Group exclusions

Our exclusions policy sets out details of investments that cannot be made in Schroder-managed portfolios, reflecting sustainability criteria, and the process and responsibilities governing its implementation.

We remain committed to active ownership, influencing investee companies and assets to transition toward sustainable business models. However, where transition is no longer possible or we conclude that their activities are unacceptable for inclusion in Schroder-managed portfolios, we will avoid investment in those companies or assets.

The policy covers three categories of exclusion:

• Coal. Coal is a major contributor to atmospheric greenhouse gas emissions and companies directly exposed to that fuel face growing social and political pressures as a result. No investment is permitted in companies identified as generating 20% or more of their revenue from thermal coal mining.
• Cluster munitions and controversial weapons. Political agreements to eliminate the most egregious weapons from use have become widespread over recent decades. Many of our clients have similar adopted policies to avoid investment in companies involved in activities described in those agreements, or operate in jurisdictions where those investments are prohibited.
• Client- and fund-specific exclusions. Many of our clients hold views that their investments should not be associated with companies engaging in specific activities. Where these views are explicitly expressed in our agreements with those clients, we must implement exclusions according to specific criteria requested by those clients.

At Schroders, we fully support the international conventions on cluster munitions, anti-personnel mines, and chemical and biological weapons. We will never knowingly hold any security that is involved in the production, stockpiling, transfer and use of these weapons. These restrictions apply across all Schroders funds.

The excluded list contains companies involved in the production, stockpiling, transfer and use of weapons identified in key international conventions:

• The Convention on Cluster Munitions (2008): prohibits the production, stockpiling, transfer and use of cluster munitions
• The Anti-Personnel Landmines Treaty (1997), also known as The Ottawa Treaty (1997): prohibits the production, stockpiling, transfer and use of antipersonnel landmines
• The Chemical Weapons Convention (1997): prohibits the use, stockpiling, production and transfer of chemical weapons
• Biological Weapons Convention (1975): prohibits the use, stockpiling, production and transfer of biological weapons.

We believe our coal exclusion policy helps to mitigate the financial risks that regulatory, social and political pressures related to thermal coal mining present to the portfolios we manage for our clients.

The challenge facing the coal industry is clear. As long-term and active investors, we are committed to protecting the portfolios we manage against the risks that transition poses.

Political and social momentum to tackle climate change is growing and coal is a focal point for that pressure. Coal use is responsible for close to half of global CO2 emissions, and generates roughly twice as much CO2 as natural gas, for every kilowatt of power produced. For the first time, coal was explicitly referenced in the agreement reached at COP26 in November 2021, which referred to “accelerating the phaseout of unabated coal power and inefficient subsidies for fossil fuels”.

Our purpose is to provide excellent investment performance to our clients through active asset management. In our capacity as fiduciaries to our clients, we are obliged to identify financial risks to our clients’ investment portfolios. The policy is consistent with our business judgement that these thermal coal mining companies are not sustainable over the long term as an investment proposition.

Controversial weapons exclusion list (as of April 2023)

Past performance is no guarantee of future performance. The value of investments and the income from them can go down as well as up, and you (or your clients) might not get back what you originally invested