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Responsible 

Investing

We believe that embedding responsible investing principles into our investment process will lead to better informed investment decisions.

Coutts defines responsible investment as the integration of environmental, social and corporate governance (ESG) factors in to our investment processes and ownership practices.

We believe that ESG factors have the potential, over time, to impact investment portfolios across companies, sectors, regions and asset classes. Strong corporate governance practices and management of environmental and social risks are important drivers to the creation of long-term shareholder value. 

The Coutts

Approach

The integration of ESG factors into our investment decision-making aligns well with our long-term investment horizon and our investment process.

  • The Coutts investment process follows a structured approach. It is disciplined, dynamic and repeatable.

    We focus on three factors of which responsible investing is an important component:

    • Managing risk
    • Managing costs
    • Investing responsibly
  • We believe that responsible corporate behaviour with respect to ESG factors can generally have a positive influence on long-term financial performance. We therefore recognise that a broad range of financial and non-financial considerations may be relevant in making investment decisions.

    We take a pragmatic approach to applying our responsible investment principles, which may at times have to be adapted to the local financial and legal environment and the commercial imperatives within which a particular company operates. However, we always expect the companies in which we invest to comply with the legal and regulatory regimes applicable to them. 

  • ESG factors are integrated into our decision making process. When investing directly in equities, we assess ESG risks and opportunities as they relate to overall corporate performance and we look to identify and mitigate ESG factors that are, or could become material to long-term financial performance. ESG risks are monitored throughout the life of the investment. 

    Funds managed by third-parties make up a significant proportion of client investment portfolios. When selecting funds, we undertake due diligence and assess the performance of each manager, which includes an assessment of their approach to responsible investment and stewardship, and the degree to which it adheres to Coutts’ approach and to Coutts’ Responsible Ownership Principles. We undertake annual reviews and receive regular reports from the asset managers and monitor progress. When investing in third-party funds, we delegate the day-to-day environmental, social and governance activities to our managers. Third-party fund managers vote at their discretion and, when exercising their vote, must take in to account the principles of good corporate governance. In respect of investments in the United Kingdom, we encourage our managers to have due regard to the UK Corporate Governance Code and the UK Stewardship Code.

  • We encourage responsible behaviour in the companies in which we hold direct public equity holdings through voting and engagement. We believe that engagement is an effective way in which shareholders can best effect positive change and enhance long-term financial performance. We identify engagement focus areas through a detailed review of our holdings in order to prioritise key ESG issues using a risk-based approach, including relative risk and size of holding.

    This is done privately (with support from Hermes EOS) as we believe this is more effective than public engagement. Accordingly, we do not typically disclose the names of companies with which we have engaged, although case studies may be available periodically. Here we outline the engagement objectives and plan for the period 2018 - 2020.

  • Coutts complies with the UK Stewardship Code. Our statement of compliance with the UK Stewardship Code and associated Responsible Ownership Principles can be found here.

    The Financial Reporting Council (FRC) is the UK regulator with responsibility for the UK's Stewardship Code. It ranks asset managers on the quality of their disclosures and activities, and Coutts is delighted to be awarded the highest rank – Tier 1.

  • Coutts is a signatory of the Principles for Responsible Investment.

    The six Principles for Responsible Investment are a voluntary and aspirational set of investment principles that contribute to developing a more sustainable global financial system.

  • We have formed a responsible investment forum to inform our responsible investment strategies and activities. This forum informs the decision making of our investment committee.

    We report regularly on voting and engagement. We also commit to engaging with our third-party fund managers to encourage their compliance with best practise standards of global stewardship. 

  • Disclosure is the key that allows investors to better understand, evaluate and assess potential risks and return, including the potential impact of ESG factors on a company’s performance.

    We actively support transparency and good reporting from companies and the integration of ESG in investment decision-making processes by engaging with other bodies with similar goals. For example, our parent company RBS is a member of the UK Sustainable Investment and Finance Association (UKSIF) and we engage with industry bodies and working groups in this developing sector. 

  •  We acknowledge that endeavours to implement responsible investing practices will take time and perseverance. We are committed to continually improving our investment processes that underpin our approach to ESG integration and stewardship.

    This framework outlining our approach to responsible investment is reviewed every two years or more frequently as needed.

Coutts Investment

Principles

Responsible investing fits naturally with our five investment principles. These underpin our end to end investment process.

Macro-informed asset allocation

We believe this is a key driver of returns over the long term.

Value and selectively contrarian

We look for assets that are inexpensive and may be unpopular and out of favour. 

Diversification

Essential to broaden sources of return and manage risk in a robust way.

Quality

We seek well-managed and stable institutions.

Patience

We focus on long-term opportunities and do not over react to short-term noise.

News and

Insights

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    The US mid-term elections and Brexit dominated the news in November but we think changes in the macro-economic environment are more important to investors.

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