Royal London: sustainable investors should consider health and safety

Royal London Asset Management (RLAM) has pointed out the benefits of taking health and safety issues into consideration when selecting investments. The firm’s Review of Sustainable Investing looks at the steps the firm has taken to ensure sustainability over the last year and trends in the area.

The firm points out that following the oil spill in the Gulf of Mexico, BP’s price dropped by 54% and dividends were suspended for the year following the clean up operation. This event demonstrates that poor health and safety practices can negatively impact on investors.

The report says, “As responsible investors we are keen to ensure that we invest in companies that take their responsibility for the wellbeing and safety of their employees seriously and maintain a good health and safety management culture.

“Less important but nonetheless a fact, is that such accidents are expensive for companies and investors.”

The firm found that companies often have a lack of knowledge about reporting on health and safety issues and initiatives as outlined by the Health and Safety Executive (HSE) which is in all companies’ interests to stay on top of. What is reported also varies greatly making it difficult for investors to compare health and safety practices and RLAM called for standardised reporting requirements.

Another area RLAM has assessed is tax. With regards to corporate tax, it said it was concerned that artificial structures designed to deliver tax benefits distorted economic realities and hampered its ability to fully understand companies that they invest it. The report added that as companies increasingly focus on emerging markets, it is vital these companies pay their taxes in order to support stability in the regions and corporate prosperity.

RLAM manages around £52.9 billion in assets and has two funds aimed at sustainable investors. The firm’s ethical funds screen out companies that generate over 10% of their turnover from the alcohol, armaments, gambling, tobacco and pornography industries. They also consider whether companies have adequate policies in the areas of human rights, animal testing and the environment.

The Royal London Ethical Bond fund aims to maximise capital over the medium and long-term and has a performance target of 0.8%. Meanwhile, the Royal London UK Ethical Equity fund selects stocks from eligible companies within the FTSE All-Share Index and has a performance target of 2.3%.

Looking ahead to the firm’s development, Robert Talbut, chief investment officer at RLAM, said, “Clients will be able to learn more about how our sustainable process helps protect investment returns, mitigates risks to corporate reputations and value, and fulfils our goal of becoming a natural choice as an investor of good standing.”

Further reading:

Sustainable investment an ‘irreversible trend’, says ING exec

Sustainable investment not detrimental to returns, say Dutch investors

The ‘do-gooder ethical investment crowd’ have plenty of sectors to invest in

Ban Ki-moon: green investors have the ‘power and responsibility’ to transform economy

Motley Fool: responsible investment is about ‘doing good by doing right’