‘We avoid governments because they finance war’
As interest in ethical and sustainable funds continues to grow, some companies are accused of “greenwashing”, or pretending they are more ethical than they actually are. How can investors distinguish the truly green?
Rathbone Ethical Bond fund manager Bryn Jones and deputy Noelle Cazalis tell Telegraph Money how they apply strict rules when judging whether a company is ethical and why they won’t invest in government bonds.
Our fund is at the highyielding end of investment-grade funds. This is for people who are looking for income.
We have an ethical mandate, but we’re not just targeting this type of investor. Ethical investors are keen to find ways they can protect the environment or do something more to better society at the same time as making money. But recently we have started to attract more traditional investors, because we have been outperforming those funds that don’t have an ethical mandate.
Bryn Jones and Noelle Cazalis of Rathbones tell Adam Williams how to find a truly ethical investment
We have exclusions such as oil, gas, gambling, predatory lending, tobacco or armament. That means we cannot invest in government gilts, because this money is then used to finance defence programmes.
But we don’t just do exclusions; any investment that goes into the fund must also have some ethical positives. That could be employment policies, green credentials or strong corporate social responsibility.
Each investor has a different definition of ethical. So what our fund does is follow a strict mandate. If a company has one negative, it is excluded from the fund. We feel this is the best way to get what we think is an ethical return.
BJ: CV: Bryn Jones and Noelle Cazalis
Bryn Jones joined Rathbones from Merrill l Lynch in 2004 to run the e Ethical l Bond fund. Noelle Cazalis, s, who previously worked at Bank of France in Paris, became deputy manager in January 2016.
A recent example is Unilever, which is excluded from our fund because of animal testing. It recently issued a “green bond”, to improve the energy efficiency of its factories, but we took the view that because of the animal testing it still should be excluded. The green bond didn’t mitigate the fact it was still animal testing.
This has been successful for us. We didn’t hold BP or Volkswagen, and avoiding these companies means we’ve not had to deal with their poor governance or environmental damage.
This is occurring a lot. The demand for sustainable investing is going up, and in order to compete in that sphere companies are greenwashing. Some green funds are doing the same. I would tell investors to look under the bonnet at what they’re really investing in.
Banks and insurers have performed well for us recently. We think that after the crisis fundamentals have improved. Charity bonds and social housing bonds have also been prominent in the fund. As for f failures, Peterborough hospital was financed through a bond. W We held that bond but then there w was some negative news coming from the NHS trust, and we viewed this as risk. We decided to cut o our losses, and ultimately it w was one we sold too quickly. But when we lose conviction