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PRI: Principles for Responsible Investment

A+

Strategy & Governance
Listed Equity – Incorporation
Listed Equity – Active Ownership
Fixed Income – SSA
Fixed Income – Corporate Non-financial
Fixed Income – Corporate Financial

A+ RATED | AGAIN

Rated A+ in all areas of the 2020 PRI assessment

Our responsible investment credentials are reflected in the UN Principles for Responsible Investment’s (PRI) annual assessment for 2020, in which we have been awarded the highest rating possible (A+) for overall strategy and governance. We were also rated A+ in the five other areas assessed, including both equities and fixed income. Only 29% of asset managers received an overall A+ rating.

What is responsible investment?

The broad array of terms and jargon used to describe various forms of responsible investing can be confusing. As purposeful and active owners, guided by our clients’ objectives, we see it as our responsibility to fully understand each asset we invest in. Therefore, in addition to financial measures, we evaluate factors such as environmental impacts, social standards, and the effectiveness of people in charge. We believe this approach allows us to better manage risk and make more informed investment decisions.

Meet the RI team

Unlike some asset managers who keep their responsible investment analysts separate from the wider investment team, our dedicated responsible investment team is fully integrated in our investment process, working alongside our conventional financial analysts to inform our investment decisions.

Ian Burger
Head of responsible investment

alt

Ian is responsible for stewardship activities and corporate governance considerations throughout Newton’s investment process, and also leads ESG analysis for certain sectors.

Lloyd McAllister
Responsible investment analyst

alt

Lloyd undertakes research and engagement on ESG issues with global companies, as well as voting and reporting to clients.

Rebecca White
Responsible investment analyst

Rebecca White

Rebecca undertakes research and engagement on ESG issues with global companies, as well as voting and reporting to clients.

Our ESG approach

ESG integration

At Newton, we integrate ESG research in our security selection process across all investment strategies, as we believe that taking ESG factors into account can lead to better investment decisions. Our ESG process is founded on three pillars: in-depth ESG security analysis, active company engagement, and active proxy voting.

ESG analysis

We aim to identify ESG-related risks and opportunities to ensure that challenges are identified and managed. This applies not only to equities, but also in a fixed-income context. We consider ESG issues when looking at sovereign risk, as well as across the credit spectrum from investment grade to high yield. Every security which our sector research analysts wish to recommend must have an in-depth ESG quality review completed by our responsible investment team.

Active engagement

Active engagement with the companies we invest in allows us to monitor changes in management processes, remuneration and social and environmental issues. By taking a proactive approach to our engagement, we can work with the companies we invest in to increase the sustainability of their businesses over time. We also take an active role in the external ESG debate across the wider industry, and help to shape policy and thought leadership.

Sustainable talk series

Listen to our talks on all things E, S and G.

ESG approach

Our philosophy and process

  • The strategy is conviction-based, with no regional constraints. Portfolios tend to hold stocks of cash-generative companies with highly attractive dividend yields. Every new holding typically has a prospective yield at least 25% greater than that of the market at the point of purchase. Any holding whose prospective yield falls below the market yield will trigger a sale.
  • As we seek to positively influence companies as a shareholder or potential shareholder, we use the levers that are available to equity investors, including proxy voting and direct engagement with companies. While we do invest in those companies that already have strong ESG profiles, we prioritise companies that are improving their ESG performance. In this way, we seek to help drive positive ESG outcomes, while having the potential to achieve financial benefits through this change.

‘Red lines’ ensure that the companies that we choose to invest in do not violate the UN Global Compact’s ten principles that promote responsible corporate citizenship, or have characteristics which make them incompatible with the aim of limiting global warming to 2°C. We also incorporate a tobacco exclusion as we do not view tobacco businesses as compatible with our commitment to sustainable investment.

We provide regular reports for investors to view the impacts of engagement with companies, and to show statistics such as the portfolio’s ESG rating and carbon footprint.

Every time we consider a security or look at an industry or country, it’s in the context of what’s happening across the world. We believe the investment landscape is shaped over the long term by some key trends, and we use a range of global investment themes to capture these.

Investment team

Our Sustainable Global Equity Income strategy is managed by an experienced team. Our global sector analysts and investment managers are located on a single floor in London, which helps to ensure that the investment process is flexible and opportunistic. Our dedicated responsible investment team is an integral part of the investment decision-making process. Guided by our global investment themes, the team works together to identify opportunities and risks through research and debate.

18
years' average investment experience
11
years' average time at Newton

Strategy profile

Objective

The strategy seeks to outperform the FTSE W World index by more than 2% per annum over rolling 5-year periods, by achieving income and capital growth from a global portfolio comprised of companies that typically yield at least 25% greater than the comparative index yield, and which demonstrate attractive investment attributes and sustainable business practices.*

*In order to prevent the portfolio from being a forced seller of securities that have suspended their dividend purely owing to the Covid-19 situation, a new sell discipline basket has been created specifically for such securities, which temporarily overrides the portfolio’s yield-based sell discipline. Securities falling into this basket may continue to be held providing there is a reasonable expectation that any dividends will be reinstated at a level consistent with the strategy’s yield criteria. The rationale for each affected security will be reviewed at least every six months.

Comparative index

FTSE W World Index

Typical number of equity holdings

30-60


Strategy size


Below £200m (as at 30 June 2020)

Strategy inception

18 July 2019

Strategy available through pooled UK vehicle

BNY Mellon Sustainable Global Equity Income Fund

View Key Investor Information Document
RI report Sustainable global equity income

Responsible investment report

Stewardship activities (voting and engagement) for the last quarter and ESG metrics.


Sustainable Global Equity Income Brochure

Brochure

More detail on the strategy's investment approach.

Your capital may be at risk. The value of investments and the income from them can fall as well as rise and investors may not get back the original amount invested.

Key investment risks

 

  • There is no guarantee that the strategy will achieve its objective.
  • This strategy invests in global markets which means it is exposed to changes in currency rates which could affect the value of the strategy.
  • The strategy may use derivatives to generate returns as well as to reduce costs and/or the overall risk of the strategy. Using derivatives can involve a higher level of risk. A small movement in the price of an underlying investment may result in a disproportionately large movement in the price of the derivative investment.
  • The strategy invests in emerging markets. These markets have additional risks due to less developed market practices.
  • A fall in the value of a single investment may have a significant impact on the value of the strategy because it typically invests in a limited number of investments.
  • The strategy may invest in small companies which may be riskier and less liquid (i.e. harder to sell) than large companies. This means that their share prices may have greater fluctuations.
  • The strategy follows a sustainable investment approach, which may cause it to perform differently to strategies that have a similar objective but which do not integrate sustainable investment criteria when selecting securities.

Our philosophy and process

  • The Real Return fund is a conviction-based strategy with no regional, sector or performance reference constraints. It adopts a forward-looking approach that seeks to anticipate change, manage risk, and identify opportunities.
  • Its simple structure, with a stable core of predominantly traditional return-seeking assets, and a layer of risk-offsetting positions, aim to dampen volatility and preserve capital.

Every time we consider a security or look at an industry or country, it’s in the context of what’s happening across the world. We believe the investment landscape is shaped over the long term by some key trends, and we use a range of global investment themes to capture these.

Smart revolution

Machines and networks are becoming more intelligent. This is disrupting the labour market, as machines increasingly replace humans in the workplace. ‘Smart revolution’ considers the implications commercially, socially and politically.

State intervention

Authorities have engaged in ever-greater policy intervention and regulation to shore up economic growth. We believe ‘state intervention’ has increased misallocation of capital, caused volatility in markets and inflated asset prices – and we think that calls for a stock-specific approach.

Financialisation

Cheap money has caused rapid growth in a sector already supported by deregulation. ‘Financialisation’ investigates the implications of finance dominating economic activity, instead of serving it.

Transcript

The investment landscape looks challenging. We think policies being pursued may be making economies and markets more fragile. So what should you do as an investor? One solution could be our Real Return strategy.
You can imagine the portfolio like this:
At the core, the emphasis is on traditional assets to generate capital growth and drive long-term returns.
Then there is an outer layer – stabilising assets and hedging positions to try to counteract risks and dampen volatility.
And this is how we construct it:
In the core, might be equities, infrastructure and renewables.
In the outer layer we use a diverse range of instruments, including commodities, bonds, simple derivative strategies and currencies.
We alter the proportions of the core and outer layer according to our evolving view on the investment landscape.
We think there’s a key advantage to active management. We can seek out returns in rising markets and try to minimise the downfall in falling markets.
Its composition is guided by the perspective of our global investment themes. They are our interpretation of the forces driving long-term change in the world.
Our Real Return strategy takes a simple, transparent approach to try to deliver, solid, stable returns for our clients.

Slide Show

Investment team

Our Real Return strategy is managed by an experienced team with a wide range of backgrounds. Our global sector analysts and investment managers are located on a single floor in London, which helps to ensure that the investment process is flexible and opportunistic. Guided by our global investment themes, the team works together to identify opportunities and risks through research and debate.

18
years’ average investment experience
12
years’ average time at Newton

Strategy profile

Performance aim

The strategy aims to deliver a minimum return of cash (one-month sterling LIBOR) +4% per annum over 5 years before fees. In doing so, the strategy aims to achieve a positive return on a rolling 3-year basis. However, a positive return is not guaranteed and a capital loss may occur.

Volatility

Expected to be between that of bonds and equities over the long term

Strategy size

£12.2billion (as at 30 June 2020), including GBP, EUR, USD and AUD strategies

Strategy inception

Composite inception: 1 April 2004

Typical assets

Selective exposure to
    Selective exposure to
Other assets via tradeable securities
    Other assets via tradeable securities

Strategy available through pooled UK vehicle

BNY Mellon Real Return Fund

View fund performance
View Key Investor Information Document

UK Inst Real Return strategy factsheet

Strategy factsheet

Performance and commentary for the last quarter.


RI report Real return

Responsible investment report

Stewardship activities (voting and engagement) for the last quarter and ESG metrics.


Real Return Brochure

Brochure

More detail on the strategy’s investment approach.


UK Inst Real Return strategy factsheet

Strategy factsheet – 2

Performance and commentary for the last quarter.

Quarterly video update: Q2 2020

Quarterly video update

Your capital may be at risk. The value of investments and the income from them can fall as well as rise and investors may not get back the original amount invested.

Key investment risks

  • The performance aim is not a guarantee, may not be achieved and a capital loss may occur.  Strategies which have a higher performance aim generally take more risk to achieve this and so have a greater potential for the returns to be significantly different than expected.
  • This strategy invests in international markets which means it is exposed to changes in currency rates which could affect the value of the strategy.
  • The strategy will use derivatives to generate returns as well as to reduce costs and/or the overall risk of the strategy. Using derivatives can involve a higher level of risk. A small movement in the price of an underlying investment may result in a disproportionately large movement in the price of the derivative investment.
  • Investments in bonds are affected by interest rates and inflation trends which may affect the value of the strategy.
  • The strategy holds bonds with a low credit rating that have a greater risk of default. These investments may affect the value of the strategy.
  • The strategy may invest in emerging markets. These markets have additional risks due to less developed market practices.
  • The strategy may invest in investments that are not traded regularly and are therefore subject to greater fluctuations in price.

Our philosophy and process

  • Sustainable ‘red lines’ ensure the poorest-performing companies are not eligible for investment, such as companies which violate the UN Global Compact Principles of sustainable corporate performance. Companies which we think are incompatible with the aim of limiting global warming to 2°C are also excluded.
  • We engage with companies where ESG issues are resolvable and can be improved, and report on that activity. We will not invest in any company that derives more than 10% of its turnover from the production and sale of tobacco.

Every time we consider a security or look at an industry or country, it’s in the context of what’s happening across the world. We believe the investment landscape is shaped over the long term by some key trends, and we use a range of global investment themes to capture these.

Investment team

Our Sustainable Global Equity strategy is managed by a team with a wide range of backgrounds and varied experience. Our global sector analysts and investment managers are located on a single floor in London, which helps to ensure that the investment process is flexible and opportunistic. Our dedicated responsible investment team is an integral part of the investment decision-making process. Guided by our global investment themes, the team works together to identify opportunities and risks through research and debate.

20
years' average investment experience
14
years' average time at Newton

Strategy profile

Objective

To achieve capital growth and income by investing in well-run businesses that both have durable financial and competitive positions and manage positively the material impacts of their operations and products on the environment and society

Comparative index

MSCI AC World Index (NDR)

Performance aim

To outperform the comparative index by 2% per annum over rolling five-year periods before fees

Typical number of equity holdings

50 or fewer

Strategy size

Below £200m (as at 30 June 2020)

Strategy inception

Composite inception: 1 February 2018


Strategy available through pooled UK vehicle

BNY Mellon Sustainable Global Equity Fund

View fund performance
View Key Investor Information Document
UK Inst Sustainable Global Equity strategy factsheet

Strategy factsheet

Performance and commentary for the last quarter.


RI report Sustainable global equity

Responsible investment report

Stewardship activities (voting and engagement) for the last quarter and ESG metrics.

Quarterly video update: Q2 2020

Quarterly video update

Your capital may be at risk. The value of investments and the income from them can fall as well as rise and investors may not get back the original amount invested.

Key investment risks

 

  • There is no guarantee that the strategy will achieve its objective.
  • This strategy invests in international markets which means it is exposed to changes in currency rates which could affect the value of the strategy.
  • The strategy may invest in emerging markets. These markets have additional risks due to less developed market practices.
  • The strategy may use derivatives to generate returns as well as to reduce costs and/or the overall risk of the strategy. Using derivatives can involve a higher level of risk. A small movement in the price of an underlying investment may result in a disproportionately large movement in the price of the derivative investment.
  • A fall in the value of a single investment may have a significant impact on the value of the strategy because it typically invests in a limited number of investments.
  • The strategy may invest in small companies which may be riskier and less liquid (i.e. harder to sell) than large companies. This means that their share prices may have greater fluctuations.
  • The strategy follows a sustainable investment approach, which may cause it to perform differently to strategies that have similar objectives but which do not integrate sustainable investment criteria when selecting securities.

Our philosophy and process

Every time we consider a security or look at an industry or country, it’s in the context of what’s happening across the world. We believe the investment landscape is shaped over the long term by some key trends, and we use a range of global investment themes to capture these.

Investment team

Our Sustainable Real Return strategy is managed by an experienced team with a wide range of backgrounds. Our global sector analysts and investment managers are located on a single floor in London, which helps to ensure that the investment process is flexible and opportunistic. Our dedicated responsible investment team is an integral part of the investment decision-making process. Guided by our global investment themes, the team works together to identify opportunities and risks through research and debate.

18
years' average investment experience
10
years' average time at Newton

Strategy profile

Objective

The strategy has an absolute-return style performance aim, while seeking to preserve capital, through security selection, diversification and simple hedging strategies. The strategy invests in well-run businesses that both have durable financial and competitive positions and manage positively the material impacts of their operations and products on the environment and society.

Performance aim

The strategy aims to deliver a minimum return of cash (one-month sterling LIBOR) +4% per annum over 5 years before fees. In doing so, the strategy aims to achieve a positive return on a rolling 3-year basis. However, a positive return is not guaranteed and a capital loss may occur.

Volatility

Expected to be between that of bonds and equities over the long term

Strategy size

£274m (as at 30 June 2020)

Strategy inception

Composite inception: 1 May 2018


Strategy available through pooled UK vehicle

BNY Mellon Sustainable Real Return Fund

View fund performance
View Key Investor Information Document
UK Inst Sustainable Real Return strategy factsheet

Strategy factsheet

Performance and commentary for the last quarter.


RI report Sustainable real return

Responsible investment report

Stewardship activities (voting and engagement) for the last quarter and ESG metrics.


Sustainable Real Return Brochure

Brochure

More detail on the strategy's investment approach.

Quarterly video update: Q2 2020

Quarterly video update

Your capital may be at risk. The value of investments and the income from them can fall as well as rise and investors may not get back the original amount invested.

Key investment risks

 

  • The performance aim is not a guarantee, may not be achieved and a capital loss may occur. Strategies which have a higher performance aim generally take more risk to achieve this and so have a greater potential for the returns to be significantly different than expected.
  • This strategy invests in global markets which means it is exposed to changes in currency rates which could affect the value of the strategy.
  • The strategy may use derivatives to generate returns as well as to reduce costs and/or the overall risk of the strategy. Using derivatives can involve a higher level of risk. A small movement in the price of an underlying investment may result in a disproportionately large movement in the price of the derivative investment.
  • Investments in bonds are affected by interest rates and inflation trends which may affect the value of the strategy.
  • The strategy holds bonds with a low credit rating that have a greater risk of default. These investments may affect the value of the strategy.
  • The strategy may invest in emerging markets. These markets have additional risks due to less developed market practices.
  • The strategy may invest in investments that are not traded regularly and are therefore subject to greater fluctuations in price.
  • The strategy may invest in small companies which may be riskier and less liquid (i.e. harder to sell) than large companies. This means that their share prices may have greater fluctuations.
  • The strategy follows a sustainable investment approach, which may cause it to perform differently to strategies that have similar objectives but which do not integrate sustainable investment criteria when selecting securities.

Our philosophy and process

  • The strategy follows an unconstrained, highly dynamic asset-allocation approach within a broad universe of global bonds; it can invest in government bonds, emerging-market sovereigns, high-yield bonds and investment-grade corporate debt. The strategy has the flexibility to manage currency exposure actively to generate additional returns.
  • Every time we consider a security or look at an industry or country, it’s in the context of what’s happening across the world. We believe the investment landscape is shaped over the long term by some key trends, and we use a range of global investment themes to capture these.

Investment team

Our Sustainable Global Dynamic Bond strategy is managed by a focused, experienced fixed-income team. Our global sector analysts and investment managers are located on a single floor in London, which helps to ensure that the investment process is flexible and opportunistic. Our dedicated responsible investment team is an integral part of the investment decision-making process. Guided by our global investment themes, the team works together to identify opportunities and risks through research and debate.

19
years' average investment experience
10
years' average time at Newton

Strategy profile

Objective

To maximise the total return from income and capital growth by investment primarily in a globally diversified portfolio of debt and debt-related securities issued by companies and governments that demonstrate attractive investment attributes and are deemed to be sustainable.

Performance aim

Aims to deliver a minimum return of cash (one-month LIBOR) +2% per annum over 5 years before fees. However, a positive return is not guaranteed and a capital loss may occur.

Strategy size

£257m (as at 30 June 2020)

Strategy inception

Composite inception: 1 March 2019


Strategy available through pooled UK vehicle

BNY Mellon Sustainable Global Dynamic Bond Fund

View Key Investor Information Document
RI report Sustainable global dynamic bond

Responsible investment report

Stewardship activities (voting and engagement) for the last quarter and ESG metrics.


Sustainable Global Dynamic Bond Brochure

Brochure

More detail on the strategy's investment approach.

Your capital may be at risk. The value of investments and the income from them can fall as well as rise and investors may not get back the original amount invested.

Key investment risks

 

  • The performance aim is not a guarantee, may not be achieved and a capital loss may occur.
  • The strategy invests in international markets which means it is exposed to changes in currency rates which could affect the value of the strategy.
  • The strategy may use derivatives to generate returns as well as to reduce costs and/or the overall risk of the strategy. Using derivatives can involve a higher level of risk. A small movement in the price of an underlying investment may result in a disproportionately large movement in the price of the derivative investment.
  • Investments in bonds are affected by interest rates and inflation trends which may affect the value of the strategy.
  • The strategy holds bonds with a low credit rating that have a greater risk of default. These investments may affect the value of the strategy.
  • The strategy may invest in emerging markets. These markets have additional risks due to less developed market practices.
  • The strategy follows a sustainable investment approach, which may cause it to perform differently to strategies that have a similar objective but which do not integrate sustainable investment criteria when selecting securities.

Engagement in practice

This series explains why we believe active engagement can drive better investment decisions, and shares some specific examples of our engagement work.

Voting

We have taken a rigorous and purposeful approach to our proxy voting since the 1970s, and are proud to exercise votes across all shares we hold for our clients, globally. We take active case-by-case decisions for each resolution item*. This dedication has been recognised by ShareAction** as proof that we have ‘rebel genetics’ within our responsible ranks.

* Only where we recognise a potential material conflict of interest do we follow the advice of a voting service provider
** ShareAction Investor Report, May 2018

Voting

Our stewardship in action

Responsible investment and stewardship

Responsible investment and stewardship 2020 annual report


Newton Responsible Investment Policies and Principles

Q2 2020 ESG report

Q2 2020 ESG report – Our latest engagement and voting activities

Earlier editions of our responsible investment report are available from our report archive.

Heritage

  • Heritage timeline

How do we hold ourselves to account?

Being a responsible and purposeful owner, on behalf of our clients, is not enough on its own. It is vital to encourage the companies in which we invest to provide better disclosure on their management of ESG risks and opportunities, but it is also important to explore what challenges such as climate change will mean for our clients’ investments and our own assets. This is why we became one of the first investment management firms to publicly disclose our environmental impact through our Task Force on Climate-related Financial Disclosures report in November 2018. In this context, we have taken various steps to reduce our own carbon footprint, such as buying only renewable energy and reducing our consumption of single-use plastics. We also place sustainability, education and diversity at the core of the projects we sponsor within the wider community.

TCFD Disclosure Report

Task Force on Climate-related Financial Disclosures (TCFD) report

How we consider climate-related risks and opportunities for our business and our clients’ investments.

What do we offer?

Icon: Integrated
Integrated ESG
Our integrated ESG approach is applied across all our strategies
, and allows us to invest in securities with ESG risks if we believe such risks are fully reflected in their valuations, but the emphasis is very much on improving respective ESG issues through active engagement.

Icon: Sustainable range
Sustainable strategies
Our suite of sustainable strategies build on the integrated process by targeting a dual outcome of investment returns and positive societal outcomes.

Icon: Exclusions
Exclusions and screening
We also offer exclusions and screening to some of our faith-based and charity investors.

Credentials

Select the icons below to find out more about our credentials in responsible investing:

Longstanding

Our commitment to responsible investment is embedded deep in our heritage. We have been proxy voting since the 1970s, and have had responsible investment analysts since the 1990s – long before it became mainstream to do so.

Voting

We have been acting like an owner by proxy voting since 1978. We vote on our clients’ behalf at every AGM. Unlike some asset managers, we have no fixed policy, but make the effort to take a view on every resolution in context – we do not abstain. ShareAction research* has highlighted our willingness to be independent and vote against management.

* Source: ShareAction Investor report, May 2018.

Engaging

Our voting reinforces our policy of engaging with companies to positively influence their behaviour and practices. Where we believe it will have a positive impact, we create an engagement plan with clear objectives and timelines, to focus attention on the most important risks and opportunities.

Comprehensive

In 2005, we introduced in-depth ESG quality reviews. Since 2012, no investment has been able to be added to our research recommended list without an ESG quality review from our responsible investment team. Few of our competitors have this depth of experience and commitment.

Proprietary

Unlike many asset managers, we do not just rely on third-party research. We have our own responsible investment team which is dedicated to carrying out ESG research. They uncover insights through engagement with companies, research of their own, and the investment perspective of our sector analysts and portfolio managers. This is important because what we look at is not mandatory to disclose. It is not measured in a comparable way, and needs to be interpreted with care.

Team

We hired our first responsible investment analyst in 1998. The team has now grown to seven. All analysts are fully integrated members of the investment team – unlike the approach taken by some other firms who keep their responsible investment analysts separate from industry analysts and portfolio managers.

Range

While all our strategies benefit from integration of ESG analysis, we offer two additional ranges tailored to align our investing to our clients’ objectives. Screened strategies exclude sectors and activities. Sustainable strategies place more emphasis on positive social outcomes.

UN PRI

We signed the UN Principles for Responsible Investment in February 2007, less than a year after they were drafted. We were the 56th investment manager to do so. Now there are 1,700.

Rating

We are rated A+ across all categories by the UN Principles for Responsible Investment. Fewer than 25% of asset managers achieved this highest rating.**

** Source: UNPRI, 2019.

TCFD

We are among the first asset managers to have completed a Task Force on Climate-related Disclosures (TCFD) report on our own business.

Shaping

Our responsible investment analysts take an active role in shaping ESG regulations and best practice at an industry level across the key boards and panels around the world.