responsible Investing

your investments - creating a better world

Investing can be a powerful force for change. The shares and funds we select on your behalf are scrutinised to ensure the companies involved are acting in a way that protects the environment and the people they work with.

We cooperate with our clients, the companies we invest in, other investors and international organisations to help build a better world.

What is responsible investing?

Responsible investors essentially take responsibility for the impact that the companies they invest in have on the world.

Broadly speaking, responsible investing covers three categories of company behaviour: environmental, social and governance, often abbreviated to ‘ESG’. 

At Coutts, we expect the companies we invest in to have strategies in place to deal with these issues.

  • Environmental – the impact a company has on the environment. This includes carbon emissions, deforestation, water usage and packaging.
  • Social – the impact a company has on society. This includes how it treats its staff, making sure supply chains avoid unethical labour practices, and the health impacts of its products.
  • Governance – the impact a company has on the business environment. This includes its accounting practices, how it negotiates with suppliers, its attitude to diversity and how it contributes to a fair and stable market environment.

 

“Climate change is an urgent priority, for our clients, for the companies we invest in, and for society. As long-term investors we believe that these companies must have credible strategies that address the impacts of climate change.”
Leslie Gent, Head of Responsible Investing, Coutts

investment process

Responsible investing is one of the three main pillars that collectively underpin our investment process, along with managing risk and managing costs.

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. 

 

our philosophy

We also believe that when companies behave responsibly towards ESG factors, it can have a positive influence on their long-term financial performance. We therefore recognise that a broad range of non-financial considerations, alongside the financial ones, may be relevant when considering which businesses to invest in.

We take a pragmatic approach when applying our responsible investment principles, which may at times have to be adapted to the relevant financial and legal environment of a particular company.

At the very least, we expect all companies in which we invest to comply with the laws and regulations that apply to them.

 

how we do this

Before investing directly in equities, we assess ESG risks and opportunities. We look to identify and mitigate ESG factors that are, or could become, material to long-term financial performance. These risks are monitored throughout the life of the investment.

Funds managed by third parties make up a significant proportion of our client portfolios. When selecting these funds, we undertake due diligence and analyse the performance of each manager, which includes assessing their approach to responsible investing and stewardship, and the degree to which they adhere to our approach and responsible ownership principles.

We monitor progress through regular reports from the asset managers, as well as annual reviews with them.

In respect of investments in the United Kingdom, we encourage our third party managers to have due regard to the UK Corporate Governance Code and the UK Stewardship Code.

 

statement of Compliance with Uk stewardship code

Coutts complies with the UK Stewardship Code, set up by UK regulator the Financial Reporting Council (FRC), and has been awarded the highest rank – Tier 1 – for the quality of our disclosures and activities.

The FRC says the code “establishes a clear benchmark for stewardship as the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society”.

Read our statement of compliance with the UK Stewardship Code and associated Responsible Ownership Principles.

Find out more about the UK Stewardship Code.

PRINCIPLES FOR RESPONSIBLE INVESTMENT

Coutts has signed up to the Principles for Responsible Investment (PRI), an organisation supported by, but not part of, the United Nations, which encourages investors to use responsible investing to enhance returns and better manage risks.

Our PRI assessment achieved an ‘A’ grade or above in each of the key categories except one, achieving the highest possible rating for our strategy and governance.

Find out more about the PRI.

 

RESPONSIBLE INVESTMENT FORUM

We’ve also formed an in-house responsible investment forum which meets monthly and directly informs the decision making of our investment committee, from which we define our relevant strategies and activities.

How we're helping our clients protect the planet through their investments

At Coutts we believe climate change poses as much of a risk to the global financial system as it does to the environment. And dealing with it is urgent.

With that in mind, we carefully consider climate change risks at every step of our investment process as we aim to help preserve our clients’ portfolios and funds, and aid the move towards a zero-carbon economy.
 

Understanding every holding’s approach to climate change

Our aim is to invest in companies or funds that are resilient in the face of environmental risks and, where possible, contribute to a lower-carbon economy.

Before we invest in anything, we analyse the environmental, social and governance (ESG) factors that could have an effect on that investment, including climate change. We give every potential investment a score to help us decide whether or not we’re doing the right thing.

Here are some of the questions we ask ourselves at the early stages of assessing investment potential:

  • does the company operate in line with the commitments made by the Paris Agreement?
  • how do they identify climate-related risks and opportunities?
  • do they have dedicated staff who focus on responsible investing?

Our approach is based on internationally-recognised principles, provided by respected global bodies such as the Principles for Responsible Investment and Climate Action 100+ (an investor initiative to ensure the world’s largest corporate greenhouse gas emitters take steps to reduce their emissions)
 

Reducing our clients’ carbon footprint

While our portfolios and funds don’t directly emit carbon, the companies we invest in on our clients’ behalf do. It’s up to us to manage this as effectively as possible and help our clients reduce their carbon footprint.

Against that backdrop, we’ve set two targets to reduce our carbon emissions:
 

Coutts_Diversification_graph_b


We’ve already reduced the carbon intensity in our Personal Portfolio Funds by 20-30% through shifting allocations to funds with a low carbon designation, while minimising the impact on risk and return.

We measure carbon emissions as ‘carbon intensity’, which covers the amount of CO2 a company emits per million dollars of sales.
 

Excluding investments that harm the environment

We’ve decided to exclude certain types of company from our investments based on the harm they cause to the environment. We will not invest in any company that:

  • derives more than 5% of its revenue from thermal coal extraction for coal mining and exploration
  • derives more than 25% of its revenue from thermal  coal generation, including utilities that own or operate coal-fired power plants
  • derives more than 5% of its revenue from involvement in tar sands – a mixture of clay, sand, water and bitumen that are mined and refined into oil
  • derives more than 5% of its revenue from Arctic oil and gas exploration – this is evaluated based on whether a company holds at least one licence or permit for drilling or exploring the Arctic offshore region.

Working with the companies we invest in to fight climate change

In addition to the activity described above, we also actively use the voting rights we have as shareholders and engage with the companies we invest in with support from EOS at Federated Hermes. And we engage continuously with the managers of the funds we hold, to improve their ESG-related efforts.

Here are three key facts about our voting and engagement record that you may not be aware of:

  • as well as climate change, we engage with companies on a range of topics including human rights, board diversity, risk management and executive remuneration
  • we frequently vote against company resolutions (we voted against management at around 40% of meetings in 2019)
  • in 2019 we voted at 100% of the relevant shareholder meetings (over 2,268 times).

Working with the world’s most respected bodies

Task Force on Climate-related Financial Disclosures

One of the most important things we are committed to is communicating our progress on tackling climate change as transparently as possible. To do this, we use the voluntary disclosures set out by the Task Force on Climate-Related Financial Disclosures (TCFD) – one of the most widely used and recognised sets of guidance for companies when reporting their climate-related risks.

See our full TCFD statement here.

 

UK Stewardship Code

Coutts complies with the UK Stewardship Code, set up by UK regulator the Financial Reporting Council (FRC), and has been awarded the highest rank – Tier 1 – for the quality of our disclosures and activities.
 

Principles for Responsible Investment

We have signed up to the Principles for Responsible Investment (PRI), a United Nations supported organisation that encourages investors to use responsible investing to enhance returns and better manage risks. Since 2019 we report to the PRI on a yearly basis on our investment and governance practises.

Our 2019 assessment results:

  • A+ for our strategy and governance
  • A for all key categories except one
  • we outperformed the average rating in all categories except one

We hope that provides some reassurance that we’re making a big effort in improving the impact of our investments, not just for client portfolios and funds, but also for the world at large.

If you’d like any more information, please don’t hesitate to contact your private banker or wealth manager.

voting and engagement

We believe voting and engagement is an effective way for shareholders to bring about positive change in a business and enhance long-term financial performance.

We identify which areas to focus on in our own voting and engagement through a detailed review of our holdings. These reviews adopt a risk-based approach, including looking at the relative risk and size of our holding in a company, so that we can prioritise.

This is done privately with support from EOS at Federated Hermes as we believe it’s more effective than public engagement.

See the engagement objectives and plan for 2019 - 2021.

See the Responsible Ownership Principles

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.

“At Coutts, we take our responsibility to our clients seriously. It's one thing to invest in a way that preserves and grows your wealth for the future; it's something else to make sure we're all proudly contributing to a future worth living in. This means making sure the investment decisions we make on your behalf always also look through a sustainability lens.”
Peter Flavel CEO, Coutts

News and

Insights

  • Investing to fight climate change

    • Markets
    • Europe
    • Equities
    • Economy
    • Insight
    • London
    • Investments
    • Politics
    • UK
    26 Jul 2019
    weekly update washington trade We look at just some of the ways philanthropists and investors can support the fight against climate change.
  • Coutts makes the grade for responsible investing

    • Innovation
    • Environment
    • Economy
    • Insight
    • London
    • Responsible Investing
    • Investments
    • Sustainability
    • Energy
    29 Jul 2019
    weekly update washington trade How we achieved strong scores when independent body the Principles for Responsible Investment took a look at our processes.
  • Getting the benefit from responsible investing

    • Responsible Investing
    • Investments
    • Insight
    19 Feb 2019
    weekly update washington trade Investors are looking beyond traditional measures of investment success to enhance the long-term returns on their investments.

Become a client

When you become a client of Coutts, you will be part of an exclusive network.

BAC_link_mobile
Read more »