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Environmental Sustainability

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Environmental impact of SRI portfolios

  • Clean water and sanitation
  • Affordable and clean energy
  • Sustainable cities and communities
  • Life below water
  • Industry, innovation and infrastructure
  • Climate action
  • Responsible consumption and production
  • Life on land

Environmental Impact

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This video looks at the Sustainable Development Goals that fall within the environmental category. This is concerned with the conservation of the natural world, as well as a companies energy usage, wastage levels and pollution.

Visit our Environmental, Social and Governance page for more information.

Environmental Investment Funds

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How are the SRI portfolios helping to combat environmental issues?

Each of the funds in our SRI portfolios invest in companies that are contributing to positive environmental change, or exclude companies deemed to be causing environmental damage. Additionally, the fund managers of our SRI portfolio have strong records of actively engaging with the companies in which they invest, to push for action on climate change. Below are some examples of the funds we have in our SRI portfolios.

EdenTree

EdenTree is a pioneer in the field of SRI, with its roots dating back to 1887, and they launched some of the first socially responsible funds in the UK in the 1980s. Climate change is a key component of EdenTree’s responsible investment engagement strategy – across their entire product range, they assess companies based on their contribution to climate change; and the managers engage with businesses on a range of environmental issues such as decarbonisation and biodiversity. Under their SRI Transparency Code, EdenTree regularly publishes details of its research and engagement on its website.

In addition to their funds, EdenTree has demonstrated that they are truly committed to combating environmental issues at a much higher level. They’re a member of the Institutional Investors Group on Climate Change (or IIGCC for short), whose mission is to drive significant and real progress towards a net zero and resilient future by 2030. EdenTree is also a signatory of the COP21 Paris Pledge, the central aim of which is to strength the global response to the threat of climate change.

WHEB

WHEB was founded in the 1990s as an environmental corporate finance boutique by Rob Wylie and Kim Heyworth, hence its name: Wylie Heyworth Environmental Business. Today, WHEB is responsible for a single global equity strategy: FP WHEB Sustainability. The companies it invests in must be aligned with their sustainability investment themes, of which five are environmental: Resource Efficiency, Cleaner Energy, Environmental Services, Sustainable Transport, and Water Management.

WHEB is a Certified B corporation, where the B stands for benefit. This means that WHEB “meets the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose”.

Ninety One Global Environment Fund

In April 2022, we introduced the Ninety One Global Environment fund across our SRI portfolios. The fund focuses on investing in companies aligned with sustainable decarbonisation – for example, renewable energy (e.g. solar, wind), electrification (e.g. electric vehicles) and resource efficiency (e.g. waste management). The fund’s managers work closely with the CDP (formerly the Carbon Disclosure Project) so they have greater access to high-quality carbon emissions data. From this, the managers then engage with companies to improve their carbon footprint or, where data is not available, to improve their disclosures.

Each of the funds in our SRI portfolios must be aligned with one or more of the United Nations’ Sustainable Development Goals, such as ‘Climate Action’, ‘Clean Water & Sanitation’ and ‘Affordable and Clean Energy’; and they must demonstrate and can evidence that a socially responsible investment culture is intrinsic to their approach.

Learn more about the environmental, social and governance impacts of SRI portfolios.

Pension Drawdown

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You can usually choose to take up to 25% of your pension pot as a tax-free lump sum when you move some or all your pension pot into drawdown, from the age of 55.

You will need to carefully consider where to invest the remaining 75% (or less if you have not needed to take the full 25%), taking your likely income needs and attitude to risk into careful consideration.

How does pension drawdown work

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This video highlights the options that you could have at retirement, specifically Pension Drawdown, what it means and the things that you need to consider when planning for your retirement.

The Golden Years?

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Be better off in retirement

Imagine you’re retiring today. Have you thought about how you’re going to financially support yourself, and potentially your family too, with your current pension savings? The run-up to your retirement may feel overwhelming, but this is an important time for you and your savings.

Following the pensions reforms, there are now more options available than ever and this has removed the compulsion to purchase an annuity. It also means that you can use your pension fund to benefit your named beneficiaries, whoever they may be.

Basic retirement lifestyle

If you are approaching retirement it’s time to think about what you’re going to do with the money you’ve been working hard to save all these years. The average UK pension pot after a lifetime of saving stands at £61,897[1]. With current annuity rates, this would buy you an income of only around £3,000 extra per year from age 67, which, added to the maximum State Pension, makes just over £12,000 a year – just enough for a basic retirement lifestyle.

In more recent years, when it’s time to take a retirement income, some people are choosing to do so through pension drawdown. Pension drawdown provides a way to establish a flexible income, set at whatever level you choose, which can be increased or decreased over time to match your needs.

Flexibility and control

For many, this may seem a more fitting solution to their retirement needs than purchasing an annuity, which is a more established option that typically offers a set monthly income for life. However, although pension drawdown offers flexibility and control, there are differences to consider.

While annuity income is fixed for life, pension drawdown can only continue for as long as you have savings remaining – and once they’re gone, you’ll receive nothing. So, it’s important to receive professional financial advice to ensure that you withdraw your money at a rate that will last your expected lifetime.

Will your savings last a lifetime?

It’s important to consider that your retirement could last for 30 years or more, depending on when you retire and how long you live. This is why some people use pension drawdown as the option to provide their retirement income. Your savings remain invested even after you retire, which means they have the opportunity to continue growing through investment returns.

But it’s impossible to predict exactly how much they will grow each year. Some years they will grow more than others, and some years they may fall in value. If your rate of withdrawal exactly matched your growth rate, your savings could last indefinitely. But, because growth is so hard to predict, this is near impossible to do.

How much can you safely withdraw?

A 4% withdrawal rate is typically stated as a guide for how much you can withdraw each year from your retirement savings. This figure is estimated based on the history of the financial markets and how much investments have tended to grow over periods of around 35 years (the expected duration of retirement for someone who retires in their sixties).

So, if you have £500,000 in savings when you retire, 4% would initially equate to £20,000 a year.

However, there are a few additional details that mean this figure can’t be used totally reliably:

  • Past performance of the stock markets cannot reliably predict future growth
  • The performance of investments in your portfolio may be better or worse than average
  • It’s impossible to know for sure how long your retirement will last
  • Your financial needs are likely to change over time, typically peaking in early retirement and then in later life

Changing pensions landscape

So, a 4% rate of withdrawal could be either overly cautious, resulting in the accumulation of wealth that could create an Inheritance Tax
liability, or overly reckless, resulting in complete depletion of your savings when you still have years left to live.

In this world of ours, very little stands still. The same can be said for the pensions landscape. As high earners are faced with even more restrictions and potential pitfalls, it is vital to understand the rules and seek specialist advice. Start talking to us today about your future retirement plans and we can help you make sure it’s a resilient one.

Building a better retirement

If you’re approaching or have already turned 55, you might be wondering what is a good pension pot value to aim for. This will naturally
depend on your circumstances. To discuss your requirements, please contact us.

Cycle to Work Day

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It was the 10th Anniversary of Cycle to Work Day on Thursday 4th August 2022, a day established by Cyclescheme.

The cycle to work scheme is an initiative under the Government’s Green Transport Plan and is an employee benefit that can save you between 26-40% on a bike and accessories.  It enables you to buy a new bike and pay through salary sacrifice and because you pay for it from your gross pay, you save tax and national insurance on the monthly payment. Ellis Bates is proud to offer this scheme as part of our company benefits.

Cycling to work is a great way to enhance your mental and physical wellbeing, as well as being environmentally friendly. With the cost-of-living crisis encouraging us all to re-evaluate our spending, commuting via bike can be cost effective and rewarding.

Angela from our Newcastle office took part in the Cycle to Work Day. She didn’t get any pictures of herself but took some shots of the lovely scenery along the way.

Visit the Cyclescheme website to learn more about the scheme.

SRI Fund Screening

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Negative screening

Every fund in our SRI portfolios has a negative screen in place, as this is the fundamental factor that makes them SRI funds and includes:

  • Avoid unethical companies (Fossil fuel, alcohol, tobacco etc…)
  • Support those making a positive contribution to the environment and/or society

Positive screening

This is an additional layer to applying a negative screen, meaning the funds go beyond the approach of ‘avoiding the bad’ and also seek ‘good’ companies trying to benefit the environment and the communities in which they operate and include:

  • Supporting companies making a positive contribution to the environment and/or society through their products and services, such as combating climate change and standing for social justice.
  • Dynamic shareholder engagement where shareholders enter into dialogue with management to encourage behavioural change.
  • Every fund in our SRI portfolios must have engagement and proxy voting policies and procedures in place.
  • ESG Rating Agencies look at a fund’s underlying investments, and scores them based on specific ESG criteria.
  • Additionally, use our own judgement, to assess whether we think a fund is suitable for inclusion in our portfolios, regardless of any ESG label they may have been given.
  • Fund Manager Meetings are an integral part of our investment process, as it allows us to satisfy ourselves that the funds we invest in really are ‘good’ as they say they are.

How do we screen our SRI funds?

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We explain the process of how we choose our SRI funds. The funds we hold in our SRI portfolios must demonstrate a commitment to key areas of responsible investment, and that a socially responsible investment culture is intrinsic to their approach.

How do we screen and choose our Socially Responsible Investment SRI funds?

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The funds we hold in our SRI portfolios must demonstrate a commitment to key areas of responsible investment, and that a socially responsible investment culture is intrinsic to their approach.

To measure and assess a fund’s Environmental, Social and Governance ( ESG) credentials, we have various tools at our fingertips.

United Nations Sustainable Development Goals (UN SDGs)

We must be able to associate each fund with one or more of the UN’s SDGs. These are 17 goals that the UN has identified will transform our world for the better, such as ‘Climate Action’ and ‘No Poverty’, and importantly, ensuring they are all achieved by 2030.

Organisations can align themselves with the SDGs using negative and positive screening processes:

Negative Screening

Negative screening deliberately excludes companies involved in activities deemed to be unacceptable such as alcohol, tobacco, and fossil fuels. A challenge here is determining whether a company should be excluded if only part of its operations are involved in these activities. To address this, de minimis levels may be applied – in other words, the percentage of a firm’s revenue generated from the excluded activity, that’s deemed to be acceptable.

Positive Screening

Positive screening seeks to support companies making a positive contribution to the environment and/or society through their products and services, such as combating climate change and standing for social justice.

Shareholder Engagement

One of the most important issues for SRI investors is shareholder engagement. Here, shareholders enter into dialogue with management to encourage behavioural change. This is based on the view that SRI investors could sell their non-green assets; but the assets may simply end up in the hands of a less ethically minded investor, so this does little to improve the way those businesses are run, and the impact their operations have on the environment and society. It’s for this reason that every fund in our SRI portfolios must have engagement and proxy voting policies and procedures in place.

ESG Rating Agencies

ESG rating agencies look at a fund’s underlying investments, and scores them based on specific ESG criteria. These ratings help as a starting point in our research process, but it’s important to remember that agencies use their own methodologies to scrutinise businesses; and along with subjective interpretation, this can result in ratings varying dramatically for the same product. We therefore have to use our own judgement, to assess whether we think a fund is suitable for inclusion in our portfolios, regardless of any ESG label they may have been given.

Fund Manager Meetings

This is an integral part of our investment process, as it allows us to satisfy ourselves that the funds we invest in really are ‘good’ as they say they are.

Over the years, we’ve developed strong relationships with many fund houses, including several high-profiles names with a huge global presence, that are responsible for billions of pounds of assets. This means we have access to one-to-one meetings with the managers, enabling us to fully understand their investment processes, how they incorporate ESG factors, the risks they’re exposed to, and how their funds are expected to perform in various market conditions, to name a few.

We will meet the managers of every single fund in our SRI portfolios, before we invest, to ensure their products are aligned – and, going forward, will continue to be aligned – with our clients’ ESG or ethical beliefs; because at the end of the day, these fund houses are custodians for our clients’ money, and everything we do comes from understanding our clients.

SRI – where people, profit and planet can live together