Ethical and environmental issues are now mainstream concerns for many investors, but Castlefield has been specialising in responsible investing since its launch in 2002. Partner Rupert Lovesy tells us more about developing a specialist firm that practices what it preaches.
Tell us a bit about how Castlefield came to be
Our story is unique – we think so anyway! Back in 2002 our founding partner John Eckersley left a large investment management business to set up Castlefield, taking some of his existing clients with him. These were mainly from the charity sector, and many of them are still with us today. This is where our passion for sustainable and ethical investing was born.
Later, we acquired two financial planning businesses. One was a long established ethical investment advice company.
So, we started to build our reputation as an investment management business looking after charity clients. Because of this, we were sought out by other charities as well as private clients who wanted to avoid certain asset classes.
How does a company that specialises in ESG develop when there’s no framework?
As a small business, it’s been a challenge. That said, with no guidelines, we were able to take the lead in designing and refining our processes. A distinguishing feature of ours is that we moved away from a purely exclusionary investment process to focus on positives, building this into our framework. We’re not impact investors, by any means, but we do make sure our investment approach does have an impact.
Third party endorsem*nt plays a big role, so we align ourselves with various external groups to show our sustainable credentials. Last year, we were proud to be accredited by the Good Business Charter - an initiative of the non-profit Good Business Foundation, that recognises responsible business practices. In addition, becoming a B Corp is very much on the agenda for this year.
How do clients see ESG investing now that ethical and environmental issues are more mainstream?
It’s been amazing to see how things have changed since the early 2000s. From day one, we’ve had enquiries from private clients and charities telling us that they want to make sure they’re investing in companies that are doing good things and not causing damage.
Our team saw interest in ESG balloon during the pandemic. It was really encouraging, but also meant that the space became very competitive very quickly.
We believe Castlefield is different from other firms because there’s a purity to our offering. We specialise in ‘Thoughtful Investment’ so our team isn’t agonising over whether to include something or not. Everyone is on the same page.
How do you reassure clients about positive returns?
We’ve been doing this for a long time, so can make more accurate predictions. Until recently, sustainable investing was very niche. People assumed that, if you’re investing for ‘good’, there’s a compromise in performance. But unlike others, we have the data to show that this isn’t true.
For example, our model sustainable portfolio has been going for 11 years. Many other model portfolios have only been in the sustainable space for three or four years because this is all so new. We can demonstrate performance over different market cycles and point to consistency. This allows us to say that, over the long-term, objectives can be met.
How do you combat greenwashing?
At Castlefield, responsible investing isn’t simply a product or one of our range of services – it’s integral to everything we stand for and do. Some firms may classify a fund that’s 60% sustainable as ESG, but our view is that it needs to be at 100% sustainability before we label it as such.
We even have one fund that we don’t class as sustainable, as it’s currently on a journey. Our clients would see through it instantly.
Transparency is key. We’re so confident in our process that we make documentation available for everyone to see. We publish all holdings on our website and people are welcome to have a look.
How do you embody sustainability in your day-to-day business?
We try and hold ourselves accountable. It’s an integrated process, from thecoffee we drinkand the shelving units in reception to the way we treat our supply chain.
We’re anemployee-owned business, which means that all of our employees are ‘co-owners’. They own a slice of the business, and what runs through it all is sustainable investing. That’s all we do.
If someone just wants to make money, they’re not a client for us. But if someone is a ‘Thoughtful Investor’ – a name that we trademarked – we’re proud to work together.
We aim to be ethical in every aspect of our business. After all, if we go through questionnaires with the businesses our clients are investing with, then we need to be able to stand up to scrutiny too.
What is the future of ESG?
If the younger generation is anything to go by, it’s going to continue growing. My daughter is 18 and sustainability is key to her decision making on a daily basis. In the advice space, those running non ESG solutions will have to change to meet demand.
The next stage of our development is that we’ll be seeking to align our fund range with the FCA’s sustainability labelling scheme. Once the final details are published later in 2023, we’ll be reviewing and adapting our fund literature, external reporting and internal monitoring systems to ensure full compliance with the new scheme.
We’ve established an internal Net Zero working group who are working towards quantifying, monitoring and reducing our carbon dioxide emissions in line with our firm’s plan to achieve Net Zero by 2030.
For us ESG is going to continue to be an exciting place to be.
