our investment research and engagements with companies, to inform our investment decisions and proxy voting.

Responsible Investment Ratings

Mathematical models created by our responsible investment analysts that provide an evidence-based and forward-looking indication of the quality of a business and its management of risk.

S

Scope 1, 2 and 3 emissions

The building blocks used to measure the carbon emissions and carbon intensity of a company. Under an international framework called the Greenhouse Gas Protocol these are divided into Scope 1, 2 and 3 emissions. Scope 1 emissions are generated directly by the business (e.g. its facilities and vehicles). Scope 2 covers emissions caused by something a company uses (e.g. electricity). Scope 3 is the least reliable because it is the hardest to measure. It covers other indirect emissions generated by the products it produces (e.g. from people driving the cars a company makes).

Screened funds

Funds that use screens to exclude companies that do not meet their ethical criteria, ESG expectations, carbon intensity or controversy standards.

Social

The “S” in ESG. Investors analyse social risks and how these are managed. This includes a company’s treatment of its employees and its human rights record for other people outside the company (e.g. in the supply chain). It also refers to a company’s commercial opportunities in responding to changing consumer demands, policy changes or technology and innovation (e.g housing, education or healthcare).

Social bonds

Bonds issued to raise money for a socially useful purpose, such as education or affordable housing. Social bonds follow the standards set by the International Capital Market Association (ICMA) and appoint independent external reviewers to confirm the money raised will be used appropriately.

Socially Responsible Investing (SRI)

A form of ethical investment that attaches particular importance to avoiding harm to people or the planet, from the investments being made.

Stewardship

A catch-all term to describe the actions taken to look after our clients’ money. It commonly involves both engagement with companies, to develop a proper understanding of business developments, issues and potential concerns; and proxy voting to support or oppose issues at company general meetings.

Stranded assets

A variety of factors can lead to the risk of assets becoming stranded, such as new regulations or taxes (e.g. carbon taxes or changes in emission trading schemes) or changes in demand (e.g. impacts on fossil fuels, resulting from the shift towards renewable energy). Stranded assets risk having their value written down, impacting the value they have in a company’s accounts.