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Profile: how Rathbone Greenbank caught the ESG client wave

Profile: how Rathbone Greenbank caught the ESG client wave

From fighting against modern slavery to holding companies to account on their carbon footprint, the Rathbone Greenbank Investments team has a lot on its plate.

Under the leadership of John David, head of research Perry Rudd, engagement manager Matt Crossman and senior ethical researcher Kate Elliot have all been vocal in their criticism of corporate behaviour.

There have been a number of initiatives that the team has been involved in over the years. On climate policy, they have engaged with companies like Shell and BP, filing resolutions on climate risk which both received 98% support at AGMs.

Besides BP and Shell, they have also had continued meetings with the likes of Rio Tinto, Glencore, Statoil and Total.

Over 250 investors, including Rathbone Greenbank, with more than $28 trillion (£21 trillion) in assets under management, have signed up to Climate Action 100+, which was launched as a global investor coalition last year. Greenbank is also a leading member of the Institutional Investors Group on Climate Change (IIGCC).

Crossman says: ‘The big story is Climate Action 100+. The IIGCC last year got together with the US and Australia to pull together a coalition of investors to engage with the 100 biggest carbon emitters to commit to three areas on carbon management and reduction. We are engaging with companies, it is high priority for us.’

Greenbank, which took its name from the Rathbones family home in Liverpool, dates back to 1997 when investment director Elizabeth Haigh joined the group. Her interest in ethical investment planted the seeds for what became Rathbone Greenbank in 2004. Haigh recruited Rudd in 1999 and David in 2001.

David explains: ‘We continued to build the team to the point in 2004 where we felt we wanted to create our own unique identity in the marketplace, to highlight the fact we did things differently, and Greenbank was formed.’

Crossman joined the team in 2004 and Elliot followed him in 2007. Rathbones’ ethical investment arm now manages £1.2 billion in assets for private clients, trusts and charities.

Since Greenbank was set up, there has been huge change in ESG investing, both in the way the Rathbones team approaches it and across the industry as a whole.

David says: ‘We have been doing this for 21 years, we’ve seen a big evolution in the approach to ethical investment. Our origins were more around ethics and value-based investment. But it is much more than simply negative screening. We have always had a much more aligned focus around positive investment.’

Rudd adds: ‘Our overall research process has expanded in the last 10 years to incorporate an active engagement programme. This ranges from requesting clarification from companies on minor data points in their corporate reporting to involvement in large-scale, multi-year projects with a range of stakeholder organisations.

‘Our ethical research process seeks to maximise the net positive social or environmental impact of our clients’ investment portfolios by identifying companies that are aware of their wider responsibilities and/or contributing to a more socially and environmentally sustainable world.’

Elliot points out that the amount of information that is now available to the team has also hugely increased over the years.

‘It’s gone from us having to actively ask firms about their greenhouse gas emissions to it becoming commonplace, with voluntary reporting and now mandatory in the UK.’

She explains that after clients fill out an initial ethical questionnaire where they can indicate areas of concern, then comes the difficult step of analysing companies and picking out the ones to invest in.

‘We look at how they operate. Are they treating employees in a responsible way, are they at risk of human rights issues? Because we have the in-house research team we are able to go into the high level of detail in the grey areas. With organisations that have some positive stuff, but have areas of concern, we can look at an individual level where they fall.’

Aside from climate policy, there are three key areas that the team has led engagement in: health and nutrition, responsible tax and modern slavery.

Crossman says: ‘Modern slavery is a systemic issue. It goes across the supply chain. Modern supply chains can get incredibly complicated and really fast. For example, Philips, for some of their products, they have 50 lanes of supply chain relationships. So what’s the best way to engage on this one? You’re never going to crack it by making it more illegal. How do you get businesses onside?’

He adds: ‘There was a law in California [aimed at slowing human trafficking and forced labour]. What we did was take that success and represent it to the UK, working with NGOs and we wrote letters to Theresa May.’

So the Rathbones team gathered public support from UK investors for transparency in supply chains (TiSC), eventually getting measures included in the UK Modern Slavery Act. Last year they also wrote to 19 FTSE 100 companies to encourage improved TiSC reporting, while also lobbying the Canadian government in favour of the legislation.

The team has also engaged companies to encourage more responsible tax policies, serving as a member of a global investor task force supporting the Principles for Responsible Investment’s work on corporate tax responsibility.

‘Elliot was instrumental in developing a framework on what responsible tax should look like. We are involved in a UK project,' says Crossman. 'I think it’s a massive issue in rebuilding trust in business.' 

‘The other area is sugar and nutrition, as well as childhood obesity. Looking to benchmark the European food industry, on not just how they are formulating products, but also how they are marketing them.

‘That will be a big one for us next year as we will look at action around company AGMs.’

Recent product launches in the industry have increasingly concentrated on ESG investing as wealth and asset managers are seeing more and more demand from clients.

‘Over the past few years there has been a growing realisation that ESG factors can materially benefit financial performance as well,’ David says.

‘There will be further evolution in the sustainable investment space. Where it is at the moment, these terms [ethical, sustainable and green] can be lumped together. Products also lump approaches together, so maybe there will be more subtlety.’

For the Greenbank team, David believes there is still potential for responsible investing to continue growing as well.  

‘I think there is a very good tailwind to ethical and sustainable investment, I think the profile has increased over the last couple of years. I think we are fairly unique in the depth and longevity of our experience. It may become more difficult to communicate that in a busier market place but we would fully support further development of this space more broadly.’

He adds: ‘As the number of investment managers and the client base grows, we would look to expand the research team as well.’

Currently, Greenbank has 21 employees, with the core team based in Bristol and charity specialists located in London and Liverpool.

With a minimum investment of £200,000, the average client size is £700,000. David says that the business is growing fast, and most clients come through word of mouth recommendations. He also says that they are starting to see increased interest from advisers.

 ‘There is a lot of interest in this space amongst the whole spectrum of private client trust and charity investors. There is a lot of talk of millennials driving the next wave in this area.

'If you look at our client base, we have clients across generations, often in the same family who have a natural interest in ethical investment,’ he says.

‘There are 80 year olds who are just as passionate. As wealth transfers down to the younger generations, perhaps given the background millennials have had, they will increasingly look to see that reflected in the portfolios they have. I would see that as a driver in the next 10 years.’

He adds: ‘I think there is a danger with the launch of the UN sustainable development goals that others come into this space without the same depth of understanding and experience which might make it more confusing for investors in terms of what they’re getting. But that just puts the onus on us to communicate better in terms of what we’re doing and how we’re going about it.'  

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