Henderson: investing ethically in ‘productivity’

On Friday we published an interview with Hamish Chamberlayne, Investment Manager for the SRI funds of Henderson Global Investors. Today we take a closer look at those funds.

1. What type of fund/s do you manage and what are their ‘objectives’?

The Henderson Global Care Growth Fund and the Henderson Global Care Managed Fund. Both funds are OEICs (open-ended investment companies). The Global Care Growth Fund invests in equities and focuses on companies that are growing sustainably and that have the potential to generate sustainable returns. The Global Care Managed Fund is a multi-asset fund that has an allocation to global equities, UK equities, and fixed income securities.

2. Who is the fund manager?

The co-managers are Nick Anderson and Hamish Chamberlayne.

3. What are the criteria you use for investing in a company?

We invest based around ten sustainability themes, and these are derived from the four ‘mega’ themes of population growth, ageing populations, climate change, and resource constraints. It is important to note that there is a delicate balance between environmental and social sustainability. The global economy is highly dependent on abundant and cheap energy. Also there is a need to maintain high productivity in order to generate enough wealth to care for ageing populations. Fossil fuels are an incredibly productive energy source and reducing dependence on them, while at the same time maintaining social cohesion, represents an enormous challenge.

Of our ten sustainability themes, five are environmental and five are social. Our five environmental themes are Cleaner Energy, Water Management, Sustainable Transport, Efficiency, and Environmental Services. Our five social themes are Health, Knowledge & Technology, Quality of Life, Safety, and Social Property & Finance. There is one common thread to all these themes – productivity. The only way to collectively achieve a sustainable global economy is to find productivity solutions for both environmental and social issues. It is not just enough to increase the efficiency with which energy is consumed, or to replace carbon-intense energy sources with renewable sources. There is a need to improve the quality and effectiveness of healthcare and the sustainability of consumer products.

4. Do you use positive or negative screening?

We use both positive and negative selection criteria. To be included in the portfolio (positive selection) the investment under consideration must fit one of the ten sustainability themes previously described. In addition, all companies assessed for inclusion must demonstrate acceptable management of long-term strategic risks and opportunities, including environmental, social and corporate governance (ESG) considerations. Rising expectations of business conduct from regulators, customers, employees and society at large are making corporate responsibility (CR) of strategic importance for modern management. Our evaluation provides a rigorous way of understanding performance in these areas, revealing value or risk often ignored by conventional investors.

Our negative ethical investment criteria are used to screen out companies that adversely affect the environment, people, and animals. We avoid businesses related to oil, mining, tobacco, armaments, gambling, the fur trade, genetic engineering, and pornography, among other things. We do not invest in companies that support the activities of oppressive regimes or those guilty of irresponsible marketing practices. For a full list of our funds’ positive and negative investment criteria please refer to our website. The links are as follows:

Henderson Global Care Growth Fund: HGi.co/bzc5

Henderson Institutional Global Care Managed Fund: HGi.co/bzc6

5. Are there any disruptive technologies that you include in your fund?

The funds have many investments in companies that are developing disruptive technologies. Efficiency is currently a major theme for us. We have found several attractive investment opportunities in firms that have strong competitive positions and where we think returns are sustainable.

6. How old are the funds and what are their sizes?

The Henderson Global Care Growth Fund was launched in August 1991 (I and A Share Classes) and has £403.55m of assets under management (AUM). The Henderson Institutional Global Care Managed Fund was launched in October 2000 (I Share Class) and July 2002 (A Share Class) which has £209.90m of AUM.

Figures are as at 31 May 2015, source Henderson Global Investors.

7. What has been the performance of the fund over the past five years?

Henderson Global Care Growth Fund

Henderson Institutional Global Care Managed

Source: at 31 March 2015. © 2015 Morningstar. All Rights Reserved, nav-nav, UK sterling, net income reinvested. Discrete performance data may change due to final dividend information being received after the end of the performance period. Performance is shown net of fees.

Please note that past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

8. You offer a wide range of investment funds as an organisation, and not all of them are marketed as ‘sustainable’ or ‘ethical’. How seriously does your firm take sustainable or ethical investment across the suite of funds?

Henderson has a strong commitment to sustainable and responsible investment across all its funds. As a company, we are a founding signatory to the UN Principles for Responsible Investment and implement the principles through the integration of environmental, social and governance (ESG) issues into our investment decision-making and ownership practices. Henderson employs an internal Governance and Responsible Investment Team to work closely with all the investment teams to help facilitate this. The firm subscribes to a wide range of specialist external research on ESG issues and makes this information available to all its fund managers. Furthermore, ESG data is integrated into all risk reporting and fund oversight processes.

9. From a personal perspective, why should people ‘consider’ sustainable investment in its broadest sense (ethical, environmental, clean, etc)? We recognise you can’t give advice, but would welcome your view in terms of considering investing sustainably generally.

We think ethical constraints and financial targets need not be mutually exclusive goals. In fact, we think there is a strong argument as to why a sustainable approach investment can potentially result in superior long-term returns. We tend to invest in mid-sized companies that are developing innovative products or services with the aim of increasing productivity, whether it is in the supply of energy or the delivery of healthcare. These companies have strategies aligned with the long-term themes that are shaping our world and thus we expect them to grow faster and more sustainably than the rest of the market.

Sustainability runs through our investment process. We are looking for quality, well-governed businesses, and those which benefit from a clear alignment of management and shareholder interests. We seek to identify those businesses with sustainable competitive advantages, judicious capital allocation, and sustainable cash flows. We believe that by investing in these types of businesses at the right price we should be able to make money for our investors.

10. With the current volatility in stock markets globally would you have any final comments for our readers about being an investor?

The Henderson Global Sustainable and Responsible Investment Funds adopt a long-term approach to investment. We would encourage potential investors to consider it as a ‘foundation holding’ over a reasonably long investment horizon.

The fund may struggle on a relative basis during periods when large oil, tobacco, and pharmaceutical companies perform well at the same time. However, such periods are usually short-lived and may present some compelling investment opportunities if the prices of our favoured companies have fallen back or appear more attractive to us from a valuation perspective.

Fund specific risks:

Where the Funds invest in assets (including cash) which are denominated in currencies other than the base currency then currency exchange rate movements may cause the value of investments to fall as well as rise.

Funds may be unable to invest in certain sectors and companies due to the ethical screening that they undertake. This may mean that they are more sensitive to price swings than other funds. 

Important information:

Please read all scheme documents before investing. Before entering into an investment agreement in respect of an investment referred to in this document, you should consult your own professional and/or investment adviser.

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change.

If you invest through a third party provider you are advised to consult them directly as charges, performance and terms and conditions may differ materially.

Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment.

Any investment application will be made solely on the basis of the information contained in the Prospectus (including all relevant covering documents), which will contain investment restrictions. This document is intended as a summary only and potential investors must read the prospectus, and where relevant, the key investor information document before investing.

Issued in the UK by Henderson Global Investors. Henderson Global Investors is the name under which Henderson Global Investors Limited (reg. no. 906355), Henderson Fund Management Limited (reg. no. 2607112), Henderson Investment Funds Limited (reg. no. 2678531), Henderson Investment Management Limited (reg. no. 1795354), Henderson Alternative Investment Advisor Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), Gartmore Investment Limited (reg. no. 1508030), (each incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE) are authorised and regulated by the Financial Conduct Authority to provide investment products and services. Telephone calls may be recorded and monitored. Ref: 34U

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