GUIDE TO ETHICAL EXCLUSIONS 2022 - If you are a private investor you should not rely on this document but should contact your professional ...
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GUIDE TO ETHICAL EXCLUSIONS 2022 If you are a private investor you should not rely on this document but should contact your professional adviser.
INTRODUCTION Many of our clients have some form of ethical screening policy operating over their investment portfolio, and you may well be considering whether ethical exclusions are right for you. This guide is designed to help you discuss and navigate the ethical options and decide the best course of action for your portfolio. We have long experience of working with our clients to implement their ethical concerns in investment portfolios. We undertake research on each issue and consider the data provided by the companies themselves, together with data from third parties to inform us on the judgements that have to be made. While we are able to operate on a bespoke basis, we have developed a set of parameters with clear definitions for each ethical issue to help clients implement their policies accurately. Our approach is both quantitative and qualitative and considers the materiality of each exclusion based upon the percentage of revenues for the overall business involved in the production and distribution of ethically unacceptable products, such as gambling, tobacco, alcohol, adult entertainment, armaments and the extraction of thermal coal or the production of oil from tar sands. We have pre and post trade systems in place that allow us to manage portfolios within these defined parameters and we regularly review the stocks excluded for each factor. The exclusionary policies described in this document apply to a range of Sarasin & Partners investment strategies. A summary matrix is included on page 14. 2 Sarasin & Partners 2022 Ethical Exclusions
CLUSTER BOMBS AND LANDMINES
Prohibited under international treaties
The United Nations Convention on Cluster The Ottawa Treaty (Anti-Personnel Mine
Munitions is an international treaty that Ban Convention) aims at eliminating anti-
prohibits the use of cluster bombs, a type personnel landmines (AP-mines) around
of explosive weapon which scatters sub- the world. To date, there are 162 States
munitions (“bomblets”) over an area. The party to the treaty while 34 UN states
convention was adopted in 2008. including the United States, Russia and
China are non-signatories.
CLUSTER BOMB LANDMINE
RESTRICTIONS
RESTRICTION DEFINITIONS USED
Cluster munitions Companies that manufacture cluster
munitions, whole weapon systems,
(Manufacturer) components, or delivery platforms.
Excluded for all
portfolios managed by
Sarasin & Partners.
Landmines Companies that manufacture landmines,
(Manufacturer) whole systems or components.
Excluded for all portfolios
managed by Sarasin & Partners.
3 Sarasin & Partners 2022 Ethical ExclusionsADULT ENTERTAINMENT
The adult entertainment exclusion
policy applies a wide definition to
exclude all producer, distributor, retailer
and ownership categories of adult
entertainment. We apply a materiality
threshold at 5% of revenues.
XXX
ADULT
RESTRICTIONS
ENTERTAINMENT
EXCLUSION DEFINITIONS USED
Adult Companies with industry related revenues,
Entertainment including producer, distributor, retailer, and
related revenues ownership categories.
Companies that produce, direct, or publish
adult entertainment materials that fall into
the following categories: Producer of X-rated
Adult films, Producer of pay-per- view programming
entertainment or channels, Producer of sexually explicit
producer video games, Producer of books or magazines
5% of revenues for with adult content, Live entertainment of an
activities connected adult nature, Producer of adults-only material
to adult entertainment. on the internet.
Companies that distribute sexually explicit
products and services, including X-rated
movies and videos, printed materials, television
Adult programs, and online products. This includes
entertainment companies providing cable channels and
distributor television for adult viewing only. Companies
in the hospitality industry are also included if
they offer ‘adults only’ films for in-room viewing
through pay-per-view services.
0.0% of MSCI AC World Index excluded
if these exclusions are applied
4 Sarasin & Partners 2022 Ethical ExclusionsALCOHOL
The alcohol exclusion policy excludes
both alcohol producers and companies
with alcohol related revenues using the
definitions below. We apply a materiality
threshold set at 5% of revenues for
producers and 10% of revenues for any
company with alcohol related activities.
ALCOHOL
RESTRICTIONS
EXCLUSION DEFINITIONS USED
Companies that manufacture alcoholic
5% of revenues from products including brewers, distillers, and
Alcohol producers
alcohol producers. vintners. This also includes companies that
own or operate wine vineyards.
10% of revenues for any
Companies with alcohol related revenues,
Alcohol related company with alcohol
including producer, distributor, retailer,
revenues related products
licensor or supplier categories.
or services.
1.1% of MSCI AC World Index excluded
if these exclusions are applied
5 Sarasin & Partners 2022 Ethical ExclusionsARMAMENTS
The armaments exclusion policy
distinguishes between the manufacture
of whole weapon systems (zero exposure)
and companies with revenues related
to weapons production, where a 10%
materiality threshold is applied.
ARMAMENTS
RESTRICTIONS
EXCLUSION DEFINITIONS USED
Companies that produce conventional,
Zero exposure to the biological/chemical or nuclear weapons.
Weapons
manufacture of whole Excludes companies that manufacture
producers
weapon systems. components of weapons systems and
support services and systems.
10% of revenues
from any company
with activities
connected to weapons Companies that derive revenues
Weapons related systems, including from components of weapon systems,
revenues components and support systems and services designed
services designed for for weapons use.
weapons use products
or services designed
for weapons use.
1.3% of MSCI AC World Index excluded
if these exclusions are applied
6 Sarasin & Partners 2022 Ethical ExclusionsCIVILIAN FIREARMS
The civilian firearms exclusion policy
excludes producers of automatic and
semi-automatic firearms. It excludes
companies with revenues related to
civilian firearm production and related
revenues, where a 5% materiality
threshold is applied.
CIVILIAN FIREARMS
RESTRICTIONS
EXCLUSION DEFINITIONS USED
Companies that manufacture firearms which
automatically eject the cartridge case of a
Zero exposure to fired shot and load the next cartridge from
Automatic or the manufacture the magazine allowing the gun user to fire
semi-automatic of automatic and more than one round of ammunition for
firearm producer semi-automatic every pull of the trigger. The screen includes
civilian firearms. all types of weapons that are automatic or
fully automatic, as well as weapons that allow
selective fire
5% of revenues from
any company with
activities related to
Companies that derive revenue from the
Civilian firearm the manufacture,
manufacture, production or distribution of
producers and production or
firearms or small arms ammunition intended
related revenues distribution of
for civilian use.
firearms or small arms
ammunition intended
for civilian use.
0.3% of MSCI AC World Index excluded
if these exclusions are applied
7 Sarasin & Partners 2022 Ethical ExclusionsGAMBLING
The gambling exclusion policy excludes
exposure to gambling using the
definitions given below. We set the
materiality threshold at 5% of revenues
for direct gambling operations and 10%
of revenues for any gambling related
activities.
GAMBLING
RESTRICTIONS
EXCLUSION DEFINITIONS USED
Companies that own or operate gambling
facilities such as casinos, racetracks, bingo
parlours, or other betting establishments,
including: horse, dog, or other racing events
Gambling 5% of revenues from that permit wagering; lottery operations;
operations gambling operations. online gambling; pari-mutuel wagering
facilities; bingo; pachislot and pachinko
parlors; slot machines; Jai-alai; mobile
gambling; and sporting events that
permit wagering.
10% of revenues for Companies with gambling related revenues
Gambling related
any company with through the operation, support, licensing or
revenues
gambling. ownership categories.
0.3% of MSCI AC World Index excluded
if these exclusions are applied
8 Sarasin & Partners 2022 Ethical ExclusionsPREDATORY LENDING
The predatory lending exclusion policy
excludes companies that generate
revenues from the provision of
controversial lending activities.
We apply a materiality threshold set
at 5% of revenues.
£
PREDATORY LENDING
RESTRICTIONS
EXCLUSION DEFINITIONS USED
Predatory lending is defined as the
“imposition of unfair and abusive loan terms
on borrowers” by engaging in deception,
fraud, or manipulation through aggressive
sales tactics, and taking unfair advantage
5% of revenues for
Predatory lending of a borrower’s lack of understanding
activities connected to
related revenues about complicated transactions. Examples
predatory lending
of products and services associated with
predatory lending include payday loans,
instalment loans, pawn loans, title loans,
tax refund anticipation loans, doorstep
loans, and check cashing.
0.0% of MSCI AC World Index excluded
if these exclusions are applied
9 Sarasin & Partners 2022 Ethical ExclusionsTOBACCO
The tobacco exclusion policy applies
a zero tolerance approach to tobacco
producers. It excludes all tobacco
producers and applies a materiality
threshold of 10% of revenues for any
company with tobacco related
activities, such as distributors,
retailers and suppliers.
TOBACCO
RESTRICTIONS
EXCLUSION DEFINITIONS USED
Companies that manufacture tobacco
products, including cigarettes, cigars,
Zero exposure to
blunts, beedis, kreteks, smokeless tobacco,
Tobacco producers any revenues from
snuff, snus and chewing tobacco. This also
tobacco producers.
includes companies that grow or process
raw tobacco leaves.
10% of revenues for
Companies with tobacco related revenues,
Tobacco related any company with
such as distributors, licensors, retailers or
revenues tobacco related
suppliers (e.g. machinery, paper, filters).
products or services.
0.6% of MSCI AC World Index excluded
if these exclusions are applied
10 Sarasin & Partners 2022 Ethical ExclusionsEXTRACTION OF THERMAL COAL
Thermal coal is mainly used in power We do not exclude metallurgical coal
generation. It is burned for steam to (coking coal), which is used in the
run turbines to generate electricity. process of iron and steel production.
Emissions from burning coal are seen We do not exclude companies that buy
as the single greatest threat to climate electricity generated from thermal coal.
change. Coal mining is also a source of
methane, another global warming gas.
We set the materiality threshold to this
activity at 5% of revenues.
THERMAL COAL
RESTRICTIONS
EXCLUSION DEFINITIONS USED
Any company that derives more than 5% of
revenues from the mining of thermal coal
(including lignite, bituminous, anthracite and
5% of revenues from
steam coal) and its sale to external parties.
Thermal coal the extraction of
It excludes: revenue from metallurgical coal;
thermal coal.
coal mined for internal power generation (e.g.
in the case of vertically integrated power
producers); and revenue from coal trading.
0.0% of MSCI AC World Index excluded
if these exclusions are applied
11 Sarasin & Partners 2022 Ethical ExclusionsPRODUCTION OF OIL FROM TAR SANDS
Some oil companies have expanded the (e.g. exploration, surveying, processing,
scope of their operations to search for refining), ownership of oil sands reserves
oil from less conventional sources with with no associated extraction revenues
higher pollution, such as oil from tar or revenue from intra-company sales.
sands. We set the materiality threshold to We do not exclude companies that buy
this activity at 5% of revenues. We do not electricity generated from tar sands.
exclude companies that derive revenue
from non-extraction activities
TAR SANDS
RESTRICTIONS
EXCLUSION DEFINITIONS USED
Companies that own oil sands reserves and
disclose evidence of deriving revenue from oil
sands extraction. This factor does not include
5% of revenues from
revenue from non-extraction activities (e.g.
Tar sands the production of oil
exploration, surveying, processing, refining);
from tar sands.
ownership of oil sands reserves with no
associated extraction revenues; or revenue
from intra-company sales.
0.0% of MSCI AC World Index excluded
if these exclusions are applied
12 Sarasin & Partners 2022 Ethical ExclusionsFOSSIL FUEL EXTRACTION
Fossil fuels are carbon-rich deposits contributing factor to human-induced
which are formed from geological global warming. As of 2020, fossil fuels
processes acting on the remains of supplied 84% of the world’s energy.
organic matter. The four fossil fuels
Aside from climate change, there are
are petroleum, natural gas, coal and
diverse externalities associated with
Orimulsion.
fossil fuels. These include: damage to
In the presence of oxygen, fossil fuels terrestrial and marine ecosystems;
can be burned to generate energy. A the production of hazardous waste;
by-product of their combustion is carbon premature deaths among human
dioxide (CO2). The increasing volume of populations from air pollution and
CO2 in the earth’s atmosphere is a major employee safety issues.
FOSSIL FUELS
RESTRICTIONS
EXCLUSION DEFINITIONS USED
5% of revenues
from the extraction Companies that derive revenues from the
Oil & gas extraction
and production of oil extraction and production of oil and gas.
and gas.
5% of revenues
Companies that derive revenues from
Oil & gas refining derived from refining
refining oil and gas.
oil and gas.
5.5% of MSCI AC World Index excluded
if these exclusions are applied
Sarasin & Partners 2022 Ethical ExclusionsETHICAL RESTRICTIONS
XXX
£
CLUSTER BOMB LANDMINE ADULT ALCOHOL ARMAMENTS CIVILIAN FIREARMS GAMBLING PREDATORY LENDING TOBACCO TAR SANDS THERMAL COAL FOSSIL FUELS
ENTERTAINMENT
Food & Agriculture
Opportunities X X X X X X X
Responsible
Corporate Bond X X X X X X X X X X X X
Responsible Global
Equity X X X X X X X X X X X X
FUND NAME
Sarasin & Partners 2022 Ethical Exclusions
Growth;
Endowments; and
Income & Reserves X X X X X X X X X
CAIFs*
Climate Active
Endowments CAIF* X X X X X X X X X X X
Tomorrow’s World X X X X X X X X X X X X
14
X Exclusionary policy applied *These funds are for registered charity investors onlyGUIDANCE NOTES All exclusions are monitored on a best endeavours basis. Restricted stocks are coded into our pre-trade compliance system to prevent portfolio managers from buying them. Each restriction is monitored and applied separately. It is not possible to apply a percentage threshold to revenues in respect of an amalgamation of ethical categories, as accurate data is not disclosed to allow meaningful analysis to take place. We use external agencies for data provision. The Sarasin & Partners Ethical Committee reviews the data and discusses all securities that the raw data suggests are excluded or close to exclusionary thresholds. The Ethical Committee investigates the data further as it deems appropriate and makes the final decision as to whether each security is restricted or permitted for investment. The exclusions, criteria and thresholds set out in this document form part of a dynamic and flexible approach to ethical screening, and are therefore subject to change at any time without notice. We review criteria at each quarterly meeting. 15 Sarasin & Partners 2022 Ethical Exclusions
IMPORTANT INFORMATION
If you are a private investor you should not rely on this document
but should contact your professional adviser.
This document has been issued by Sarasin & Partners LLP which is
a limited liability partnership registered in England and Wales with
registered number OC329859 and is authorised and regulated by
the UK Financial Conduct Authority. It has been prepared solely for
information purposes and is not a solicitation, or an offer to buy or
sell any security. The information on which the document is based has
been obtained from sources that we believe to be reliable, and in good
faith, but we have not independently verified such information and we
make no representation or warranty, express or implied, as to their
accuracy. All expressions of opinion are subject to change without
notice.
Please note that the prices of shares and the income from them
can fall as well as rise and you may not get back the amount
originally invested. This can be as a result of market movements and
also of variations in the exchange rates between currencies. Past
performance is not a guide to future returns and may not be repeated.
Neither Sarasin & Partners LLP nor any other member of the Bank J.
Safra Sarasin group accepts any liability or responsibility whatsoever
for any consequential loss of any kind arising out of the use of this
document or any part of its contents. The use of this document should
not be regarded as a substitute for the exercise by the recipient of his
or her own judgment.
Sarasin & Partners LLP and/or any person connected with it may act
upon or make use of the material referred to herein and/or any of
the information upon which it is based, prior to publication of this
document. If you are a private investor you should not rely on this
document but should contact your professional adviser.
© 2022 Sarasin & Partners LLP – all rights reserved. This document
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Sarasin & Partners LLP.
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