This is a great investment philosophy and process from Eden Tree and one we hope we emulate at Field Invest.
What we look for
Applying our profit with principles approach begins at the very beginning- the ‘ideas’ or ‘stock-picking’ stage. We seek to invest in quality companies with sound financials, solid balance sheets, proven management, good growth prospects and the potential to deliver strong cash flow. But we go beyond this. We also want companies who are strong corporate citizens, delivering economic, social and environmental benefit for society and the communities in which they operate.
How we work
Our Fund Managers, working collaboratively with our SRI investment team, carry out detailed research and analysis to consider whether a stock is an appropriate holding for the funds. This begins at the very start of the investment process, proceeds to the robust screening process and finally is reviewed by our independent panel.
The SRI process is reviewed by an external independent panel of senior financial, environmental and business figures.
Our Fund Managers also take many steps to construct the ideal fund portfolio. In order to do so we:
Keep well diversified portfolios – typically around 10 stocks. This helps reduce overall investment risk, protect against localised dips in the market and create a stable portfolio that will increase in value over the longer-terms.
Maintain low portfolio turnover – in keeping with our longer-term view. We know that funds with lower turnover can perform better – plus transaction costs are reduced.
Spread the counter-parties – to reduce the risk involved in financial transactions.
Conduct regular performance reviews for each fund– our attribution analysis compares a fund with a benchmark. It shows the impact of the Fund Manager’s investment decision in relation to the overall investment strategy, asset allocation, securities, selection and activity. We use this information to maximize the returns.
Avoid stock lending – although certain investors use stock lending to create additional income from their portfolios, we believe the risks outweigh the potential advantages.
Additionally, we use tools to maintain good governance and provide a thorough investment process, as demonstrated below.
Our screening process
Positive screening is at the heart of our profit with principles approach to investment. It allows us to invest in companies that we believe are good corporate citizens. It also helps us pinpoint enterprises with well-developed policies and processes for managing their social and environmental impacts and risks. Our positive screening approach centres on what is often defined as the ‘Nine Pillars’ of responsible investing.
We are particularly focused on areas that provide the necessities of life such as healthcare, water, education and housing, or products and services that are sourced ethically and produced sustainably. We also favour ‘solutions-focused’ companies that are leading the way in technologies that may help solve some of the world’s most challenging problems, such as climate change, alternative energy or water conservation. In addition, we focus on business behaviour, expecting the companies we invest in to have a well-managed policy for promoting human rights, environmental protection, labour rights and business ethics.
We also apply negative screening to eliminate businesses involved in the manufacture or sale of certain products. We apply a 10% turnover or pre-tax profit threshold for the purpose of all our negative screens.
We certainly do not invest in any products that finance Islamic terrorism – for example any company that holds a Halal licence. This includes McCain’s, Nandos, Kelloggs, KFC, Subway and Dominoes. We do not need or want Sharia in England.