Russell Investments has enhanced its environmental, social and governance (ESG) credentials with an expanded range of exclusions across its flagship global shares and fixed income funds.
In a client note released last week, Russell says following a review of its responsible investment strategy the multi-manager would “broaden the exclusion list” applied to the Global Bond Fund and the Global Opportunities Fund – both structured as Australian unit trusts.
The Russell note says the two funds already screen out “companies which produce components that are either key in, or dedicated to, the production of antipersonnel mines and/or cluster munitions”.
Russell, which is the underlying investment manager for the BNZ KiwiSaver scheme (excluding cash and global equities), introduced the cluster-screening approach last December in the wake of a public outcry about potential exposure to controversial weapons in the government-mandated savings regime.
Under the revised ESG policies the two Russell funds “will also no longer invest directly in securities which manufacture tobacco products or are involved, either directly or indirectly, in the production of the core nuclear weapon systems, or components/services of the core nuclear weapon systems, that are considered tailor-made and essential for the lethal use of the weapon”.
All up Russell – via third-party research house Sustainalytics – identified 62 securities for the banned list comprising, tobacco (13), nuclear weapons (35), and anti-personnel mines/cluster munitions (14).
However, the global bond and equity products will only have to offload three and 15 securities, respectively, once the new ESG exclusion list is implemented.
Alister van der Maas, Russell NZ head, said the affected underlying managers would have until July 30 to complete the divestments.
“We’ve done extensive analysis that shows the exclusions will have negligible impact on the funds,” van der Maas said.
He said Russell includes ESG factors in its portfolio construction process but has also implemented exclusions in Australian and European-based products.
“The US is also looking at it closely but hasn’t implemented anything yet,” van der Maas said.
The Global Opportunities Fund currently lists underlying managers as:
- Sanders Capital;
- Fiera Capital;
- Man Numeric Investors;
- Janus (Perkins);
- Russell Investments;
- Wellington Management Company;
- Tiburon Partners;
- RWC Partners; and,
- J O Hambro Capital Management.
Meanwhile, the Global Bond Fund comprises:
- Colchester Global Investors;
- Schroder Investment Management North America;
- Loomis Sayles;
- PIMCO Australia;
- Insight Investment; and,
- Russell Investments.
The London Stock Exchange sold Russell Investments to a duo of US private equity firms – TA Associates and Reverence Capital Partners – in 2015 for US$1.15 billion.