Sparinvest makes its core strategies available with an additional ethical overlay, which excludes certain investments. Implementation of our exclusionary screening for ethical strategies is carried out in partnership with the external ESG specialists, ISS-Ethix.
The exclusionary criteria for these funds result from ongoing consultation with clients. At present, the standard ethical screening for Sparinvest portfolios consists of:
- A norm-based filter, screening for violations of global norms: environmental protection, human rights, labour standards, and anti-corruption;
- A sector-based filter, screening for certain levels of corporate involvement in sectors such as: alcohol, tobacco, gambling, pornography, weapons, oil sands and thermal coal.
Within the ethically-screened funds, companies will be divested promptly for breaches of the sector screen, or for confirmed and unaddressed breaches of the normative framework. Norms-based analysis may also result in companies being given an ‘AMBER’ rating by ISS-Ethix. This may indicate an alleged but unconfirmed breach, a verified breach which the company is addressing, a potential breach which has not yet occurred, and other situations.
In such circumstances, the portfolio managers have the discretion – based on further qualitative analysis – to exclude/divest, or to invest/remain invested, but with engagement regarding the issue. We also make use of dialogue with companies through our engagement programme.
An ethical exclusion filter can be applied to any of Sparinvest’s strategies under the terms of a mandate or SIF. In such circumstances, the client can decide the exact scope of the exclusions required.