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The middle ground

Ecclesiastical is among the more unique investment houses out there, with a strong charity focus and a background in insuring churches.

The insurance parent started life in 1887 and, as the name suggests, built a niche insuring church properties from the consequences of fires.

Over the next century, the group branched out to become a specialist insurer of charities, care homes, schools, nurseries, and heritage properties such as Cornwall’s Eden Project and Blenheim Palace in Oxfordshire.

As might be expected, the investment arm has an ethical bias, with an early mandate to provide suitable portfolios for clergy members and avoid areas deemed morally dubious.

The firm is owned by a registered charity so it has no shareholder demands to meet and gives part of its profits to a selection of worthy causes.

Overall, the firm has 1.3bn under management, with around 220m of this from retail investors.

Ecclesiastical launched one of the earliest ethically screened funds in 1988 and original manager Sue Round remains in charge of the Amity UK offering.

During the next two decades, the group branched out from this ethical focus, adding four non-screened funds, and repositioning its investment business in 2008.

This involved a rebrand from Allchurches to Ecclesiastical Investment Management for the fund arm and adding screening to two portfolios to meet growing demand on the ethical side.

Meanwhile, the firm has also been working to improve its presence in the IFA market, boosting its sales function and listing products on platforms such as Cofunds and FundsNetwork.

As a result, the European growth and International growth rebranded to Amity European and Amity international, adopting the same screening as the established UK fund. Ecclesiastical also launched an ethical corporate bond portfolio and expanded the Amity suite to four.

This vehicle has just reached its first anniversary under managers Robin Hepworth and Chris Hiorns, investing in government and quality fixed-interest securities.

The group retains two non-screened funds with Allchurches higher income and Allchurches UK equity growth both coming under the Ecclesiastical brand.

Round says they also took the chance to freshen up the Amity ethical criteria, as factors such as equal oppor-tunities are now ensconced in law.

While the process retains various negative screens, avoiding areas such as tobacco alcohol, pornography and arms, it also invests in companies taking an ethical approach. Unlike some rivals, the group has never worked off a list of approved companies, believing this would block off chances in stocks improving their SRI activity.

In essence, its approach is a middle way between so-called dark and light green, integrating SRI screens into stock selection rather than the other way around.

Round and her team have also avoided going down the pure environmental route with their funds, as they feel most of the alternative energy space is inhabited by small-cap stocks.

Instead, they begin with basic stockpicking, looking for companies with sound financials, good management, growth prospects and the potential for strong cashflow.

If the financials look good, they apply the negative and positive screening to capture a company’s socially responsible credentials.

Positive screens will include basic business activities, focusing on companies following socially responsible practices, such as maintaining product quality, ethical supply sources and respecting indigenous peoples.

Other screens pick up community relations, such as charitable donations, employing local people and offering work placement schemes, or activities in environmental management, human rights, labour relations and urban regeneration.

Ecclesiastical votes on corporate governance or ethical issues involving companies held in the funds, sometimes collaborating with similarly minded organisations to exert maximum influence.

In general, the group takes positions in companies whose potential is in their corporate plans for long-term growth.

They avoid churning shares for the sake of it, preferring to build enduring relationships.

This long-term view of life is also evident in unusually lengthy manager tenures on portfolios, which speak to a stable corporate environment.

Apart from Round’s 20-year tenure on Amity UK, Hepworth has also been at the firm since 1988, running the higher income portfolio since launch in 1994.


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