Our Continuing Journey on Ethical Investing

Following the successful launch of P1 Investment Management’s ethical investing proposition for retail clients in 2017, P1 pledged to several environmental standards to demonstrate our commitment as an ethical wealth manager.

We outlined our progress just over a year ago (February 2018), and here review how that journey is continuing. First published at DISCUS.

Q G Rayer (2019), P1’s Continuing Journey on Ethical Investing, DISCUS, available at http://discus.org.uk/p1s-continuing-journey-on-ethical-investing/, 5 pages, 18 April 2019.


Introduction

Following the successful launch of P1 Investment Management’s ethical investing proposition for retail clients in 2017, P1 pledged to several environmental standards to demonstrate our commitment as an ethical wealth manager.  We outlined our progress just over a year ago (February 2018) [1], and here review how that journey is continuing.

At P1 we believe that ethical investing really matters and are determined to demonstrate our engagement is more than skin-deep. Particularly since we carefully assess fund managers for inclusion in our ethical portfolios to ensure they meet high ethical and sustainability standards while avoiding those that only have a superficial commitment.  For interested advisers, details are available on our website [2], [3].

Our journey has included corporate standards and internal initiatives as well as employing staff with specific sustainable investing qualifications [1].  We use formal standards, carbon offsetting and schemes that help our people individually ‘do their bit’, including support for charitable activities.

ISO14001 – Environmental Management

In November 2017, P1 achieved ISO 14001:2015 certification, demonstrating that we meet a high standard of environmental management. This was the result of a team effort across P1, requiring us to formalise our environmental management processes. It gave structure to our initiatives, and many activities now fit within this framework.  Significantly, it also includes ongoing procedures for improvement and regular auditing to ensure we retain the standards met.

The Carbon Disclosure Project

Climate change caused by human carbon emissions has been a strong theme for P1, motivating our commitment to target carbon-neutrality [4], [5], [6].  We continue to be a signatory of the CDP (formerly the Carbon Disclosure Project) [7].  By joining the CDP, we support the call for greater disclosure of critical environmental data by companies.  It means P1 is supporting CDP to engage with over 6,000 companies globally, requesting transparency, collecting and disseminating data on carbon emissions. This plays a crucial role in assisting superior decision making for investors wishing to avoid carbon-intensive businesses and direct their capital towards more sustainable enterprises.

As wealth managers, our assets under management help provide CDP with the leverage it needs to fulfil its role.  By signing up to the CDP, not only do our clients see the strength of our commitment, but we also join a community of investors representing $100 trillion of assets that give CDP the authority to collect environmental data.

Carbon Offsetting

P1’s carbon offsetting initiative ultimately aims to achieve carbon-neutrality across all activities.  We wish, if possible, to reduce our carbon emissions to zero.  However, while there are areas (such as business travel) where low-carbon alternatives can be selected (for example train travel rather than by car), often a truly zero-carbon option is not available.  Consequently, we estimate carbon emissions from our activities and offset them to achieve carbon-neutrality.

We have addressed this progressively.  In 2017, the estimated carbon-footprint generated by daily staff commuting to and from work totalled 14.6 tonnes of carbon dioxide equivalent annually, which we more than mitigated using a scheme that not only offset 17 tonnes of CO2 equivalent but also planted 17 trees in the South West UK (our location) [8].  In 2018 this was extended to business travel.  Becoming aware has helped us reduce emissions so that in 2018, we entirely offset our footprint for both commuting and business travel over the year with 12 tonnes CO2 equivalent (also planting a further 12 trees).  Our next priority will be office energy use.

Row for the Ocean fight against plastics in the ocean

Plastics Pollution

During 2018, our focus included the appalling harm plastic waste is causing to wildlife and sea creatures [9], [10].  While individuals can make personal decisions to reduce their plastics use, they are often constrained by available choices.  P1 is exploring how ethical investing can help address the challenge and asked its ethical fund managers to complete a survey on how they are tackling plastics.  The results are being used to promote higher standards and give us valuable insight into the ethical funds with the strongest credentials in this area.

To help progress this, P1 has also become a signatory of the “Plastics Solutions Investor Alliance” (PSIA) [11], which has added focus to our manager selection in this area.   We have also been delighted to sponsor the “Row for the Ocean” team in the latest Talisker Atlantic Challenge.  This was undertaken by the four oarswomen, crossing 3,000 miles of the Atlantic to raise awareness against single-use plastic and support Plastic Free Exeter [12], [13].

Progressive Fossil Divestment

As environmentally-aware investors, P1 often considers climate risks [14].  Apart from climate-related challenges such as sea level rise, storm surges, droughts and extreme heat [15]; research suggests that carbon-intensive industries’ share prices may not reflect potential liabilities for damages from all associated hazards [16], [17].

Fossil fuel companies’ activities are significant contributors to Carbon Dioxide emissions leading to global warming.  In consultation with our external ethical oversight committee, we decided to divest from fossil fuels progressively [18].  In December 2018, our model portfolios were 40-46% invested in funds that are explicitly committed to total fossil divestment [19], [20].  In April 2019 this figure rose to 56-64% and will continue to increase progressively by time-bound targets to 100% after that.

How this helps Advisers

Clients increasingly wish to invest ethically, often with specific concerns in mind.  The Investment Association reports £16.4 billion assets in the UK ethical funds sector in January 2019, a yearly increase of £0.7 billion [21]. Advisers need to know how to best help clients by selecting the most appropriate ethical funds and accessing the skills of wealth managers who can support them in this crucial area.

Advisers must be confident that the wealth managers they choose to support the ethical and sustainable investing requirements of their clients have the necessary skills and commitment.  By using the services of firms like P1, who have met certified environmental management standards such as ISO 14001, are signatories of initiatives such as CDP and PSIA, while also progressively fossil divesting and working towards carbon-neutrality; advisers can demonstrate to their clients that they are providing them with a service that best meets their ethical requirements.

References

[1] Q. G. Rayer, “How P1 ‘walk the talk’ on ethical,” DISCUS, 8 February 2018 2018. [Online]. Available: http://discus.org.uk/p1-walk-talk-ethical/.
[2] P1 Investment Management, [Online]. Available: https://p1-im.co.uk/.
[3] P1 Investment Management, “Ethical Investing,” [Online]. Available: https://p1-im.co.uk/managed-portfolio-service/ethical-sustainable-investing/.
[4] Q. G. Rayer, “Should Ethical Investors Target Carbon-Neutrality?,” in Proceedings of the 12th Annual Green Economics Institute, Green Economics Conference, 10-12 June 2017, p271-275., Oxford University, 2017.
[5] Q. G. Rayer, “Why ethical investors should target carbon-neutrality,” in International Conference on Sustainable Energy and Environment Sensing (SEES 2018), 18-19 June 2018, Fitzwilliam College, University of Cambridge, United Kingdom, 2018.
[6] Q. G. Rayer, “What about zero?’ asks Dr Quintin Rayer, Head of Ethical Investing at P1,” The Review, p. 11, 20 December 2018.
[7] Carbon Disclosure Project, [Online]. Available: https://www.cdp.net/en.
[8] Carbon Footprint, [Online]. Available: https://www.carbonfootprint.com/.
[9] Q. G. Rayer, “Saving Our Seas,” Citywire New Model Adviser®, no. 576, p. 19, 22 January 2018.
[10] Q. G. Rayer, “Ethical investing and the scourge of plastics,” DISCUS, 15 November 2018. [Online]. Available: http://discus.org.uk/ethical-investing-and-the-scourge-of-plastics/.
[11] As You Sow, “Ocean Plastics,” [Online]. Available: https://www.asyousow.org/our-work/waste/ocean-plastics. [Accessed 25 March 2019].
[12] “Row for the Ocean,” [Online]. Available: https://www.rowfortheocean.co.uk/. [Accessed 4 April 2019].
[13] “Plastic Free Exeter,” [Online]. Available: https://www.facebook.com/plasticfreeexeter/. [Accessed 4 April 2019].
[14] J. Porritt, “The world in context: beyond the business case for sustainable development,” Cambridge: HRH The Prince of Wales’ Business and the Environment Programme, Cambridge Programme for Industry, 2001.
[15] National Academies of Sciences, Engineering, and Medicine, “Attribution of Extreme Weather Events in the Context of Climate Change,” The National Academies Press, Washington, DC, 2016.
[16] Q. G. Rayer and R. J. Millar, “Investing in Extreme Weather Conditions,” Citywire Wealth Manager®, no. 429, p. 36, 8 February 2018.
[17] Q. G. Rayer and R. J. Millar, “Investing in the climate,” Physics World, vol. 31, no. 8, p. 17, August 2018.
[18] Q. G. Rayer, “Fossil engagement: if you won’t divest, at least do this…,” Citywire Wealth Manager®, no. 478, p. 41, 14 March 2019.
[19] Q. G. Rayer and P. Walton, “COP 2018, Climate Change and P1’s Fossil Divestment Programme,” DISCUS, 10 January 2019. [Online]. Available: http://discus.org.uk/cop-2018-climate-change-and-p1s-fossil-divestment-programme/.
[20] Q. G. Rayer and P. Walton, “Divesting from fossil fuel firms can send a message on climate change,” Citywire New Model Adviser®, no. 620, p. 21, 14 January 2019.
[21] Investment Association, “PDF ARCHIVE OF STATISTICS,” January 2019. [Online]. Available: https://www.theinvestmentassociation.org/fund-statistics/full-figures/. [Accessed 25 March 2019].

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