Sustainable Balanced Fund Impact Report

2023

Our first annual Sustainability and Impact report for our Sustainable Balanced Fund describes the fund management approach during 2023. It evaluates the positive impact the fund has made through both capital allocation and our active engagement.

We thank our clients for their increasing focus on the importance of allocating capital towards positive change, inspiring a better future for people and the planet. We hope you enjoy this new format and look forward to your feedback on the report."

Lyn Tomlinson, Head of Impact and Philanthropy

Making a difference through collective investment and engagement

We strongly believe that our decisions around capital allocation and how we use our influence with companies and managers can bring about real change in the world. This year’s Sustainability and Impact Report details the progress we're making in both areas. Some of the key highlights:

Investing for impact

We’re delighted that 24% of the portfolio is contributing to solutions by supporting the United Nations (UN) Sustainable Development Goals (SDG’s), as assessed under the Impact Management Projects’ (IMP) framework. For more information on the impact created by the solutions we are allocating to, see pages 5 and 14-19 of the report. For more information on the methodology, see our Impact measurement framework. Please see the Important Information section below on how we’ve calculated the percentage of holdings contributing towards solutions².

We group the holdings classified as "contributing to solutions" under our five impact themes and align them to these UN Sustainable Development Goals (SGDs). The largest weights are to investments that are contributing to Good Health and Wellbeing and Climate Solutions. Read more about how we are using our influence to contribute to solutions on pages 22-24. Please see Important Information below¹.

Despite a volatile year for markets, we have maintained our long-term outperformance against the peer group. Over the course of the year the fund delivered a return of 6.0%, ahead of the peer group, as represented by the ARC Steady Growth PCI Index, return of 5.8%.

Strong returns from the core direct equity strategy were the primary driver of returns over the year. The strategy delivered positive returns across a number of sectors. Our thematic holdings experienced a more volatile year, especially those companies linked to the energy transition. High levels of inflation in the UK have made meeting inflation plus return targets more challenging in the shorter term. While we remain confident that we can continue to deliver returns above inflation, every year, we review the assumptions behind our investment strategies. This includes the expected return and risk of our portfolios, as well as our views on macroeconomic trends such as inflation and growth. Please see Important Information below to understand how we’ve calculated our financial performance³ ⁴.

Using our influence

We are committed to using our influence to push for progress. We engage both directly with companies we invest in and with fund managers whose funds we invest through.

As at the end of last year, we engaged with 31 of the 40 companies owned within our directly invested equity portfolio. And engaged with 14 of the 16 actively managed funds across equities, bonds, alternatives, and cash. For more information on our engagement, please see pages 24-27. Please see Important Information below to understand how we’ve calculated our engagement⁵.

Annual sustainability and impact reports 2023

Read more about our estimated amalgamated impact achieved across all three of our sustainable flagship funds

Contact us

To discuss your wealth management requirements, or to find out more about our services, please contact us below.

Important information

¹ The sources of this data are Cazenove Capital and the third party fund managers of the positions held in the Fund. SDG classifications based on the fund managers' assessment of the primary SDG being supported.

² Data shown reflects the notional aligned impact calculated for the positions held in the fund as at the 31 December 2023, based on the value of assets as at the 31 December 2023. The positive impact is generated by the companies that we invest in and the users of their products and services, like the organisations that have helped improve access to healthcare, finance and education and the people who choose to switch to renewable energy. Investors in the SUTL Cazenove Sustainable Balanced Fund are aligned with these impacts by investing in a company’s activities generally but do not finance any particular activity, product or service that a company may undertake or make available. We use the most up to date underlying impact data available as reported by the companies and fund managers in which we invest to estimate these impact metrics, and apportion it according to our holding size. To illustrate the aggregated impact, we translate the impact into more meaningful comparisons using the following conversion ratios: over a decade, one tree captures and stores 60kg of carbon dioxide from the atmosphere (Source: EPA), the average UK home uses 2,700 kWh of electricity in a year (Source: Ofgem). Where data is not available we have not included it, with the expectation that our results are conservative. Impact metrics provided, in part by Net Purpose.

³ The sources of this information are Cazenove Capital and Lipper. Data to 31 December 2023. Inception 1 August 2018. Past performance is not a guide to future performance. The above charts show the performance of the Cazenove GBP Sustainable Balanced model portfolio shown as representative past performance for the SUTL Cazenove GBP Sustainable Balanced Fund prior to to funds launch in 29 April 2022, followed by the performance of the Fund after this date. Returns between the 1 March 2018 and 1 October 2018 are of a simulated model based on the actual returns of the strategies underlying holdings, assuming no asset allocation changes. Fund performance is shown in GBP and net of underlying fund fees and trading costs. A discretionary portfolio management fee and VAT may also be applicable. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.

⁴ ARC GBP Balanced PCI Index representing peers group returns.

⁵ Engagements are coordinated by Schroders and Cazenove Capital. Engagement figures may be subject to revision given ongoing quality assurance processes and delayed logging of engagements.

The value of your investments and the income received from them can fall as well as rise. You may not get back the amount you invested.