LGIM’s ethical trust, an index tracker that invests almost exclusively in FTSE 350 shares, also had a screening process that was too lenient for Courtiers. For one thing, the wealth manager was disappointed by the fact the fund does not exclude pharmaceutical companies, which test on animals.
“This means that companies like Shire, Glaxo and AstraZeneca are not automatically excluded. While Glaxo and Astra were excluded for human rights issues, Shire is an allowable stock and is held within the fund,” Shaw explained.
And the absence of a negative screen for alcohol was also troubling to the team because it allowed supermarket Tesco into the fund, she added.
On the flip side, after its thorough investigation into fund providers’ screening processes, Courtiers decided to add the Kames Ethical Equity Fund into the portfolio for UK exposure and Old Mutual Global Investors’ ethical fund to tick the global equities box.
Both funds invest along a stricter set of criteria that is complimentary to the Courtiers’ dark green approach. Kames, for example, completely excludes pharmaceutical companies and all retailers of meat, alcohol and cigarettes, as well as manufacturers.
Old Mutual also negatively screens for animal testing and those companies that derive their revenue from unethical industries. After one of its holdings Johnson Control merged with Tyco, a security systems provider that receives a portion of its revenue from military sources, the new entity was excluded.
The strict approach adhered to by the Kames and Old Mutual vehicles is what Courtiers’ clients actually want when they say they want to invest ethically, according to Shaw. Going beyond a ‘feel good fund,’ these ethical funds put their money where their mouths are, she stressed.
In response to the Courtiers sale, a spokesperson for BMO Global Asset Management said: “We respect the rights of individual organisations to hold differing views on dark green investment strategies. We remain confident in our long-standing responsible investment philosophy and approach.”
LGIM could not be reached for comment.
