The EU Sustainable finance disclosure
The EU Sustainable Finance Disclosure Regulations apply to our Irish Fund Management Company ‘RBS Asset Management (Dublin) Limited’ and our Irish domiciled investment fund the ‘Equator ICAV’.
The information below details how, as investment manager, we support the fund’s compliance with these regulations, and we also apply these principles across our wider funds and portfolios.
Coutts believes that strong corporate governance practices and management of environmental and social risks contribute to the creation of long-term investment value. Accordingly, Coutts considers sustainability risks when making investment decisions. When investing in other funds or investing directly Coutts will have a bias for investments with stronger ESG characteristics and an approach to ESG investment which is consistent with that of Coutts when other factors such as expected performance and other risks are similar.
The following describes how Coutts integrates sustainability risks and other ESG factors into its investment decision making and on-going ownership processes:
Investment decision making
The Investment Manager integrates externally and internally produced ESG data into decision making and risk monitoring processes to consider sustainability risks throughout the investment process.
Ownership and stewardship
The Investment Manager uses proactive and reactive engagement with management and boards of issuers of bonds and equities to monitor their ESG practices and encourage best practice.
This approach is relevant to investments made both directly into bonds or equities and indirectly through collective investment schemes or ETPs.
Further detail on the Investment Manager’s approach to integrating Sustainability Risks and other ESG factors in its investment process is available at: www.coutts.com/responsibleinvesting.
On this website you can also find the Investment Manager's engagement objectives and plan along with the Responsible Ownership Principles reports on its voting records and engagement activities.
Principle adverse impacts
This section summarises the current investment due diligence policies of Coutts, in respect of the principal adverse impacts of our investment decisions on sustainability factors.
It is divided into four key areas:
- Information about our due diligence policy on the identification and prioritisation of principal adverse sustainability impacts and indicators
- A description of the principal adverse sustainability impacts and of any actions taken or planned
- A brief summary of our shareholder engagement policy
- A reference to our adherence to responsible business conduct codes and internationally recognised standards for due diligence and reporting and the degree of our alignment with the objectives of the Paris Agreement.
We approach sustainability from the perspective of the harm that our investment positions might do externally to sustainability factors, and what steps we take to mitigate that harm. This is based on our corporate sustainability values. This policy is subject to certain exceptions, for example: where the client expressly instructs us not to follow the firm-wide policy or where we invest in passive products.
Prior to making any investment decision, our investment team are required to conduct investment due diligence on the proposed investment position. This investment due diligence will evaluate a variety of factors including an assessment of how the proposed investment position is assessed against the following four sustainability indicators:
1) Weighted Average Carbon Intensity, using scope 1 and 2 emissions
2) Exposures to fossil fuels related activities including Thermal Coal Extraction, Thermal Coal Energy Generation, Tar Sands, and Arctic Oil & Gas Exploration
3) Exposures to Controversial Weapons
4) Exposures to severe controversies / breaches of UN Global Compact
Having completed the diligence assessment, when evaluating the merits of a proposed investment, we determine the extent to which the results of the diligence exercise should weigh on our investment decision, taking into account our sustainability values as articulated below.
The investment team exercise their judgment as to whether and how the results of the diligence process impact on the investment decision, as against Coutts’s sustainability values:
- Environmental: We generally aspire to invest in investment positions which have relatively less adverse impact on environmental sustainability (as compared to competitors in the same sector), as measured by portfolio carbon intensity, and exposure to fossil fuels related activities.
- Social: We generally aspire to invest in investment positions which meet fundamental responsibilities in the areas of human rights, labour, environment and anti-corruption, as measured by reference to the UN Global Compact as well as prevent exposure to Controversial Weapons.
Given the data, and against our criteria, we will decide on whether or not to invest and whether any conditions are imposed on the investment.
We will report on actions taken with regard to principle adverse impacts in the future.
Coutts has implemented a shareholder engagement policy, which sets out how we integrate shareholder engagement in our investment strategy. This includes how we:
- monitor investee companies on relevant matters (including strategy, financial and non-financial performance and risk, capital structure, social and environmental impact and corporate governance)
- conduct dialogue with investee companies
- exercise voting rights and other rights attached to shares
- cooperate with other shareholders
- communicate with relevant stakeholders of the investee companies
- manage actual and potential conflicts of interests in relation to our engagement.
Our engagement policy is available on our website: www.coutts.com/responsibleinvesting.
Coutts adheres to the following codes and standards:
- TCFD: we use the voluntary disclosures set out by the TCFD, which are one of the most widely-used and recognised sets of guidance for companies and asset managers when reporting climate change-related risks. Our TCFD statement is available on www.coutts.com/responsibleinvesting
- UN PRI: we are signatories to the internationally recognised Principles for Responsible Investing
- UK Stewardship Code: Coutts complies with the UK Stewardship code and our statement of compliance is available on www.coutts.com/responsibleinvesting
- Climate Action 100+: Coutts has signed up to the initiative and actively engages with companies we invest in to ensure they’re tackling climate change.
In addition, Coutts has taken steps to align its business to the objectives of the Paris Agreement as follows:
- Coutts has committed to be climate positive for direct emissions by 2025
- Coutts Asset Management has committed to align all discretionarily managed investment portfolios to the Paris Agreement by 2030
The remuneration policy for NatWest Group Executive Directors includes environmental, social and good governance goals within the framework of a balanced scorecard of measures. These are detailed in the NatWest Group’s annual report and accounts. A balanced scorecard approach also applies to colleagues across the organisation and is used when setting the specific performance goals of individuals, including those involved in our investment management processes.
To encourage long-term thinking, the performance assessment takes into account our colleagues’ display of our values and core behaviours, ensuring that the assessment considers both what has been delivered and how it has been delivered.