February 2023 Advisory Committee Meeting Summary

In this piece, Eleanor Walley from the investment management team summarises the External Advisory Committee from February 2023.

The February 2023 Advisory Committee meeting began by addressing the recent membership changes as a result of succession planning. In 2024, our original four Committee members will need to step down, due to the provisions set out in the Advisory Committee’s Terms of Reference. We expressed our appreciation for the valued input of the outgoing members, as well as welcoming Juliana Burden, Head of Research at Ethical Screening, to the Committee.

Mark Elliott presented to the Committee on the UK Opportunities Fund. He provided an overview of the characteristics and performance of the fund, which aims to harness the growth potential of sustainable UK-listed, multi-cap businesses over the long term. ESG is at the very forefront of the investment approach and our screening policy excludes certain industries with a harmful environmental and/or social impact (ie. fossil fuels) from the investable universe of the fund.

Castlefield recently submitted a response to the Financial Conduct Authority’s (FCA) consultation on fund labelling (Sustainability Disclosure Requirements), part of which proposes the disclosure of any ‘unexpected’ holdings given the sustainable positioning of the fund. Although this is not yet mandated, we trialed the idea and asked the board members to provide feedback on holdings they considered to be surprising – BT Group, Britvic, Glanbia, Devro and Zotefoams were among the stock names mentioned. It turned out to be a useful discussion and the consensus was that, regardless of whether the proposal is mandated, it would be best practice to repeat this exercise across Castlefield’s funds.

We welcomed an external speaker from Ethical Consumer to present the findings of a project that involved the ranking of over 100 UK investment funds labelled as sustainable. He explained the methodology behind the analysis which is based on ranking funds according to ten criteria, each worth half a point, in order to score each fund out of five. Castlefield achieved a score of 3.5, and the speaker explained to the Committee the rationale behind the score, as well as how this could be improved moving forwards.

A standing item on the Committee’s agenda is to review significant changes to fund holdings since the last meeting. Whilst there have been no specific issues nor any divestments on ethical grounds, we have exited from EMIS, a provider of healthcare software that been taken over, as well as Headlam Group, a floor covering company.

The Committee also discussed a new holding in the UK Smaller Companies Fund, Treatt, a natural extracts and ingredients manufacturer to the global beverage, flavour, fragrance and consumer goods markets.

The Committee then discussed a notable engagement with the telecommunications company, Teleperformance, a holding in the European Fund. In the final quarter of 2022, serious concerns over working conditions of content moderators for TikTok surfaced following a tweet from a Colombian Minister. The company were accused of subjecting content moderators to particularly egregious content and shares subsequently fell 40%.

serious concerns over working conditions of content moderators for TikTok surfaced following a tweet from a Colombian Minister

Teleperformance responded diligently, providing a good deal of assurance and temporarily exiting from the most egregious part of content moderation, although the company since announced that it will re-enter full-service content moderation.

Finally, the Committee shared ideas for the next meeting, including engagement on the cost-of-living crisis and support in place for the workforce, particularly those on a lower income.

Written by Eleanor Walley