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Aberdeen engages in ethics

Aberdeen has brought out the ethical engagement UK fund, an Oeic that will invest in companies that are improving their ethical behaviour.

The fund will be managed by Andrew Preston, who leads Aberdeen’s socially responsible investment team. Preston began his fund management career in 1985, focusing on UK, US and Japanese markets for Murray Johnstone. He joined Murray Johnstone International in 1992, becoming head of socially responsible investments in 1996. Following the merger with Aberdeen he became head of SRI for the Aberdeen Group.

Preston and his team currently manage Aberdeen’s ethical world fund. The new fund differs from this by focusing on the UK rather then working within a global remit.

Aberdeen believes the new fund will complement its investment style where in-house analysis drives individual stock selection. Prospective stocks will be drawn from buy lists generated by the Pan-European equities team lead by Yoon Chou-Choing, rather than the SRI team’s global equity team.

The portfolio will be spread across a range of sectors and will aim to promote ethical corporate behaviour. The investment team will favour companies that show commitment and progress in this. They will monitor the ethical behaviour of companies in three areas – corporate governance, the environment & labour and human rights. The efforts companies are making to improve will be examined and rated. The investment team will consult with the management of each companies the conclusions drawn from all the information that is gathered will determine the engagement process.

Aberdeen regards the strict ethical screening used by some fund managers as a constraint that has the potential to be too inflexible in some cases. Instead of excluding companies that fail strict ethical criteria, it believes investors will prefer to work with the companies to help them attain a higher level of ethical performance.

This product provides another option for IFAs with clients who have a socially responsible attitude to investing, rather than a ‘dark green’ ethical approach. Prospective investors may be more inclined to change things from within rather than exclude some sectors because they do not want to profit from something that goes against their morals.

However, even though shareholders are in a strong position to exert pressure on companies to make the desired changes, there may be times when engagement is not successful and it may be necessary for the fund to turn its back on an otherwise sound investment opportunity.

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