rathbone greenbank review · 2016-07-18 · rathbonegreenbank.com greenbank review spring 2016 3 i...

Inside this edition

Investing for a 2°C worldA taxing issue Engaging with corporate tax responsibility

Waging war on poverty? An overview of the UK Living Wage

Carbon capture and storage Magic bullet or too little, too late?

Spring 2016

Rathbone Greenbank Review

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Greenbank Review Spring 2016 rathbonegreenbank.com

A taxing issue 4

Investing for a 2°C world 6

CCS and climate change mitigation 10

Waging war on poverty? 12

Engagement review 14

Events 15

Contents

EditorPerry RuddHead of Ethical Research

Deputy editorAndrew McCormick

If you have any comments on this publication, please let me know. [email protected]

Cover image: Foreign Affairs Minister and President-designate of COP21 Laurent Fabius waves the official gavel of the COP21 Climate Conference, after adoption of an historic global warming pact at the COP21 Climate Conference in Le Bourget, north of Paris, on 12 December 2015 © Francois Guillot/Afp/Getty Images

Inside cover image: ‘Earth Crisis’ a 2.3-ton globe displayed by US artist Shepard Fairey, Obey’s creator, on the Eiffel tower in Paris, as part of the organisation of the Conference on Climate Change COP21-CMP11 © Newzulu/Alamy Stock Photo

rathbonegreenbank.com Greenbank Review Spring 2016

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In preparation for a talk I gave recently on the subject of ethical and sustainable investment, I searched the Financial Times

for news items evidencing a strong connection between business and issues of ethics, governance and environmental or social impact. Perhaps the huge number of articles returned should not have been a surprise!

Indeed, recent events have provided further evidence of the need to consider non-financial factors at every stage of the investment process, not just because many are morally compelling, but because, in reality, these issues can have a material financial impact.

Consider, for example, the damage done to Volkswagen by the emissions scandal (a clear governance issue) or the Governor of the Bank of England’s warning to the global insurance industry of the risks associated with climate change. You only have to look out of the window to see the social, political and climatic changes going on in the world. These changes are reflected in the global economy and, through it, the financial markets in which we invest on our clients’ behalf.

Our work to integrate such analysis into our investment process, and to go beyond this through our active engagement work, has kept the team extremely busy over recent months.

Against a backdrop of extreme weather events, we continued to engage with companies most exposed to the challenges and risks of climate change. Notably, we were lead participants in co-filing shareholder resolutions demanding greater transparency on climate risks from the UK’s major oil companies — risks associated with the valuation of fossil fuel reserves we can ill-afford to burn. In an attempt to learn more about possible options for carbon mitigation, we visited a carbon capture and storage facility in Canada. We were also in attendance when the issue of climate change was brought into the global spotlight at the United Nations Climate Change Conference in Paris last December.

In terms of social impact, we worked to promote corporate tax responsibility and the abolition of modern slavery. We were pleased to be instrumental in ensuring that the UK’s Modern Slavery Act, which became law in March 2015, included a clause on transparency in supply chains. Our Investor Day this year will focus on this subject and the related topics of human trafficking and supply chain risk, building on our work and that of other organisations and companies engaged with this important issue.

This review only touches upon the many research and engagement projects that we undertake, so please visit our new website for further information and updates throughout the year.

On behalf of the whole Rathbone Greenbank team, I hope that you enjoy this edition of the Review. If you have any comments or if we can assist you in any way, we would be delighted to hear from you.

John David Head of Rathbone Greenbank Investments

Recent events have provided further evidence of the need to consider non-financial factors at every stage of the investment process, not just because many are morally compelling, but because, in reality, these issues can have a material financial impact.

Welcome to the Spring edition of the Rathbone Greenbank Review


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A taxing issueIt can be difficult to get people excited about tax at the best of times, let alone during the breakfast slot at a conference before the coffee’s served. But that was the challenge faced by panel members at PRI in Person 2015. Thankfully, the room filled up, the debate was lively and it became clear that tax is an issue firmly on the investor agenda.

The conference in question was the annual global gathering of the UN-backed Principles for Responsible

Investment (PRI) and we were there to lead a session highlighting the publication of a guide on corporate tax responsibility.

Rathbone Greenbank has been working on the issue of responsible tax since 2010 and has supported the development of the PRI guidance document since 2013. In this article, we chart the progress of this work from its inception and offer some insights into what is involved in a PRI engagement project of this kind.

The catalyst for our work on tax was the series of campaigns organised by UK Uncut in 2010 against companies such as Vodafone, Boots and the Arcadia Group (owner of Burton, Dorothy Perkins and Topshop). Against a backdrop of austerity, campaigners sought to highlight the injustice of companies using a variety of complex, but legal, means to minimise their UK corporation tax bills. Thus began a steep learning curve in tax practices, tax avoidance strategies, corporate disclosure and the ever-changing regulatory backdrop.

The next milestone came in July 2013, when a small coalition of investors1 was formed. From initial discussions within this group, it became apparent that a lack of understanding about a highly complex issue made investors reluctant to question companies on their tax arrangements. Our aim therefore was to develop guidance for investors wishing to engage with companies and policymakers. This would serve as an introduction to the topic for non-experts as well as encouraging consistency in the information requested of companies by investors.

As part of this project, the group met with senior tax and finance department representatives from a cross-section of companies within the mining and consumer goods sectors to accumulate a broad range of viewpoints. In order to encourage a frank and open discussion, we agreed to keep the names of participating companies confidential.

These discussions covered aspects of tax policy, governance and disclosure and gave us an understanding of current and best practice in addition to some of the challenges companies face in improving corporate disclosure. In conjunction with these company meetings, we also spoke to regulators and representatives of civil society. 1 Rathbone Greenbank Investments,

Royal London Asset Management, Legal & General Investment Management and the Church of England


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The guidance provides an introduction to key tax planning strategies along with a series of questions to ask companies. The hope is that the guidance will encourage more investors to engage with companies on this important issue, promoting greater corporate transparency and more responsible tax practices.

Rathbone Greenbank will continue its work on this important point of social justice, encouraging companies to pay a fair share in order to support elements of our social fabric that enable people and companies alike to go about their business in a safe, efficient and profitable manner. It’s also important in terms of investment risk at a company level and the possible broader market impacts of aggressive tax planning distorting competition.

Our work on tax is also connected to the issues of human capital management and modern slavery (see p14) through the broader theme of inequality – one of the most significant challenges facing the world today and one whose causes we will continue to identify and address through dialogue and engagement.

Our guidance was published as a private discussion paper in 2014. Initial feedback from investors was positive, although the domestic focus of our initial enquiries raised questions about an issue which is global in nature. Our group therefore asked the PRI to convene a global working group to expand the guidance and make it relevant to a broader range of investors.

We remained actively involved in this expanded working group, presenting to PRI members via a webinar in January 2015 as well as meeting with key stakeholders throughout the year and helping to draft the report’s final content.

The resultant guidance document was published by the PRI in November 2015 and is available to download from its website.2 It sets out the case for why investors should engage with companies about tax – not only from a moral perspective, but also to mitigate the significant investment risks that can arise from aggressive tax planning.

2 www.unpri.org/publications Engagement guidance on corporate tax responsibility: why and how to engage with your investee companies


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Investing for a 2°C world

The effects on planetary health are also expected to generate accompanying societal pressures as populations migrate, wealth distribution shifts

and the threat of conflict increases.

In the face of this bleak prognosis is the contention that limiting global warming to 2°C above pre-industrial levels is achievable with prompt action and will forestall some of the more severe anticipated consequences of climate change. Many mitigation scenarios have been proposed to achieve this target with varying probabilities of success being argued. One scenario widely regarded as synonymous with the 2°C temperature cap is the International Energy Agency’s 450 ppm scenario – a plan to limit atmospheric CO2 to no more than 450 particles per million.

In support of this particular proposal, the Intergovernmental Panel on Climate Change (IPCC) Synthesis Report published in 2014 noted that “scenarios leading to CO2-equivalent concentrations in 2100 of about 450 ppm or lower are likely to maintain warming below 2°C over the 21st century relative to pre-industrial levels. These scenarios are characterized by 40-70% global anthropogenic GHG [greenhouse gas] emissions reductions by 2050 compared to 2010, and emissions levels near zero or below in 2100”.

Debate surrounds the exact means by which these emissions reductions will be achieved and who should bear the greatest burden of cuts. However, given the significant contribution to global greenhouse gas emissions

from the energy sector, it is clear that the move toward a low-carbon global economy will require profound changes in the way we produce and consume energy.

In December 2015, world leaders met in Paris to negotiate a legally binding agreement for a worldwide reduction in GHG emissions. As these talks began, the outcome was far from certain. However, the subsequent Paris Agreement – the first universal climate agreement in history – is an ambitious accord which incorporates many of the measures that the responsible investment community has been calling for. Indeed, the efforts of investors in demonstrating a clear demand for action on climate change throughout the negotiation process were recognised as being key to securing an ambitious agreement.

Climate change and its effects present a diverse range of risks and opportunities for investment portfolios and their holdings. Long-term investors need to be mindful of these factors and to ensure that portfolios are resilient to potential risks and well-positioned to benefit from the opportunities.

While much will depend on how implementation of the Paris Agreement unfolds at a national level, the strength of political will it demonstrates is clear. Opening this April for contributing parties to sign it into force, this historic resolution promises to herald a new era in responsible investment in which we will be active participants.

Scientific consensus is now virtually unanimous in asserting that human activity has been the dominant cause of climate change since the 1950s. Supporting that consensus is the evidence linking activities such as deforestation and the burning of fossil fuels to accelerated global warming, rising sea levels, an increased incidence of extreme weather events, loss of essential biodiversity and reduced crop yields.


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Main outcomes of the Paris Agreement— to limit global warming to ‘well below’ 2°C above

pre-industrial levels with a recommendation to make efforts to further lower the target ceiling to 1.5°C

— to achieve net zero GHG emissions in the second half of the century

— to establish a mechanism for countries to target reduced emissions above their submitted Intended Nationally Determined Contributions (INDCs)

— to assist developing countries with their progress towards using greener sources of energy by providing $100bn of financial help annually (effective from 2020)

Exclude or adopt an underweight position in companies and investments directly contributing to the problem, e.g. companies involved in the extraction of fossil fuels or operating in carbon-intensive industries.

Assess the exposure of investment portfolios and their holdings to climate risk through carbon footprinting, carbon intensity analysis and sensitivity to carbon pricing.

Engage with companies and policymakers to encourage actions consistent with a 2°C global warming limit.

Include or adopt an overweight position in companies and investments contributing to climate change mitigation and adaptation. Examples of mitigation include renewable energy, energy efficiency and avoided deforestation; examples of adaptation include more resilient food chains and flood defences.

Above: COP21 participants30 November 2015

The following pages illustrate how Rathbone Greenbank can help clients to respond to and shape the world’s low-carbon future.


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412,500 Meals and snacks served

1,617sets of square brackets in draft text at start of week (indicating text to be finalised)

30,372 people attended the summit

195countries

13 days of climate talks

Rathbone Greenbank’s responses to a post-Paris world

Exclude

Assess

Mining, oil and gas, airlines and electricity sectors

Carbon footprint of equity holdings across all investment portfolios managed by Rathbone Greenbank (RG)3

Clients can request a carbon footprint of the equity portion of their individual portfolios.

Exclude any link

76%

Exclude worst offenders

15%

emissionsemissions1

£745m of assets under management

of which £290m can be footprinted

Tonnes CO2 per £1m invested

But remember, positive investments can have high carbon impacts…

Public transport stocks average 1,233 tonnes per £1m invested.

147.8

RG FTSE 350

258.2

1,233

1 Scope 1 and 2 emissions (direct emissions and those related to energy use)2 An indication of the size of a listed company: number of shares in issue x share price 3 As at 31 March 2015. For further information see www.rathbonegreenbank.com/news/portfolio-carbon-footprinting

18%

81%

13%

71%

by market cap2by market cap

187 countries submitted climate action plans (responsible for 98.6% of global GHG emissions) ahead of the conference

As at 31 December 2015 Market cap and emissions given as percentages of FTSE 350

Our ethical questionnaire criteria:

— high carbon impact

— oil and gas


89 engagement projects in 2015

46 focused on environmental issues

of which 23 directly related to climate or carbon issues

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$100bna year pledged to finance transition for developing nations

0square brackets

historic global agreement

Country pledges

2.7-3.5°C

Maximum temperature increase above pre-industrial levels

2°C

1.5°C

Needs to be signed by 55 nations representing, at least 55% of global GHG emissions

OPEN for signing from April 2016

ambition

Paris Agreement

goal

pages of final text

3 1

Engage

Include Across all investment portfolios managed by Rathbone Greenbank

invested in climate change mitigation

£77.5m

For example

invested in climate change adaptation

£15m

Next steps: Rio Tinto, Anglo American, Glencore

the highest rating on the CDP’s climate action benchmarkAglobal investors 8of the highest-emitting companies in the FTSE 100

10

resolutions calling for reporting on strategic risks of climate change

5

meetings behind the scenes

30+

For example: Aiming for A

energy effi ciencyrenewable energysustainable fo

restry

fl ood defences

resilient food chains

e

98% of votes cast at both BP and Shell AGMs supported the shareholder resolutions

BP and Royal Dutch Shell resolutions 100 shareholders needed to co-file resolutionsGreenbank clients provided 43 of these at Shell and 23 at BP

by market cap


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While the Paris Agreement was undoubtedly a watershed moment in the policy debate on climate change,

the current course of carbon emissions leaves no room for complacency. We remain on a trajectory of increased global warming: the United Nations Framework Convention on Climate Change estimates current reduction commitments will only limit warming to 2.7°C by 2100. While we have grounds to expect significant reductions going forward, what of existing atmospheric carbon and the industrial output of the near future? Alongside the shift toward renewable energy sources is the need for measures to mitigate the harm of continuing carbon output.

This is certainly the opinion of the energy sector companies we’ve spoken to who suggest that the Paris Agreement provides a solid basis for global carbon pricing and an endorsement for continuing investment in carbon capture and storage (CCS) technology.

CCS is an umbrella term for a suite of technologies developed to separate, capture and store the carbon dioxide generated from industrial activity. These technologies are simple in conception but complex in execution. Large scale emitters are supplied

with systems that separate and capture carbon dioxide from their waste streams for onward transportation to permanent subterranean storage facilities. These mitigating technologies are currently functioning in many industrial operations, however the challenge lies in their affordable integration on a far greater scale.

CCS is regarded by many in the energy sector as the technological fix for climate change, the reasons why being as much psychological as scientific. It’s hard to conceive of a decentralised energy system utilising smart storage and distribution to balance mixed supply with demand when a ‘magic bullet’ mindset prevails.

For this reason, and the fact that mitigating technology is already in play, CCS is heavily favoured by policymakers. Indeed the most recent assessment by the Intergovernmental Panel on Climate Change asserted the possibility and affordability of mitigating climate change via CCS. However, this assumed that all countries acted immediately to reduce or limit their emissions, that a global price for carbon was put in place and that CCS technology became readily available as delays in action, or the non-availability of CCS, would increase costs significantly.

The 2015 Paris Agreement delivered what many previously considered impossible: a global deal on curbing carbon emissions obligating all industrial nations and providing clarity on how to advance future ambitions. Among those ambitions was the desire to further reduce the nominal 2°C global warming limit to 1.5°C — a recommendation reflected in the agreement’s final wording.

However, CCS has been slow to take off while there has remained a lack of large-scale testing and lingering concerns over implementation costs and efficiency: power generators in particular argue that they would need to burn additional fuel to meet output demands with CCS mitigation.

While the prospect of CCS technology becoming affordable and scalable for energy generation in the appropriate time frame is questionable, it may yet play an important role in projects which have both a suitable point source of emissions and access to permanent geological storage. The International Energy Agency (IEA) predicts a modest role for CCS by 2020 but projects a significant cross-industry growth in scale by 2030 if climate commitments are to be met.

In light of the continuing debate about the role of carbon mitigation strategies, we decided to accept a September 2015 invitation to tour a fully functioning CCS project attached to the controversial oil sands refining process in Canada — an industry with a number of negative environmental impacts. Could the lessons being learned there have benefits for the wider world?

Can CCS contribute to climate change mitigation?


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Alternating impermeable rock formations keep CO2 trapped below existing hydrocarbon deposits and drinking water table.

Water table

Existing hydrocarbon deposits

How Shell Canada’s Quest CSS project worksCO2 is separated, dried and compressed into a dense fluid for transport to the storage well head.

CO2 is pumped into permeable rock layer 2,300m below the surface displacing salty water present to fill the tiny spaces within the porous rock.

The company we visited worked with the Government of Alberta to commission a CAD$1.35bn CCS unit capable of capturing 1m tonnes of carbon dioxide a year, cutting greenhouse gas emissions from the refining process by 35%. The carbon capture technology is fitted to the ‘upgrader’ unit which makes the viscous bitumen produced from oil sands more suitable for refining. The captured liquid carbon dioxide is piped many kilometres further north, where it’s injected into a saline aquifer deep underground. That way, potentially harmful emissions are kept from entering the atmosphere indefinitely.

While we’ve seen CCS in action, concerns about costs and timescales remain. The IEA’s 2009 projection identified the need for 100 large-scale integrated projects (LSIPs) to be operational by 2020 to drive the commercialisation of CCS technology. By the end of 2015, there were 15 LSIPs in operation with a further seven under construction, the majority of which were being used for the purpose of enhanced oil recovery,

thereby delivering little in the way of net carbon benefit. The scale of the challenge in encouraging universal CCS deployment cannot therefore be overstated.

Furthermore, the IEA estimates that the total investment required to deploy any necessary forms of low-carbon energy technology up to 2050 would be $316 trillion. Given the sheer scale of the numbers involved, the industry will struggle to fight off accusations that the money could be better invested elsewhere, notably in the renewable energy industry where costs are falling dramatically.

The scale of the problem of climate change means we can’t afford to be dogmatic about the technologies we choose to back, just as we can’t remain dependent on an unsustainable energy system. CCS must be taken seriously as a bridging technology to ease the transition to a more balanced, low-carbon energy system. But it’s not a ready-made solution for climate change.

Left: Oil sands mining in Alberta.Above: Carbon capture unit attached to the Scotford Upgrader near Fort Saskatchewan, Alberta (Matt Crossman).

Source: 2013 IEA CCS Technology Roadmap

Above: Matt Crossman (right) with Colin Ashton, Manager Technical, Shell Albian Sands.

Coal power Iron and steel Gas power Gas processing Pulp and paperBioenergy Cement Chemicals Refining

CO2 c

aptu

red

and

stor

ed (M

tCO

2/yr

)

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

02020 2025 2030 2035 2040 2045 2050

Carbon capture and storage in the power and industrial sectors in the 2°C scenario


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Co-ordinated by the Principles for Responsible Investment initiative, the project focuses on the measures taken by companies to protect and invest in the value created by their employees. Areas covered include improvements in employee safety, the payment of fair wages and the provision of an attractive working environment. While there are encouraging examples of good company practice, it remains clear there is significant room for improvement in the way that companies communicate their efforts to investors.

Various definitions exist to determine what constitutes a ‘living wage’, but it is commonly agreed that it should provide

the minimum income necessary for workers to meet their basic needs. It stems from the recognition that statutory minimum wage rates set by governments are often too low for workers to meet those needs.

Initially focused on the earnings of workers in supply chains across the developing world, stagnation in real wage growth in recent years has expanded the living wage debate to companies’ direct employees and contractors in developed countries.

UK Living WageThe UK Living Wage Campaign was launched in 2001 in London where disparities between wages and living costs were greatest. The Greater London Authority first calculated its London Living Wage rate in 2005 and the Centre for Research in Social Policy first published a UK Living Wage rate for outside of London in 2011.

While their calculation methodologies differ, both rates are set at a level that allows for adequate housing, a healthy diet, social integration and the avoidance of chronic stress. Both rates consider a weighted average of minimum income requirements across different types of household in their respective areas to arrive at a single figure.

By January 2016, over 2,100 organisations were accredited Living Wage Employers (including Rathbone Brothers Plc), although the majority already pay most of their workers above the Living Wage, so the cost of meeting the terms of accreditation is relatively small. Organisations with larger numbers of lower-paid employees have been slower to seek accreditation, but it has been encouraging to see recent commitments from large employers such as Sodexo, Centrica, IKEA and Lidl.

Our response to this issueIssues such as low pay, highest to lowest pay ratios and insecure employment practices form an integral part of how we assess companies from both positive and negative perspectives. These factors are of particular importance in industries such as retail, hospitality, agriculture and the services sectors where low-paid casual labour is widespread. We believe that companies that invest in and support their employees will be better placed to succeed in the long term than those that treat employees as a cost to be minimised. This belief was supported in a study by KPMG in 2015 which found that universally adopting the Living Wage in the UK would have net benefits for companies and the economy as a whole.

Since 2014, Rathbone Greenbank has participated in a collaborative engagement project on the issue of employee relations.

Waging war on poverty?

A living wage is seen as a means of lifting people out of poverty and reducing inequality. Higher wages mean workers need to work fewer hours to support themselves and their families, are able to save more and have greater opportunities for discretionary spending.


13

Living Wage v. National Living WageIn the Summer Budget 2015, it was announced that a new mandatory National Living Wage (NLW) would be introduced from April 2016. This will be paid to workers aged 25 and above and is initially set at £7.20 per hour. By 2020, the aim is to bring the NLW to a level equivalent to 60% of median earnings, equating to the government’s target of £9 per hour. Workers under the age of 25 will not see their pay affected.

The NLW has been cautiously welcomed by low pay campaigners, though it has largely been characterised as a rebranded, additional minimum wage band for the over-25s rather than a true living wage. There is also no provision for regional variation and the 2014 London Living Wage is already higher than the 2020 NLW target level.

The impact of changes to the tax credits system and other in-work benefits is also important. While the government has stepped back from the £4.4bn cuts initially proposed for the tax credit system, planned revisions to Universal Credit benefits and certain limitations on new tax credit claimants remain. The overall impact of these changes on the incomes of the lowest paid is yet to be seen.

UK Living Wage calculations also accommodate in-work benefits, the 2014 London Living Wage report noting that: “If means-tested benefits were not taken into account… the Living Wage would be approximately £11.65 per hour.”

Early indications suggest that the introduction of the NLW has had a positive impact for employees in the retail sector. A number of retailers (including Morrisons, Next and Aldi) have announced increases to staff wages above the mandatory NLW rate but below the level of the Living Wage. The impact has been harder to gauge in other low-pay sectors (such as domiciliary care) where it is more difficult for providers to offset higher wage bills by increasing prices.

Variations in rates, however, do not diminish the importance of the Living Wage agenda. It is estimated that more than one in five employees in the UK are currently paid less than the Living Wage. As one campaigner who works in the care industry attested, it really can mean the difference between financial insecurity and the ability to lead a fulfilling life.

Year Statutory UK London(from October) minimum wage Living Wage Living Wage

2015 6.70 8.25 9.40

2014 6.50 7.85 9.15

2013 6.31 7.65 8.80

2012 6.19 7.45 8.55

2011 6.08 7.20 8.30

We also believe that it supports Rathbones’ position as a Living Wage Employer to engage on this matter with other companies where possible, and we routinely raise issues of low pay and working conditions in meetings and correspondence as part of our ongoing corporate engagement activity.

Comparison between Living Wage rates and statutory minimum wage for workers aged 21 and above. (£/hr.)

Sources: www.gov.uk/national-minimum-wage-rates and www.livingwage.org.uk


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Climate change: corporate strategies and stranded assets2015 was a landmark year in the climate change debate – one in which we continue to play our part. The major focus of our work was the ground-breaking resolutions filed at BP and Royal Dutch Shell. Made possible by the involvement of many Rathbone Greenbank clients, both companies will now have to improve disclosure and report on the strategic risks to their business from climate change in the future. This ensures that climate change will be assessed as a risk by the senior management of both companies and that their respective plans for investment in low-carbon technologies will have to be made public.

Climate change: policyIn May 2015, we joined the Institutional Investors Group on Climate Change (IIGCC). Our first action as a member was to co-sign a letter to the finance ministers of the G7 countries calling for a renewed level of commitment to setting long-term emissions reductions goals. We also signed the Montréal Carbon Pledge, an initiative which seeks to demonstrate widespread investor commitment to measuring and responding to the climate impacts of investments. We were present at COP21 in Paris in December 2015, adding our voice to calls for a global deal on curbing greenhouse gas emissions and agreeing financing pathways to enable the transition to a low-carbon global economy.

Modern slavery and human traffickingSince 2013, we have co-ordinated support in the investment community for the introduction of UK legislation requiring companies above a certain size to report on efforts to combat human trafficking in their supply chains. Our efforts were instrumental in supporting the passage of the Modern Slavery Bill through Parliament in 2015 and the resultant

Modern Slavery Act contains the company reporting clause we actively campaigned for. We further engaged directly with the Home Office’s Modern Slavery Unit in the second half of the year and provided feedback on the draft guidelines for companies, which were published in October.

Human capital managementSince 2014 we have been active participants in a collaborative engagement project on employee relations. In December 2015, the PRI published an investor guide to engaging with retailers on this issue. This summarises the results of the project and also sets out key metrics for assessing a company’s performance on this issue in addition to questions for management. The project involved dialogue with 27 global retail companies, with the aim of better understanding their employee relations strategies and encouraging improved disclosure and performance on the issue. Of these companies, 22 improved their reporting and three improved their performance.

Sustainable development goalsWe were invited by non-governmental organisations CAFOD and ShareAction to act as finance sector experts in the November 2015 parliamentary roundtable discussion “Helping industry to lead on climate and development finance targets”. We briefed policymakers on specific action needed in the areas of sustainable development and low-carbon solutions, strengthening human rights due diligence and tackling corruption.

Engagement reviewWe continue to use our voice and that of our clients as a force for positive change to influence companies and policymakers. As part of this commitment we are pleased to provide a summary of engagement activities undertaken by the team during 2015.

Activity by type

AGMDialogueEducation

Info request Meeting Policy

35%

9%

13%

18%

23%

2%


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2015 reviewWe aim to maintain a balance between social, environmental and governance-themed engagement activity. Although there remains a considerable degree of overlap between these categories, we apply a label to each engagement action we undertake according to its main driver: for example, although climate change has many social implications, we categorise actions carried out under this theme as environmental.

During 2015, 51% of our engagement activity was categorised as environmental. This was above average but reflects the fact that the COP21 climate change conference was at the forefront of the global agenda in 2015.

The various types of engagement activity we undertake reflect the degrees of escalation which different stages of an engagement project can require. Dialogue and information gathering remain our principal activities followed by an increasing amount of policy work. We also include the number of educational webinars we participate in to ensure that our level of knowledge and understanding on particular issues is maintained. We remain committed to attending AGMs and some 9% of our engagement work last year revolved around this core component of shareholder democracy.

Activity by theme 2015SocialGovernanceEnvironmental

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EventsRathbone Greenbank Investments Investor Day 2016

Modern slavery: whose business is it?

Our 19th annual Investor Day will address the issues of modern slavery and human trafficking, and the risks these represent in the supply chains of UK business.

IET London: Savoy Place 2 Savoy Place, London WC2R 0BL

Thursday 19 May 20169.30am-2.30pm

Speakers include— Steve Chalke MBE, founder and chair, Stop the Traffik— Matt Crossman, ethical research and corporate engagement,

Rathbone Greenbank Investments.— Justine Currell, deputy head of Modern Slavery Unit, Home Office— Louise Nicholls, head of responsible sourcing, Marks and Spencer Plc

For more information and to reserve a place, please visit rathbonegreenbank.com/investor-day-2016 or call Catherine Naughton on 0117 930 3000.

The Funding Network (TFN)

We are pleased to announce our continuing support for TFN events around the country as they raise funds and awareness for social change projects.

The Old Fire Station 40 George Street, Oxford OX1 2AQ

Thursday 5 May 2016 at 6.15pm

For further details on this event and how to register, please visit thefundingnetwork.org.uk/events/tfn-oxford/175

32%

17%

51%

Contact usRathbone Greenbank Investments provides personalised and professional investment services for investors who wish to ensure that their investments take account of their environmental, social and ethical concerns.

For further information on the services that we provide, or to arrange a meeting, please contact us.

Rathbones has offices in:

Aberdeen | Birmingham | Bristol | Cambridge | Chichester | Edinburgh | Exeter Glasgow | Kendal | Liverpool | London | Lymington | Newcastle | Winchester

For international investment services, Rathbones has an office in Jersey.*

For private circulation only.

This document is published by Rathbone Investment Management as a service and does not constitute a solicitation, nor a personal recommendation for the purchase or sale of any investment; investments or investment services referred to may not be suitable for all investors. Therefore we recommend you consult your account executive before taking any action. Rathbone Investment Management will not, by virtue of distribution of this document, be responsible to any other person for providing the protections afforded to customers or for advising on any investment. The information and opinions expressed herein are considered valid at publication (March 2016) but are subject to change without notice and their accuracy and completeness cannot be guaranteed. No responsibility can be accepted for errors of fact or opinion or for forecasts or estimates. Past performance is not necessarily indicative of future performance and the price or value of investments, and the income derived from them, can go down as well as up and an investor may get back less than the amount invested. Changes in the rates of exchange may have an adverse effect on the value, price or income of or from an investment denominated in a foreign currency. Investors should bear in mind the higher risk nature of smaller companies, that the markets in their securities may be restricted and may be less regulated than the main markets. As a result, having bought the securities, it may be difficult to sell them, assess their value or the extent of the risks to which they are exposed. Rathbone Investment Management, and its associated companies, directors, representatives, employees and clients may have positions in, be materially interested in or have provided advice or investment services in relation to the investments mentioned or related investments and may act on research before it is published. Neither Rathbone Investment Management nor any associated company, director, representative or employee accepts any liability for any direct or consequential loss arising from the use of information contained in this document. The levels and basis of taxation may change with future legislation. Unless otherwise specified, any chart and statistics are compiled by Rathbone Investment Management.

*Rathbone Investment Management International is the Registered Business Name of Rathbone Investment Management International Limited which is regulated by the Jersey Financial Services Commission. Registered office: 26 Esplanade, St. Helier, Jersey JE1 2RB. Company Registration No. 50503. Rathbone Investment Management

International Limited is not authorised or regulated by the Financial Conduct Authority in the UK. Rathbone Investment Management International Limited is not subject to the provisions of the UK Financial Services and Markets Act 2000 and the Financial Services Act 2012; and, investors entering into investment agreements with Rathbone Investment Management International Limited will not have the protections afforded by that Act or the rules and regulations made under it, including the UK Financial Services Compensation Scheme. This document is not intended as an offer or solicitation for the purpose or sale of any financial instrument by Rathbone Investment Management International Limited.

We are covered by the Financial Services Compensation Scheme. The FSCS can pay compensation to investors if a bank is unable to meet its financial obligations. For further information (including the amounts covered and the eligibility to claim) please refer to the FSCS website www.fscs.org.uk or call 020 7892 7300 or 0800 678 1100.

Rathbone Investment Management Limited is a wholly owned subsidiary of Rathbone Brothers Plc.

No part of this document may be reproduced in any manner without prior permission. © 2016 Rathbone Investment Management Limited. All rights reserved. Rathbone Greenbank Investments is a trading name of Rathbone Investment Management Limited, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered office: Port of Liverpool Building, Pier Head, Liverpool L3 1NW. Registered in England No. 01448919.

It is important to us that all materials used in the production of this document are environmentally sustainable. The paper is FSC® certified and contains 100% post consumer waste and is manufactured at a mill accredited with ISO 14001 environmental management standard. The pulp used in this product is bleached using an Elemental Chlorine Free process (ECF).

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For more information, please visit:rathbonegreenbank.com

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