We asked George Crowdy, co-manager of Royal London Asset Management's new global sustainable equity fund, how he balances financial and sustainable goals
RLAM's new fund, a recent addition to its long-established sustainable range, follows the range's investment process, "the crux of which is our consistent scorecard approach," says Crowdy. "50% of the score is given to sustainable factors, 50% to financial," he says, "and we believe we can find mis-valued opportunities in both dimensions."
Companies must be above average in both to be eligible for investment. "So companies that have a negative impact on the world like tobacco, armaments or fossil fuel extraction are quickly screened out because they don't score highly enough on the sustainable side", he says.
Firms with products that make a positive impact don't get a free pass. "Our sustainable score is split equally between corporate governance (G) factors, and environmental and social (ES) factors that look at the products and services of a company and its operations. So even a renewable energy company needs to be above average on governance to get through," he says.
But Crowdy thinks the transition to a sustainable economy means much more than building wind turbines. "Had it not been for the development of the cloud and energy-efficient data centres, the vast majority of developed economies would not have been able to function during the [Covid-19] crisis," he says. He argues that companies providing solutions to a range of global problems are likely to have more attractive financials by virtue of higher, more durable revenue growth.
The sweet spot is "finding companies where both products and operations provide positive impact", he says, citing a sportswear brand that facilitates physical wellbeing but also leads in sustainable manufacturing processes and new forms of recyclable product. "Our team really does believe that companies addressing the world's greatest challenges should be more interesting, less risky places to invest," he says.
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