Ruffer Investment Company | ESG

We interpret responsible investment as the incorporation of environmental, social, and corporate governance (ESG) considerations throughout our research and investment processes, while being active stewards of our clients’ assets through engagement and voting. Our Responsible Investment Policy is based on these twin pillars of integration and stewardship which are summarised below. More details can be found in the attached Responsible Investment policy.

We have a dedicated Responsible Investment team (the RI team) which sits within our Research function and works closely with research analysts to conduct responsible investment activities. Ruffer is also a signatory to the following organisations: 

• Principles for Responsible Investment
• Climate Action 100+
• Carbon Disclosure Project (CDP) 
• Transition Pathway Initiative 
• IFRS sustainability alliance
• Institutional Investors Group on Climate Change
• UK Stewardship Code
• Net Zero Asset Managers Initiative 

Integration refers to the incorporation of potentially material ESG factors into our fundamental analysis of individual securities. ESG considerations are sources of both opportunity and risk and are thus potential contributors to investment performance. They are one important sub-set of the risks and opportunities we consider in our fundamental investment analysis to help guide security selection and portfolio construction. 

Equities

We grade the level of ESG due diligence required for equities depending on certain materiality thresholds such as the size of the holding, the proportion of issued share capital held by Ruffer, or third party ESG ratings. We draw qualitative and quantitative considerations from both internal and external research and formal and informal data sources. MSCI ESG Research is our primary source of ESG data, metrics, and ratings. The Sustainability Accounting Standards Board (SASB) framework provides us with guidance on material issues to consider at company level.

For every holding, we complete a standardised ESG summary of risks and recent controversies and for holdings we consider material, a more extensive due diligence task is conducted collaboratively between the research analyst and the RI team. Each assessment covers potential areas for engagement, with materiality driving our decisions on where to focus our resources. 

We monitor companies by:

• reading company statements and reports, and third-party reports
• meeting with advisors and sell-side analysts 
• engaging with the board and senior management of companies directly 
• attending annual general meetings (AGMs) 
• conducting ad hoc reviews based on both specific and sectoral analysis 

Throughout our holding period, the designated analyst is responsible for keeping ESG considerations under review, with input from the RI team.

Sovereign bonds

We have developed a proprietary model to assess sovereign ESG risks, consisting of country-level indicators to gauge each sovereign issuer’s exposure. We include environmental inputs ranging from renewable energy usage to waste recycling and population studies assessing physical climate risk in low-lying areas. Social and governance indicators are equally broad, including health and education, female participation in the labour force and measures of political stability and corruption. This tool gives us a country-level ranking based upon these ESG risks.

Protective strategies

We invest in derivatives, both directly and through third party funds, and in credit securities via third party advisors. We cannot take an active ownership role in the management of these instruments and securities because Ruffer predominantly holds interests in indices (whose underlying assets we have no visibility of), rates or currencies which may not directly relate to any one company, issuer, or security. Nor are we able to integrate ESG considerations into the selection of, or investment in, these instruments.

At Ruffer, stewardship activities include engagement (either individual or collaborative, with escalation if required) and proxy voting. Our annual Stewardship Report (attached) highlights the depth and breadth of our stewardship activities with specific examples. Our focus on engaging directly with company management has afforded us a deeper understanding of the companies we invest in. 

Engagement 

We prioritise engagement where we have identified material financial, reputational, or regulatory risks. When an ESG issue is identified, we will usually raise it directly with investor relations, sustainability experts, company management or executive or non-executive directors. Interactions typically involve a combination of face-to-face meetings, video calls, telephone calls and written communication. Learnings and company information acquired through engagement will be incorporated into the investment analysis process to inform future investment decisions.

Voting policy

We vote on all shareholdings held within the Ruffer Investment Company.

We take this voting responsibility seriously. We review relevant issues and exercise our judgement, based on our in-depth knowledge of each company. The opportunity to vote enables us to encourage boards and management teams to consider and address areas that we are concerned about, along with those areas that we want to support.

Ruffer has a voting policy and internal voting guidelines as well as access to proxy voting research to assist analysts in their assessment of resolutions and the identification of contentious issues. Although we take note of proxy advisers’ voting recommendations, we do not delegate or outsource our decision on voting on our investors’ shares. We may, as part of our escalation policy, co-file or file shareholder resolutions where we think this a necessary step to signal change.

Ruffer is a signatory to the Net Zero Asset Managers Initiative, and more information on how we will achieve our commitments can be found in our climate change reporting which is attached. We follow a pragmatic fossil fuel strategy which prioritises delivering our investment objectives with a desire for real world emissions reduction. 

We publish an annual Task Force on Climate-Related Financial Disclosures (TCFD) report (attached), which explains our past climate-related activities. It provides an insight into how our understanding of the risks and opportunities our investee companies face has evolved. We seek to engage with management at companies that contribute significantly to Ruffer Investment Company’s portfolio emissions, encouraging them to adapt their business models or disclose additional information related to aligning with the transition to a low-carbon economy. We also publish a number of carbon metrics. 

We maintain transparent and responsive communication with investors to ensure we meet their needs. This is achieved through:

• our quarterly Responsible Investment Report providing an overview of recent engagement activities
• our annual Stewardship Report covering our stewardship activities in response to the UK Stewardship Code 
• our voting records including aggregated quantitative and qualitative voting data with explanations of our voting rationale 
• our annual TCFD Report
• ad hoc thought pieces published online or in the annual Ruffer Review