RATHBONE ETHICAL BOND I

Investment Process

In the first stage of the investment process the managers looks at the economic environment to determine which industries to own as well as the duration of its investments. The team then seeks to identify attractive opportunities in the investment grade corporate bond sector. To do this it uses its Four Cs Plus approach to evaluate creditworthiness. It assesses Character - whether a company’s managers have integrity and competence; Capacity – ensuring that a company isn’t over borrowing and has the cash to pay its debts; Collateral –whether there are assets backing the loan which reduces risk; and Covenants – loan agreements which set out the terms of the bond and restrictions in the company. The final C is called The Plus which according to Rathbones means: “We think differently to the market, sometimes contrarian, sometimes sceptical of orthodox thinking but always opinionated.” The bond issuers will also be assessed against a set of positive and negative social and environmental criteria. A company will fail the negative screen if it is involved in any of the following areas: armaments, environmentally unsustainable activities, animal testing, tobacco, nuclear power, alcohol, pornography, and gambling. But it must also show at least one positive aspect such as management of environmental impacts or human rights. The ESG research, is carried out by Rathbone Greenbank, the company’s ethical research division. Indeed, approval for investments must be given at a weekly meeting, by the whole ethical investment team.