Exclusion policy
At FSSA Investment Managers, our approach to responsible investment has been shaped by an emphasis on stewardship and the belief that quality managers and good governance should ensure that environmental and social concerns are rightfully addressed. As such, in our research we look for evidence that the management operates the business effectively and in the interests of all stakeholders — both now and for the longer term. We believe that companies that do not look after their customers, employees, suppliers, and the larger community, are unlikely to be rewarding long-term investments.
We believe that not everything has a price and will not invest in companies unless they meet our quality standards. This same consideration applies for companies we own but where the quality has deteriorated over time. To this end, we monitor companies and engage with management teams to evaluate whether their direction of travel remains positive.
That said, we believe that there is no such thing as a perfect company. ESG is a complex subject, and the companies and markets we invest in are at varying stages of development. Ultimately, we aim for our engagement efforts to improve their trajectory, help them achieve their long-term objectives, and align those goals with their key stakeholders.
As a team, we are committed to:
We carry out these commitments by excluding certain industries from our investment universe. While most of what we encounter in our research are shades of grey, there are certain people we would never invest in and businesses that we would not own. Beyond these exclusions we conduct our own pragmatic research to ensure that the companies we invest in meet our quality criteria.
Exclusions
Controversial and conventional weapons
We do not invest in companies involved in the production or development of cluster munitions, anti-personnel mines, small arms, biological and chemical weapons, depleted uranium, nuclear weapons and white phosphorous munitions, and have set a revenue threshold of 0%. This also applies to companies that own more than a 50% interest in entities that derive any revenue directly from the manufacture of such products.
If, after investment, we identify any holdings in conflict with this exclusion, we will initiate an orderly sale of the position within a reasonable timeframe.
Tobacco products
We do not invest in companies involved in the production of traditional cigarettes and other tobacco products (including cigars, chewing tobacco, vape products and e-cigarettes), and have set a revenue threshold of 0%. This also applies to companies that own more than a 50% interest in entities that derive any revenue directly from the manufacture of tobacco products.
If, after investment, we identify any holdings in conflict with this exclusion, we will initiate an orderly sale of the position within a reasonable timeframe.
Pornography
We do not invest in companies involved in the production or distribution of pornography or adult entertainment, or own any product categories of pornographic or adult entertainment content, and have set a threshold of 0%.
If, after investment, we identify any holdings in conflict with this exclusion, we will initiate an orderly sale of the position within a reasonable timeframe.
Additional screening
Thermal coal
We do not invest in companies with material exposure to thermal coal. We define this in terms of revenue from thermal coal mining, and have set an annual revenue threshold of 10%.
If, after investment, we identify any holdings that have thermal coal revenue in excess of 10% (measured on a rolling three-year average), we will engage with such companies, though we may continue to hold the stock while urging a reduction.
Gambling
We do not invest in companies whose primary business is gambling. We define this in terms of revenue from gambling, and have set a threshold of 10%. This applies to companies that own or operate gambling facilities, produce gambling products, or provide support services to the gambling industry.
If, after investment, we identify any holdings that have gambling revenue in excess of 10%, we will engage with such companies, though we may continue to hold the stock while urging a reduction.
Governance
We adopt a principles-based assessment of good corporate governance practices which is guided by four governance pillars – Accountability, Independence, Transparency and Stewardship. Assessment of good governance may include, for example, taking into account indicators such as ownership profile, board structure, board independence, and remuneration of staff. Additionally, we consider:
Bribery
We do not invest in companies where systemic bribery is believed to be taking place. We expect companies to adhere to Principle 10 of the United Nations Global Compact (UNGC).
Tax evasion
We believe all companies should adhere to local tax legislation in both the letter and the spirit of those laws. Those that do not are likely to face a regulatory or consumer backlash, or both. We will not invest in companies that persistently flout local tax legislation.
The implementation of the exclusions and screening are dependent on information relating to either reported revenues or revenue estimates and UNGC breaches provided by reputable third-party research providers. Where such information turns out to be inaccurate or there are delays in accessing such information, the implementation of the exclusions and screening may in turn be delayed.
Disclaimer
The commitments and targets set out on this website are current as of today’s date. They have been formulated by the relevant First Sentier Investors (FSI) investment team in accordance with either internally developed proprietary frameworks or are otherwise, based on the Institutional Investors Group on Climate Change’s (IIGCC) Paris Aligned Investment Initiative framework. The commitments and targets are based on information and representations made to the relevant investment teams by portfolio companies (which may ultimately prove not be accurate), together with assumptions made by the relevant investment team in relation to future matters such as government policy implementation in ESG and other climate-related areas, enhanced future technology and the actions of portfolio companies (all of which are subject to change over time). As such, achievement of these commitments and targets set out on this website depend on the ongoing accuracy of such information and representations as well as the realisation of such future matters. FSI will report on progress made towards achieving these targets on an annual basis in its Climate Change Action Plan. The commitments and targets set out on this website are continuously reviewed by the relevant investment teams and subject to change without notice.