Rathbone Funds lifts the lid on sustainable multi-asset investing

by | Feb 21, 2022

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For professional advisers only

Will McIntosh-Whyte, manager of Rathbones’ range of four risk-rated sustainable multi-asset funds, outlines what he hopes to achieve with this range, why sustainable investing makes sense and what some of the challenges and opportunities are in managing sustainable multi-asset portfolios.

Reversing the mantra

With pandemic restrictions seemingly stretching out into periods measured in years not months, with speed limits dropping to horse and cart levels, and with towns becoming car free, is it any wonder Generation Zers are deciding to avoid cars altogether?

If you’re of a particular age, you may remember the mantra “mirror, signal, manoeuvre (MSM)” from your driving lessons as if it was “hands, face, space”. MSM seems to fit other parts of our lives as well: mirror what others are thinking (don’t be cancelled), virtue signal on social media (get likes) and then, maybe, manoeuvre (actually do something).

As managers of a suite of sustainable funds, we need to reverse this mantra: do something, communicate and hopefully others will follow.


To achieve this, we need to directly engage with the companies we invest in. We need to understand those companies to know whether they are trying to do the right thing, that they are sustainable businesses. Monitoring sustainability ratings and screens can be a useful starting point, but they will not be enough. The world is messy and complex, and the sustainability information we seek tends to be heavily qualitative – something that blanket rating systems struggle to effectively measure. As with any external information source, it’s important to understand the methodology being used in order to know what the data is and – more importantly – isn’t telling you.

Just doing the right thing

Our sustainable multi-asset funds’ focus on businesses whose operations make decent profits while also supporting the UN’s Sustainable Development Goals. These 17 goals just make sense, and they can all be summarised as looking after people and the planet: treating employees and communities right, reducing poverty, and looking after the planet so we all have a healthier home.

We bring the same constructive scepticism to our sustainable objectives as we do to our financial objectives. For example, we are not impressed by companies just changing their logos to rainbow, black or any other colours or fonts. We would rather work with those that can point to facts and results regarding diversity. We are impressed by honest and unvarnished transparency about businesses and credible strategies to do the right thing by employees, suppliers and the wider society, all backed up with evidence.


We are not dazzled by companies that simply produce their anti-slavery or pay-differential reports on time. Instead, we care about how businesses are actually treating their employees and those who are in their supply chain. We engage with companies, make our own enquiries and when necessary challenge them robustly. Companies will make mistakes. We will make mistakes. That’s the human reality, and no different to investing generally: sometimes you buy the wrong thing. Sometimes the right thing will do something wrong. But we promise to always be open about our investments. If we can no longer argue that a business is doing the right thing by people, ultimately, we vote with our capital.

Businesses must invest in change, investors must help them change

As always, it’s hard to separate the economic imperative from the sustainable objective. Take renewable energy for example. It will only eclipse carbon-heavy energy when the technology gets to a scale that makes it reliably cheaper for most areas around the world. And that’s the unsubsidised cost. Because, for most consumers, paying extra for basics is a luxury. Bluntly, the question goes:

Will you convert to renewables to save the planet for no extra cost? Yes, of course – where do I sign?


But change it to:

Will you convert to renewables to save the planet, but it costs twice as much? Sounds good, send me the details (but then it comes time to pay, cash is running low and economy wins out).

My point here is that the consumer alone won’t drive change. Business owners (and investors like us who provide them with capital) must take responsibility. Companies need to strive to improve renewable technology to the point where it becomes a no-brainer for people. We as investors need to give companies the cash and the encouragement to help them get there. Because if energy companies don’t change, then they will be forced to by governments. That can be painful, driven by unrealistic deadlines and a lack of commercial awareness. If the vaccine success in the UK has shown us anything it’s that the private sector can get things done quicker and more efficiently due to less bureaucracy.


Green gold is in those hills

One thing I can confidently predict is the acceleration in hyped-up ESG stories. It could be a rerun of the dot.com bubble. Lots of hot money chasing the next big thing in renewable energy or carbon capture, for example. We believe it’s crucially important to stay disciplined and focus on the fundamentals of every company we look at. Cash flow and profits (non-subsidised) are the cornerstone of durable business models, and that applies to sustainable investments as well. It’s the only way to ensure you don’t pay over the odds for a pinched-out claim.

There is no doubt in my mind that responsible capitalism is the best way to solve the planet’s issues. Yes, government ‘encouragement’ might accelerate activity, but innovation based on profit has the best record in quickly and effectively supplying solutions to problems. Investing in that system for sustainable ends makes sense to me.

However, charlatans and fraudsters flock to all new markets, and sometimes people’s hopes can outstrip reality. As investors, we take nothing at face value and the same attitude applies when we are running our sustainable multi-asset funds. We constantly check that businesses’ actions match their promises. The need for caution has never been more appropriate.


As fund managers, we believe we should always nag, nudge and champion businesses that we invest in to do more to innovate, to keep improving. In our sustainable multi-asset portfolios, that goes for how they treat people, the environment and their supply chains, as well as their efforts to make profits for their shareholders. The way I see it, a company that continues to screw its suppliers, its staff or its community won’t last long, regardless of the profits it may hustle today. In the end it’s common sense to avoid such poor companies.

Financial sustainability matters too

Ultimately, it doesn’t matter how environmentally or socially responsible a company is if it’s not going to be around for the long term. Customers increasingly care about sustainability and the values of the businesses they buy from, and this is translating into their financial decisions. However, while investors want to do good, they still need to achieve their financial objectives.

We focus on companies that are not only benefitting people and the planet, but also have strong balance sheets, quality management, genuine barriers to entry and tailwinds behind them that are driving growth, in order to meet those long-term objectives.


We want companies that display strong sustainability credentials, but they must also have viable long-term business models. In today’s world the two are becoming inextricably linked: if you behave badly, you are likely to face repercussions of some sort. This may be governments stepping in with regulation, customer boycotts or investor revolts over supply chain issues or treatment of workers. The corporate world is quickly learning that you reap what you sow. Similarly, being a great company is no good if you fail to innovate and adapt in a changing market.



Will McIntosh-Whyte, Fund Manager

Rathbone Greenbank Multi-Asset Portfolios

For more information visit sustainableinvesting.rathbonefunds.com






This is a financial promotion relating to a particular fund range. Any views and opinions are those of the investment managers, and coverage of any assets held must be taken in context of the constitution of the fund and in no way reflect an investment recommendation. Past performance should not be seen as an indication of future performance. The value of investments may go down as well as up and you may not get back your original investment.

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