We incorporate an exclusion list to our investment screens across all applicable QUAERO CAPITAL investment strategies.
We do not invest in companies that are involved in the production or supply of indiscriminate and controversial weapons, in line with our commitment to the UN PRI and International Humanitarian law.
We therefore exclude companies that breach Oslo and Ottawa conventions, ensuring we do not invest in companies that use, stockpile, produce or transfer cluster bombs or anti-personnel mines.
We exclude companies involved in the use, stockpiling, production and transfer of chemical or biological weapons. We also exclude companies with significant involvement in nuclear weapons in line with the Treaty of the Non-Proliferation of Nuclear Weapons (NPT).
In addition, we exclude companies whose conduct is in systematic and severe breach of UN Global Compact principles, which reflect global norms:
- Human rights
- Support and respect the protection of internationally proclaimed human rights
- Make sure that they are not complicit in human rights abuses
- Labour standards
Businesses should uphold:
- The freedom of association and the effective recognition of the right to collective bargaining
- The elimination of all forms of forced and compulsory labour
- The effective abolition of child labour
- The elimination of discrimination in respect of employment and occupation
- Support a precautionary approach to environmental challenges
- Undertake initiatives to promote greater environmental responsibility
- Encourage the development and diffusion of environmentally friendly technologies
- Businesses should work against all forms of corruption, including extortion and bribery
The list is aggregated using insights and analysis shared by third parties, supplemented with internal analysis from our investment teams and ESG analyst. The list is updated during the ESG committee meeting every 3 months. The purpose of this list is to ensure we avoid investing in companies that systematically and severely breach these norms. We don’t expect this list to replace our own ESG analysis, but to support it.
Selective exclusions vs. sector exclusions
Our general preference is not to systematically exclude industries across our portfolios. While a portfolio can limit exposure to, for example, any company in the exploration or extraction of oil, by divesting the ability to influence the strategic direction of the company is lost completely. Additionally, industries are very interlinked, which makes it difficult to decide where to draw the line. If we divest oil companies, should we divest any company that uses oil as an input? Or any company that sells services or machinery to the oil industry? Having said that, in some portfolios we have taken the step to exclude certain sectors, usually due to evaluation of long-term risks associated with the sector that don’t match the risk profile of the portfolio.
We subscribe to the philosophy that by encouraging more responsible and sustainable behaviour from companies across industries, we can create much more value and more positive impact. However, by the nature of our investment approach we avoid many of the controversial sectors that other funds actively screen out. We have historically held few companies exposed to weapons, tobacco, pornography, gambling and mining. We identify challenges to the sustainability of those industries, all exposed to significant and unpredictable external factors such as regulation.