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Responsible Investing

Responsible investing, socially responsible investing, ESG, Ethical investing, these are all terms you will have seen us use this year in our blog content. You may have also seen these terms in the press lately, as the impact of the Covid-19 pandemic has really accelerated these issues and brought them to the forefront.

Research shows that demand for Environmental, Social and Governance (ESG) and sustainable investment focused portfolios has hit record levels.

As we have stated before, this is something that we believe this is going to become a long-term trend and our aim with our blog posts on this area is to help you understand what this is and keep you updated with movement in this area.

Ethical investing has been a traditionally niche market with limited options however with ESG (environmental, social and (corporate) governance) investment become ever more prevalent and the Covid-19 pandemic, there now seems to be turning point for accelerating client interest in this area.

Brooks Macdonald recently conducted a survey in which they asked 188 advisers whether they thought the current pandemic would speed up a transition to a greener, more equitable society.

The response was an overwhelming yes with 90% responding positively.

Global fund data provider FE fundinfo, also did some research and found that 55% of IFAs increased the amount of client money in ESG investments in 2019 and that more than four-fifths of advisers expected demand for ESG options to rise in the coming year.

Many ‘ethical’ or ‘ESG’ screened funds now outperform the more traditional (aka ‘non ethical’) funds and portfolios. Morningstar data examined almost 5,000 Europe-based funds and found that around 60% of sustainable funds have done better than their non-ESG peers over one, three, five and 10 years.

The focus on ‘greener’ investments may suggest that it’s just the ‘E’ in ESG that is currently in the spotlight however if you look at the impact of the Covid-19 pandemic and even the recent Black Lives Matter movement, these also put the spotlight on the ‘S’ and ‘G’, putting diversity and social equality (including employment conditions and healthcare) up at the forefront and may make people think about aligning their investment preferences (i.e. investing into companies which support diversity and equality) with their own personal views.

Brooks Macdonald also did some research last year in which 800 individuals were surveyed on their views on responsible investing. One of their findings was that interest was high across all age groups, however, it was the individuals under 40 that were the most engaged with this with 94% saying they already used a responsible investment solution or would be interested in doing so.

Responsible investing therefore gives us an opportunity to connect with the next generation of clients. As it’s the future generations who will feel the benefit of living on a ‘greener’ planet.

We have noted recently in our ESG blogs that we expect the regulators to hone in on ESG matters and that assessing client’ sustainability preferences be a key conversation topic when discussing investments.

The FCA has already indicated that sustainability risks should be appropriately considered in the advice process that investment objectives should include the understanding of clients’ responsible investing.

Hopefully, this is further ‘food for thought’ for you to start thinking about how can your personal views and beliefs align with your investment strategy?

We are already actively discussing ESG issues with clients on a regular basis and will continue to develop these conversations and use the feedback in our processes within the business.

Please keep an eye out for more posts on these themes in the future, this is something we are committed to as a business and to help our clients understand.

Andrew Lloyd


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Prudential PruFund Growth Positive Unit Price Adjustments – 25/08/2020

Prudential PruFund Growth Positive Unit Price Adjustments 25/08/2020

I have just finished listening to Prudential about their quarterly update on their ‘PruFund’ range of ‘smoothed’ multi asset funds.

PruFund Funds are reviewed for their Expected Growth Rates (EGR) and their Unit Price Adjustments (UPA) on either a monthly or quarterly basis.  They also have daily smoothing limits too.

The good news is that there has ben no change to EGRs, on PruFund Growth this remains the same at 5.70% gross per annum for pension and ISA investments.

Further good news on the UPA follows for Series A and Series D PruFund Growth:

Series A                                2.73% increase to fund value

Series D                                2.74% increase to fund value

The difference in increase is accounted for by a slight difference in product charges.

Series A covers Flexible Retirement Plan pensions and the ISA product and Series D covers the Prudential Retirement Account, earlier investments.

Please note that Series E for later Prudential Retirement Account investments had a positive UPA of 2.58% applied on 25/06/2020 on a monthly review.

‘Smoothing’ can include further price reductions as well as possible increases.  Volatility will remain based on the current market situation and outlook.

Different charging structures will impact on actual net returns as disclosed in reports etc.

Should you have any questions on the above please do not hesitate to contact me.

Steve Speed


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Invesco Weekly Market Performance Update

Please see this weeks Weekly Market Performance Update from Invesco which was published today:

The overall tone in forward-looking economic data remains broadly supportive, albeit with occasional disappointments, such as the EZ’s weaker than expected Composite PMI data. Beyond the (inevitable) strong post-lockdown bounce, however, the outlook remains less certain, reflected in continuing dovish comments from Central Banks and further fiscal support. Positive news on the vaccine front continues to come out, but widespread availability of a proven vaccine is likely to be a mid-2021 story rather than anytime sooner. Meanwhile on the virus front the situation remains mixed, with still high levels of new cases globally and the emergence of new clusters of inflections. But these generally have not been met by new aggressive lockdowns as authorities have so far reacted with only very localized and limited measures. With the Democratic Convention over and the Republican equivalent this week, the US Presidential and Congressional elections will increasingly become a major focus for investors as we move into the autumn. Another potential stumbling block for those looking for reasons to be more cautious on the outlook, even if history has shown that such concerns are often misplaced.

Global equities edged higher last week, with the MSCI ACWI in sight of its all-time high set in February. Gains were concentrated in the US, as all other major DMs saw modest declines. Small caps also fell. Value’s relative rally came to an abrupt halt, as Financials and Energy were weak and IT-related stocks boosted Growth. This weighed on UK stocks too.

Fixed income markets eked out modest gains across the board but are struggling to make sustained upward progress with yields at current levels and spreads in credit markets around their post-bear market lows. Government bonds were slightly ahead of credit, with IG ahead of HY.

The US$ recovered the previous week’s losses but remains close to its YTD lows against most major currencies. Commodities had a mixed week. Oil and Gold saw small declines, but copper appreciated.

• After a precipitous decline of nearly 34% in just over a month in February and March, the S&P 500 has staged a spectacular rally off its lows, rising just under 52% since then and making a new all-time high last Tuesday. It is now up 5.1% YTD.
• The recovery has surpassed anything seen in other major DM equity markets. Japan (Topix), Europe (MSCI Europe ex UK) and the UK (FTSE All Share) are still respectively -8%, -13% and -21% below their YTD highs. EM equities have fared somewhat better and are now just -1% below theirs.
• The US’s rally has not, however, been exceptional compared to previous bear market recoveries. Post the GFC crisis the equivalent rise was 49.4%, so broadly the same. The difference then, of course, was that this was after a multi-year bear market, which saw the market fall materially further than this time around (-56.8%).
• And a rising tide has not lifted all boats, at least not equally. The equally-weighted S&P 500 remains 7.8% below its all-time high, highlighting that the rally has been mega-cap led. Apple (+71%), the US’s first $2trn company, Microsoft (+36%) and Amazon (+77%), the three largest companies in the index, have all seen outstanding performance YTD. But there are still around 150 companies that are down more than 20%, while more than half the market has not made any gains this year.
• What has driven the rally? It’s been all about a re-rating. The 12m Trailing PE has risen from 23.4x to 29x (based on Datastream data), with earnings down -15%. At 22.3x the 12m Forward PE has only been surpassed during the TMT bubble. It’s been a spectacular rally, but one that has left the market not without its risks against the backdrop of an uncertain economic outlook and expectations of a strong earnings recovery.

Key economic data in the week ahead:

• A light week ahead on the data front.
• While not data, the key focus of the week in the US will be the annual (virtual this time) Jackson Hole Symposium. This year’s symposium is entitled “Navigating the Decade Ahead: Implications for Monetary Policy”. On Thursday attention will be on Federal Reserve Chairman, Jerome Powell, and his expected comments on the Fed’s ongoing policy framework review, while on Friday Governor of the Bank of England, Andrew Bailey, will also be speaking. Outside this, Tuesday sees the Conference Board Consumer Confidence reading for August, which is expected to show a slight improvement compared to July but remaining depressed relative to pre-virus levels. Initial Jobless Claims out Thursday are expected at 925k from last week’s above expectations reading of 1.1m. The week ends with the Fed’s preferred inflation measure, Core PCE Inflation, on Friday, which is expected to show a sharp rise (0.5%mom from 0.2%mom). This outsized gain is unlikely to have a material impact on the Fed’s medium-term inflation outlook given that the drivers of this outperformance largely reflect payback from virus-related declines previously.
• In the UK the Lloyds Business Barometer on Friday is expected to remain relatively weak compared to the robust PMI readings that we saw last week. Nationwide House Price Index on the same day is expected to see year-on-year growth increasing to 2%, up from 1.5% in July.
• No data of note from China, the EZ or Japan.

Please keep checking back for regular updates on the markets from a range of investment managers.

Andrew Lloyd

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ESG Matters – The Smarter Investment in Our Future

Please see the below ESG article from Aberdeen Standard Investments written by Jerry Goh, their Asian Equities Investment Manager, received yesterday afternoon (13/08/2020).

These past few months have forced fund managers, like everyone else, to become more flexible while waiting for life to get back to normal.

Luckily, technology allows me to work from home with minimum disruption. I can mirror my office desktop on my home computer to securely access work programmes and files. I can easily talk to company executives via widely-used video conferencing apps.

My job is to analyse corporate governance (G) issues at Asian companies. Governance, along with ‘environmental’ (E) and ‘social’ (S) factors, make up the ESG trinity.

ESG, and responsible investing, have become hot topics in recent years. This will become even more so as the coronavirus pandemic forces us to rethink our priorities when pursuing economic growth.

As governments around the world pledge trillions of dollars to support businesses and save jobs, this presents a one-in-a-million opportunity to make a substantial commitment towards a sustainable future. One thing I have learned during this time is that sustainability and resilience are often synonymous.

Asia’s record on ESG matters is mixed. After decades of rapid growth, the world’s 10 most polluted cities are located within this region1. Labour conditions can be appalling2. Corporate governance standards, while improving, tend to lag global best practice.

Having said this, there are many signs that things are getting better. Here are a few from my travels – in person and online:

In recent years the region’s investors – asset owners and asset managers – have shown more of an interest in responsible investing. This will put more pressure on companies to change bad behaviour.

For example, Japan’s Government Pension Investment Fund, one of the largest pension funds in the world, announced in 2017 its plan to increase allocations in responsible investments to 10% from 3%3. The targeted amount is equivalent to some US$33 billion today.

Fund managers are signing up to internationally recognised agreements, such as the United Nations Principles for Responsible Investment (PRI), to demonstrate their commitment to sustainability tenets. In China and the ‘rest of Asia’, the number of net new PRI signatories grew 64% and 17% during 2018/2019, compared to a year earlier. In Japan and Australasia, gains were 12.5% and 8% respectively. Combined, net new signatories in all these markets rose by 3394.

Regulators are also doing their part. The Singapore Exchange introduced sustainability reporting for listed companies on a ‘comply or explain’ basis in 20165. Hong Kong Exchanges and Clearing is implementing the recommendations from a consultation paper designed to strengthen ESG rules6. Policymakers in Thailand are driving changes that have made Thai companies among the region’s best for sustainability disclosure7.

Regional industry groups, such as the Asian Corporate Governance Association, provide platforms for stakeholder conversations on responsible investing via conferences and other events.

As a result, Asian companies have become more fluent in the language of ESG, demonstrating evidence of ESG considerations within business strategies and adopting more robust governance practices.

There is still room for improvement, of course. For instance, there is insufficient transparency around materiality assessment – identifying the ESG factors that affect business performance. There is confusion over disclosure of relevant ESG-related data. Lack of reliable data remains a problem.

As I write this, Singapore (where I am based) has relaxed some of the restrictions put in place to combat the spread of the coronavirus. A few countries within this region are also taking the first tentative steps towards normality.

Everyone has to think carefully about the sort of future they want. Even when the coronavirus is beaten, the world still faces significant challenges.

But this cannot mean that it’s ‘business as usual’. Everyone has to think carefully about the sort of future they want. Even when the coronavirus is beaten, the world still faces significant challenges.

For example, climate change poses an even greater long-term threat than Covid-19. Many people around the world would have seen, or experienced, the effects of rising temperatures. Societies are already counting the human and financial costs of higher sea levels and extreme weather events.

Social inequality – the growing gap between the world’s haves and have-nots – is another major challenge. Inequality has led to widespread anger that, in some cases, has unleashed social and political upheaval.

The world is also consuming resources at an unprecedented rate. People are depleting the world’s natural resources which cannot be easily replaced, if these resources can be replaced at all.

Investors everywhere have an important role to play in finding answers. We can help direct investments towards companies that are working on sustainable solutions, or engage with companies to help change bad corporate behaviour.

Recalcitrant firms that persist with carbon-heavy activities, that exploit their workers, or damage the environment, can be penalised by having their access to capital revoked.

Even if our work and personal lives won’t feel completely ‘normal’ for some time, we mustn’t allow this sense of suspended reality delay those important decisions that will have profound effects on the world.

Finding solutions will generate new investment opportunities. However, our generation also has a huge responsibility to all those that follow us. We cannot let them down.

1World Economic Forum

2The New York Times, Foxconn Is Under Scrutiny for Worker Conditions. It’s Not the First Time, June 11 2018

3Reuters, Japan’s GPIF to raise ESG allocations, July 2017

4UN PRI, Annual Report 2019

5SGX, Sustainability reporting guide and rule, June 2016

6HKEX, Exchange Publishes ESG Guide Consultation Conclusions And Its ESG Disclosure Review Findings, Dec 18 2019

7CFA Institute, Market Integrity Insights, June 12 2019

Our Comment

This blog highlights Asia’s focus on ESG and ‘responsible investing’, and as we have noted before, the Coronavirus Pandemic has brought ESG matters to the forefront, not just in Asia, but globally.

It seems that this type of governance and investment will become (to use a phrase which now seems to be used daily) ‘the new normal’ with investing.

If you haven’t already, please see the below links which will take you to our 3-part blog series, ‘An Introduction to ESG’ which we posted throughout July for an introduction to what ESG is, how its measured and what we at People and Business are doing to make sure we are moving in the right direction with regards to sustainable investment themes.

We will continue to post regular ESG content, both our own original content and a selection of good quality input from various Fund Managers and investment houses.

Part 1 –
Part 2 –
Part 3 –

Andrew Lloyd


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Jupiter Insight: Will we see a more regenerative form of capitalism?

Please see the below insight from Jupiter Asset Management’s Environment & Sustainability Fund Manager, Abbie Llewellyn-Waters, which we received earlier this week:

It has become clear that we are at a precipice of change. The status quo has been shattered and there is an opportunity to reconsider a new normal. This applies to capital markets as well and underpins the need to deliver a more regenerative approach to investing and how we rebuild our economies to become structurally more sustainable.

Despite the easing of lockdowns throughout the world, there remains speculation about whether the old demand trends for fast or luxury fashion, as well as eating, drinking and travel, will hold. For example, only 9% of people polled by YouGov in the UK wanted things to return to exactly how they were before the crisis.

From our perspective, we see a great opportunity in companies that are positioned to transition to a more regenerative form of capitalism – where companies that treat workers well, don’t exploit vulnerable communities in their supply chain, that take proactive action in a crisis, and that limit their impact on the environment, will be more attractive to investors.

We anticipate that asset prices will increasingly reflect this. In fact, Harvard published a white paper in May  that looked at parallels between US share prices and salient corporate social responses to Covid-19 (such as sick pay policies, appropriateness of government aid acceptance, dividend cuts), and concluded that there was a clear alpha correlation between the two.

Sustainable investment themes have accelerated

Sustainable themes have accelerated as a result of the Covid-19 crisis. Firstly, momentum for environmental policy has gathered pace, despite the fragile state of the global economy. Policymakers have been quick to draw the link between the coronavirus and the environment – like viruses, greenhouse gases care little for borders. The debate around carbon policy, and specifically carbon tax, has notably speeded up. The recent eye watering impairments within the oil sector brings further caution to the broader carbon capital at risk in the system.

There has also been important research quantifying pollution reduction, one of the few positives from this crisis. There has been a staggering drop in emissions through the crisis, at a level that is obviously unsustainable but has at least demonstrated the efficacy of urgent policy response. As a result of the global measures to combat Covid-19, the IEA (International Energy Agency) expects global CO2 emissions this year to decrease to levels of 10 years ago. This is significant and could support the case for a more agile economic culture that includes more working from home. It is effectively an ‘investment-free’ solution to help deliver the legal commitments of the Paris Agreement.

There also continues to be strong momentum in human capital management within the sustainable companies that we focus on, with an increasing correlation between fair treatment of workers and share price returns.

Finally, another interesting new theme is sustainable supply chain management. For years, efficiency has been the overriding aim in supply chains – “just enough, just in time”. Covid-19 has shifted the focus to security. While this has implications for working capital, it also offers new revenue opportunities. For example, infectious diseases have previously been mischaracterised as an issue mainly for developing markets. But R&D investment into non-Covid infectious diseases in developed markets is increasing, which has the potential to create entirely new revenue streams.

All in all, we expect the journey ahead to be much more complex than the Q2 market rally might suggest. As active long-term investors, our focus remains finding high quality companies that are leading the transition to a more sustainable world.

As we have highlighted over the past few months, sustainable investment themes and ESG are being talked about now in the press more and more by the regulator, fund managers and investors.

If you haven’t already caught up with these blogs, please see the below links which will take you to our 3-part blog series, ‘An Introduction to ESG’ which we posted over the past month for a basic introduction to what ESG is, how its measured and what we at People and Business are doing to make sure we are moving in the right direction with regards to sustainable investment themes.

Part 1 –
Part 2 –
Part 3 –

Andrew Lloyd


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What is ESG? – An Introduction – Part 3

What is ESG? – An Introduction – Part 3

This is the final instalment into our 3-part introduction to ESG.


In part 1, we explained what ESG is. In part 2, we went a little deeper and looked at the 10 ‘UN Global Compact Principles’ and the screening process for firms when selecting ESG compatible investments and companies.

Please check out the first 2 instalments if you haven’t already.

Part 1 –

Part 2 –

Here in part 3, the final instalment in our ‘What is ESG? – An Introduction’ blog series, we will look at what we at People and Business are doing as a firm to make sure that we are moving in the right direction by selecting firms with good ESG processes.

Due Diligence

We are required to write an annual Due Diligence report as a firm, to demonstrate our processes into making sure all the firms we use, whether it be a platform, product provider or investment solutions, are and remain suitable for our clients.

We measure this in a number of ways including service levels, performance and now, their ESG processes.

Whilst this is an annual requirement, we don’t view this as a once a year ‘tick box’ exercise. Our Due Diligence process is built into everything that we do. We continuously look at the companies we partner with, to ensure they provide the best possible service for our clients. The annual report is just a summary of our findings over the past year.

As our Due Diligence is something we build into our way of working on an ongoing basis and our ESG research is ongoing, this will be added as a permanent section of our annual Due Diligence report which we complete in the last quarter of each year. This month, we wrote an addendum to this report, fully focused on ESG.

Our ESG Focus

Last year, when the ESG investment focus really started getting some momentum, we made the decision to build this into our Due Diligence process and move towards an ESG investment approach where possible, and suitable for our clients.

We have asked our clients (both new clients and as part of our annual review process) for their thoughts on ‘ethical’ investing for years. Traditionally, ‘ethical’ investments haven’t produced the same level of returns as standard investments, but this has been changing. You no longer need to compromise on your investment returns to be a ‘good’ investor.

Just over 2 years ago, we became aware that Blackfinch Asset Management were due to launch a series of ESG approved Managed Portfolio funds. However, with any brand new investment, it’s not practical to go jumping in straight away. We need to see past performance over a real measurable period and how firm’s manage their investments and keep us, as the IFA, updated into the management of their Model Portfolio Services.

We were impressed with what we saw from Blackfinch and their ESG screening process. They use a combination of positive and negative screening, with much more of a focus on positive screening.

Over the past 2 years, we have been monitoring the progress of these portfolios and how they manage them. In September 2019, Steve actually went and visited Blackfinch’s Head Office, meeting key investment personnel and fund managers in Gloucester.

On the 2 year anniversary of the funds, we undertook analysis on the Blackfinch portfolios against their peers in the market which we currently use or have recommended in the past, and not only found they out performed, but had the strongest ESG processes.

Given our research, we have made the decision to introduce these Blackfinch Managed Portfolio Solutions into our investment proposition, where appropriate for our clients.

We are satisfied that they are ahead of the game on their ESG policies and feel that they will only continue to enhance these.

Currently, we are still under way with our ESG project and are looking into the ESG policies of all the investment firms/ solutions we have under our proposition and will continue this throughout the rest of this year, and then monitor this on an ongoing basis.

We are now building ESG into our client review process, highlighting ESG to our clients and getting their views.

Although ESG is still a relatively new concept within the industry, we have been looking at this for a while behind the scenes and will continue to embed this focus through everything we do at People and Business. As the market becomes more ‘ESG aware’ we expect there to be much more of a focus on ESG in this industry and we will monitor this to ensure that we keep up to speed.


Hopefully this blog series has given you a brief understanding of what ESG is, how this is measured and what we are doing as a firm to ensure we are moving towards more sustainable and socially responsibly investments.

This may be the final instalment into this ‘What is ESG? – An Introduction’ blog series, but this won’t be the last you will hear from us on the subject of ESG (far from it!).

As this blog notes, this is becoming a big theme in this industry, and we want to make sure we are and continue to be ahead of the curve, by selecting investments and firms that, we believe are ‘doing the right thing’.

The current Covid-19 Pandemic has further raised the profile of ESG as people contemplate potentially the next major crisis, global warming.

Along with our regular industry updates, we will continue to source good ESG content to keep you updated, and later this year, we will post an update into how we are getting along with our ESG processes.

As a business, we will also consider how we can move in the right direction too. We are about to invest in new lights in the office that use far less power.

Andrew Lloyd


Team No Comments

What is ESG? – An Introduction – Part 2

What is ESG? – An Introduction – Part 2

Last week, we posted part 1 of our 3-part introduction to ESG blog series. If you haven’t read this already, here’s the link:

In part 1, we explained what ESG is. Here, in part 2, we dig a little deeper

As we noted last week, a lot of the ESG processes within this industry are built upon the 10 ‘UN Global Compact Principles’.

The United Nations Global Compact is the world’s largest corporate sustainability initiative.

This is a call to companies to align strategies and operations with universal principles on human rights, labour, environment and anti-corruption, and take actions that advance societal goals.

Their mission:

‘At the UN Global Compact, we aim to mobilize a global movement of sustainable companies and stakeholders to create the world we want. That’s our vision.’

To make this happen, the UN Global Compact supports companies to:

  1. Do business responsibly by aligning their strategies and operations with 10 Principles on human rights, labour, environment and anti-corruption; and
  2. Take strategic actions to advance broader societal goals, such as the UN Sustainable Development Goals, with an emphasis on collaboration and innovation.

The 10 UN Global Compact Principles:

Human Rights

Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and

Principle 2: make sure that they are not complicit in human rights abuses.


Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;

Principle 4: the elimination of all forms of forced and compulsory labour;

Principle 5: the effective abolition of child labour; and

Principle 6: the elimination of discrimination in respect of employment and occupation.


Principle 7: Businesses should support a precautionary approach to environmental challenges;

Principle 8: undertake initiatives to promote greater environmental responsibility; and

Principle 9: encourage the development and diffusion of environmentally friendly technologies.


Principle 10:
Businesses should work against corruption in all its forms, including extortion and bribery.

The Screening Process

A key strategy of sustainable and responsible investing is incorporating environmental, social and corporate governance (ESG) criteria into investment analysis and portfolio construction across a range of asset classes.

The 10 UN Global Compact Principles are the foundation for investment firms who wish to bring ESG on board within their investments.

Firms use 2 methods of screening whether the companies they choose invest in are considered compatible with the 10 principles.

Positive Screening

Investment in sectors, companies or projects selected for positive ESG performance in comparison to industry peers.

This involves selecting firms that show examples of environmentally friendly and socially responsible business practices. This also includes avoiding companies that do not meet certain ESG performance thresholds.

Negative Screening

The exclusion from a fund or certain sectors or companies involved in activities deemed unacceptable or controversial (e.g. tobacco, arms, gambling etc).

This involves avoiding companies that create negative impacts considered incompatible with the UN Global Compact Principles.


Positive Screening is our preferred method when we are looking at how firms screen, as this shows a more active approach into looking into firms that are committed to making a difference, rather than just excluding the ones that don’t. However, most companies use a combination of both as in reality, as the UN Global Compact was only started in 2015, most investment firms/sectors still have a long way to go towards meeting their ESG goals, but it’s good to see that the industry is starting to adapt.

Check back for Part 3 of this blog series next week, in which we will look at what we at People and Business are doing as a firm to make sure that we are moving in the right direction by selecting firms with good ESG processes.

Andrew Lloyd


Data Source:, and Blackfinch Asset Management’s ESG Policy July 2020

Team No Comments

What is ESG? – An Introduction – Part 1

What is ESG? – An Introduction – Part 1

ESG. You may have seen this term in the financial press or in our blogs. We recently posted the following blog, which was an update from Jupiter on Sustainable Investment Themes.

In our closing comments of this blog we said that we were currently developing our own ESG processes and would post more content on this shortly, so here goes.

What does ESG stand for?

ESG stands for Environmental, Social and Governance

But what is it?

Investopedia definition for ESG is;

‘Environmental, social and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments.’

ESG is more of a theme or a set of principles to follow rather than a single set principle.

Over the last few years, ESG has started being used more to describe how well a business is managed than to explain how sustainable its product or service is.

More recently, the mainstream press has been using ‘ESG’ as a catch-all term for investing with a ‘responsible’ or ‘ethical’ screen.

There are no official industry or regulatory standards for comparing these different approaches. However, with ESG now so important, some key definitions for certain factors have been accepted across the industry.

Breaking it down


Investing with consideration for the environment. This includes working to reduce pollution and climate change, and to source sustainable raw materials using clean energy sources. The focus is on how a firm approaches environmental concerns, the ecological impact of its products and its carbon footprint.


Investing with consideration for human rights, equality, diversity and data security. The focus is on how companies are incorporating these. It’s also about looking to see if each is actively investing/working towards a healthier and higher quality of life for staff and stakeholders.


Investing with consideration for positive employment practices, business ethics and diversity. The focus is on how a company builds its management structure and works with all its different stakeholders. How does it approach investor and employee relations? Does the board work with transparency, honesty and integrity? Does this filter down to the rest of the company?


Renewed efforts to combat global warming, cutting emissions and reducing our carbon footprints has been highlighted by the Covid-19 Pandemic and this has further raised the profile of ESG.

‘Doing the right thing’, ‘socially responsible’ and ‘ethical investing’ has now hit the mainstream press and become one of our regulators, the FCA’s, focuses.

As a firm, we are committed to ensure that we review the ESG policies of all the companies we work with and recommend.

We started looking at ESG over a year ago and discuss this regularly in our weekly team meetings. We decided that we would make this one of our key projects this year to ensure we stay ahead of the game because we believe this is the right approach and we believe that the regulator will issue guidance for firms over the next few years to ensure ESG is incorporated within their propositions.

We can already say that we are starting to incorporate this within our firms service proposition and are committed to driving this forward even further.

This blog is aimed as a gentle introduction to ESG. A lot of the ESG processes within this industry are built upon the 10 ‘UN Global Compact Principles’.

Check back for Part 2 of this blog next week, in which we will look at these 10 principles and the screening process investment firms use to assess whether an investment is compatible with these principles or not.

Andrew Lloyd


Data Source: Investopedia and Blackfinch Asset Management’s ESG Policy July 2020

Team No Comments

Legal and General: US Update

Please see the below update from Legal and General posted yesterday (29/06/2020) regarding the current situation in the US.

Their Asset Allocation team discuss their thoughts on the presidential election, the market’s likely reaction to what could happen, and the ongoing spread of Covid-19 in some states.

The electoral collage

Momentum is clearly with Joe Biden at the moment. Donald Trump’s handling of the pandemic and protests after the death of George Floyd have eroded his approval rating and have led to him losing ground in poll after poll.

Biden has always held a lead in national polls, but that advantage in poll averages has jumped from 4% in May to 10% now. Arguably even more worrying from Trump’s perspective are polls in swing states also shifting significantly towards Biden, and losses of support among both older voters and even his most reliable base of ‘white, no college’ voters.

Nevertheless, don’t count Trump out (again)! Our baseline remains that it will be a tight race to the end. The heat Trump is taking from the dual crises could calm down and the economy may well look stronger by November. Trump’s strategy again seems to be all about turning out his base. If he can get all of the 35-40% of voters that back him no matter what to turn out to vote, then it will take much more excitement about Biden from the rest of the electorate than is evident so far for him to beat Trump.

It should go without saying that it’s still early in the race and a lot can and will happen. To mention only a few wild cards: What will the economy look like in late October? What if there is a second wave of the virus in the autumn? What if a significant number of people get sick after Trump rallies? What if states need lockdowns on election day? What if targeted lockdowns inadvertently favour Democrats or Republicans? What if COVID-19 influences turnout differently among age cohorts? What if Trump or Biden themselves become ill?

Blue wave versus Trump 2.0

We would not expect a big equity market reaction to any type of divided government. If Trump wins, it would be roughly the status quo; under Biden, it would likely prevent many of the most market-moving policies in either direction.

Yet a Biden victory of any flavour could still bring a few market-related policy changes. America’s China policy would largely remain unchanged in substance, but could become less volatile in style. A multilateral approach to China should make an all-out trade war with the EU less likely. Tech regulation should continue to tighten gradually but, unless personnel choices say otherwise, this has not been a policy area Biden about which has shown particular passion. Generally, expect the policy direction to be more social, more green and more redistributive.

On the other hand, a ‘Blue Wave’ in which Democrats control Washington would be the most market-moving outcome, in our view; this has become the single most likely outcome in betting markets. In short, from a market perspective, this would imply higher corporate taxes and more fiscal spending. Even if these two ultimately balance each other out, the market’s gut reaction seems likely to be negative.

And what would Trump 2.0 look like? The desire to be re-elected has arguably been a moderating force on Trump’s policy choices around issues like the trade war. But in a second term this factor disappears. So what does Trump want to achieve with a second term? Money? Power? Policy? Legacy? Dynasty? We don’t have a clear answer for this question yet. Either way, it is unlikely that Trump 2.0 will be calmer than Trump 1.0.

The only two things we are certain of are that the campaign will get very ugly, and that if Trump loses he will not go quietly into that good night.

Houston, we have a problem

The virus continues to spread at an alarming pace in southern states, with the one-week change approaching Italian peak levels in California, Texas and Florida – a risk James highlighted over a month ago. We don’t think this is due to greater testing (which would dilute the share of positive test results). State governors are becoming concerned, with some Texan cities suspending elective (non-urgent) surgeries to free up hospital capacity.

By and large, the re-opening of the local economy is being ‘paused’ rather than ‘reversed’. But new research from the University of Chicago argues that lockdowns only account for 7% of the loss of economic activity. Instead, it is fear that prevents people going out. The study calculated this by examining economic activity in border towns located between different regulatory regimes.

Apple mobility data also suggest Texans are already cutting back on activity, and there appears to be an inflection point with activity levelling off in the median US state.

From a market perspective, there has been a tug-of-war between economic data continuing to paint a V-shaped recovery picture and deteriorating virus newsflow. We would argue that equities are pricing something at the optimistic end of our Scenario 1, implying there will be little market tolerance of signs the virus is significantly slowing down the economic recovery. But at the same time, the starting point for sentiment is already slightly bearish, so it would not take much of a correction to turn our sentiment signals much greener.

As you can see from this update (and from the news!), the situation in the US looks problematic, with no resolution in sight. The run up to a presidential election is always volatile and this one is likely to no different (if not worse due to the Covid-19 situation).

It will be an interesting few months for the US in the run up to November.

Keep an eye out for further updates here on the US and the impact of their Covid-19 and election struggles, and of course general market updates and other content which we continue to post regularly.

Andrew Lloyd


Team No Comments

The FCA’s focus for the remainder of 2020

Our regulator is working on the advice market and helping to manage risk in this area.  We recently completed a return for the FCA that focused on how we are dealing with the pandemic and our business and financial resilience.

I am pleased to say this did not pose a problem for us and we are comfortable with our current position with the focus on keeping ‘business as usual’ for our existing clients while keeping our staff safe.

We have extracted the precis of the FCA’s current views from a third-party compliance business’ blog in an email received on Friday 26/06/2020:

In their latest 2020/21 business plan the FCA outlines 5 key areas of concern and risk:

  • there is a good level of operational resilience 
  • understand firms’ financial resilience so that firms can fail in an orderly manner
  • markets can function enabling price formation and orderly trading activity
  • customers are treated fairly
  • customers are aware of the risk of, and protected from, scams

In her speech earlier this month, The FCAs Executive Director of Supervision, Megan Butler outlined the regulators response to COVID19 and expectations for the rest of 2020.

The speech Highlights:

  • In operational terms, advisers and wealth managers responded well to the onset of the coronavirus (Covid-19) crisis.
  • Whilst acting with speed has been the absolute priority, as the industry adapts to the long-term impact of coronavirus, there is a need to transition from the immediate ‘incident response’ towards focusing on longer-term impacts. In her speech to PIMFA’s members, Megan Butler explores the FCA’s priorities and longer-term expectations for the wealth management and advice industry.
  • Key areas of focus for the FCA include operational resilience in light of coronavirus, financial resilience (and within that the preservation of client assets and money) and acting with integrity.
  • On the latter, the FCA has identified some firms which have tried to avoid their liabilities to customers by closing down companies and setting up new ones. These practices are unacceptable, and the FCA will continue to take action against firms conducting such activities.

To ensure that firm’s stay on track with risk management, operational and financial resilience and customer focus, the FCA will be focusing on key outcomes:

  •  Client money and custody assets: They see an increase in clients running to cash, so firms are being encouraged to return finances that will not be invested in the short term and/or if firms are facing wind-down.

P and B IFA response:  At inception of our business we decided not to hold client money to minimise risk to our clients.  This is not an issue for us.

  •  Suitability and advice and discretionary investment decisions are (as always) front and centre of treating customers fairly and in their best interests, but will be scrutinised in particular around firms’ response to the pandemic

P and B IFA response:  Our key focus during the pandemic has been servicing our existing clients.  Our Due Diligence process on investments has been enhanced with additional criteria.  One area of interest is the ESG approach of Fund Managers.  ESG stands for Environmental, Social and (Corporate) Governance.

  •  Acting with integrity when it comes to charging appropriate fees is paramount

P and B IFA response:  The standard ongoing advice fee for UK IFAs is c 0.79% per annum according to our third party compliance consultants, with many IFAs targeting 1% per annum.  We remain competitive against our peers with our ongoing advice fee at 0.50% per annum.

  •  Firms need to continually showcase they have adequate systems and controls to manage Financial crime and market abuse

P and B IFA response:  We remain committed to fighting financial crime.  At our weekly Team Meetings and monthly Board Meetings we discuss risks, scams and blocking financial crime.  We have systems and controls in place to protect our clients and our business.

  •  There is a keen focus on pension transfer activity, with their detailed guidance on advisers providing triage, abridged and defined benefit pension advice.

P and B IFA response:  Due to regulatory and compliance input and escalating Professional Indemnity Insurance costs we have withdrawn from Defined Benefit Pension Transfer Advice.

Finally, there is a focus on the future of regulation, with a move to an outcomes based focus with new regulatory principles covering:

  •  Adaptive shift from ‘regulation and forget’ to iterative and responsive approach
  •  Results and performance driven regulation rather than defining a way, thus providing freedom to choose strategies
  •  Risk weighted approach, shifting to data-driven from one size fits all risk evaluation
  •  Finally, a collaborative strategy which aligns regulators nationally and internationally

It is good to see that our regulator, the FCA, is keeping an eye on advice businesses in the UK during this time of heightened risk.  We have taken appropriate actions to ensure quality ongoing advice is provided to our existing clients at this time and to lower our business costs for the time being.

We understand clients need to be kept up to date and constantly upload new blogs to keep you informed and email clients when appropriate during this pandemic crisis.

Our resilience and business continuity plans have been tested and we have adapted quickly to providing advice on a Covid-19 risk free basis (from a distance).  We will continue to monitor and try to improve our resilience and business continuity plans.

We are not sure how long this will last; it could be a while yet.  Personally, I am really looking forward to normal ‘business as usual’ when I can see my clients again!

Take care of yourselves.

Steve Speed