At Thomas and Thomas, we start with the most important person – You!
Having run our Ethical Portfolios for over 15 years for our clients, we know a thing or two about screening funds and the diligence required to build a truly Ethical Portfolio that seeks not to harm Society and the Environment whilst also contributing to positive changes.
We know that money talks. Our clients’ collective investment power can actually make a difference to the way that fund managers select certain stocks and sectors.
We also know that the term ‘Ethical’ can mean different things to different people. It would be very easy for us to decide upon our own Negative and Positive Screening criteria. However, that’s not how we like to work.
We want to know what our clients’ collective views are when it comes to ‘avoiding those red lines’.
This is why we launched our 8th annual Pro-Ethical Screening Survey – to ask our treasured clients what matters most (and least) to them within their Ethical Portfolios.
There is a sound reason for this. In absolute honesty, there are some ‘big’ red lines that most Ethical fund managers won’t cross – but then there are some variations depending upon the funds remit and published Ethical Policy. Animal testing is one of those grey areas.
If we can understand where the ‘overlaps’ are for our Pro-Ethical clients, we can then ensure that we focus on these collective red lines when we conduct our quarterly screening. It is important to understand that fund managers will alter their Ethical Policies from time to time. If (for example) they stop screening out Alcohol as a ‘red line’ – does that matter to our clients collectively?
We have worked out that our clients like ‘quick fire’ questions that can be swiftly completed – alongside comments boxes that allow them more time to express their opinions if they have any in particular. This year, we again used ‘Smart Survey’ to enable us to seek our clients’ views and to collate them.
This enables us to then study the common ground that matters most (or least) to our clients in general. We can then build our Screening Criteria for the year from this data.
So how did the Survey go?
Well firstly, we were absolutely staggered by the response rate, with 95% of all invited clients responding within the two-week time frame that we set. We can’t thank our Pro-Ethical clients enough, as this kind of uptake really ensures that we are gathering the most relevant possible data.
Most firms would give their right arm for a response rate above 60%. To receive 95% responses was truly incredible and shows just how passionate and invested our clients are in their Pro-Ethical portfolios.
We asked the same Negative Screening questions as last year, but expanded slightly on some titles to add clarity. The Survey asked our clients to record a response from 3 (very important) down to 0 (not important at all) against 13 key Negative Screening areas. In other words: ‘which areas do you most want to avoid?’
The most important area according to our collective score was ‘Poor Human Rights/ Oppressive Regimes’ which has been our clients’ collective area of most importance every year since we started this survey.
Animal Testing for Cosmetics was the next most important, with Pornography in third place. Tobacco fell from second most important (last year) to fourth (this year) which was interesting. Gambling was a close fifth in terms of importance, followed by Armaments. However, it is important to state that we will continue to prioritise screening out all of these areas for our clients as they are clearly very important to them.
Areas of less importance appeared to be Nuclear Power, Genetic Engineering and Alcohol. Interestingly though, Nuclear Power did score quite highly as important when we added together the ‘Very Important’ and ‘Somewhat Important’ categories. It is clearly a polarising topic and something we appreciate does matter to some of our clients.
We then moved on to ask about Positive Screening. This is where we are asking ‘which areas would you most like to support within your investment portfolio?’
The results this year were very interesting.
Ocean Waste was again the most important area collectively scored by our clients. However, Climate Change fell to third place with Air Pollution scoring much more highly. We wondered if people are possibly thinking in more granular detail about their local environment now than they were five years ago.
We certainly realised the importance of keeping our beach clean going!
In addition, we know which areas to try and focus on when considering positive impact within our clients Ethical Portfolios.
Social Housing Projects again came last in our client list of ‘Very Important’ screening. However, it was fascinating to see that it scored the highest in the ‘Somewhat Important’ category with 50% of respondents scoring it this way.
We think that our clients are now looking for more from fund managers in terms of positive use of funds to help house people who really need it. This could become more of an important area as time moves on.
As ever, we loved the comments! There was definitely an appetite for trying hard to avoid supporting any country that runs an oppressive regime and treats humans poorly. There were also very interesting thoughts around the negative impacts of Vaping and the need to support clean water projects. Clients also wanted to remind us that contributing to a clean environment and trying hard not to contribute to pollution was critical.
Our fund house contacts watch our annual Pro-Ethical Survey with great interest. Between them, our Pro-Ethical clients hold some £30 million in these funds and so our collective opinions do count for something.
Thank you so much for taking the time to complete the survey. If you want to chat anymore about your own Ethical Screening preferences or you feel in any way that you don’t fit the collective scoring mentioned in this feedback article – please do let us know so that we can talk to you about different options.
I have also produced a full response document which is available if you want to see a little more about how we apply this important data.
As ever, we are here for you if you need anything at all. My very best wishes indeed.