ABN Amros local replica of its Global Socially Responsible investment fund will use positive, negative and best of sector screening techniques.
The Australian version of the Netherlands-based fund will be open to institutional and ‘mezannine’ investors (those with more than $20,000 to invest) from the beginning of December.
The fund will be offered as an Australian unit trust, and at this stage we will feed investments directly into the fund managed in Amsterdam, said ABN Amros, joint chief executive officer, Ian Manton-Hall.
The first step in the stock selection process for the global equity fund involves applying a negative screen for companies that are involved in armaments, nuclear energy, tobacco, gambling, pornography and the animal fur trade. A companys performance with respect to repressive regimes, child labour and animal testing can also lead to exclusion from the fund.
The fund then ranks remaining companies on their approach to business practices that are considered to make a contribution to sustainable development of the environment or society. Criteria for determining this contribution include: the extent of a companys reporting of, and compliance with environmental standards, the type and development of an environmental management strategy, the use of eco-friendly design, a commitment to recycling, labour relations and the extent and use of community links. Non-fulfillment of one or more of these criteria doesnt necessarily eliminate a company from the portfolio, as a high performance in other areas can be regarded as adequate compensation. Only companies that rank in the top quartile will be considered for selection.
Stocks are also selected in accordance with the best in class principle that compares companies to industry peers, operating in the same sector. The weightings of each sector in the fund will be tied to those used by the funds benchmark–the Morgan Stanley Capital Index (MSCI) World index.
Companies also need to satisfy out standard financial performance criteria as well, said Manton-Hall.
Innovest Strategic Advisors Group (USA); Kinder, Lydenberg and Domini (USA) and Ethical Investment Research Services (UK) are providers of the social and environmental research for the fund.
The fund assigns 10-20 per cent of its assets to be invested in pioneering companies involved in forward-looking technology relevant to the environment and will include alternative energy and fuel cell technology companies. At least 80 per cent of the portfolio is made up of large multinationals.
Over a three year cycle the fund aims to outperform the MSCI World Index by two per cent. From its inception in May 2000, the fund has dropped by 18.8 per cent compared to a 24 per cent fall in the benchmark (measured in Euros). For the year to August this result is reversed with the fund returning a fall of 29 per cent compared to the benchmark fall of 27 per cent said Manton-Hall.
The Australian version of the fund will require a minimum investment of $20,000.
The top 10 holdings at the end of August were: Pharmacia, CGNU, Suncor Energy, Ahold, Swiss reinsurance, Vivendi, Novo Nordisk, MedTronic, Prudential and BP Amco.