SustainAbility: The Safe theme

At Royal London Asset Management our sustainable funds are built around four core sustainability themes: Clean, Healthy, Safe, and Inclusive. We seek out companies that make a positive contribution to one or more of these themes, both through what they offer (their products and services) and how they operate.

To qualify, more than half of a company’s revenues must come from activities aligned with these sustainability themes. The aim of this thematic approach is to ensure that our investments are financially robust, while supporting a more sustainable future.

The ‘safe’ theme

Keeping safe from harm is one of mankind’s primal instincts. It’s therefore no surprise that there is constant demand for the products and services of companies that help to protect us and avoid harm. Whether in the physical, digital or financial world, companies in our ‘safe’ theme help to detect, prevent and secure against risks and harms to provide a safer outcome. 

In practice there’s a broad range of companies that provide products and services that fit this theme. They do everything from putting out fires in homes and buildings, to developing braking technology for passenger trains, or improving street lighting. And with our social and workplace interactions increasingly digital, we also invest in companies making the tools to help with identity verification, protect against hackers, and safely move billions of dollars around the world each day.

Increasingly, the businesses aligned with our safe theme don’t just address existing harms, but through a blend of regulation, rising standards and changing technology, will often innovate to protect today against tomorrow’s risks.

Why ‘safe’ companies can make good investments

Demand for safety-critical products and services is normally non-discretionary. Regulation, including building codes and workplace standards, tends to become more robust over time rather than weakening. This helps underpin long-term demand for specialist safety providers.

Regulation, including building codes and workplace standards, tends to become more robust over time rather than weakening. This helps underpin long-term demand for specialist safety providers.

Many small businesses lack the scale to keep pace with regulations and so rely on other specialist providers to provide safety functions. Others choose to outsource this non-core part of the business. This is creating potential opportunities for specialist service providers that have the expertise to meet ever-changing regulations.

Meanwhile, the rise of AI is multiplying the scale and sophistication of online fraud and cybercrime. This is boosting demand for the services of companies that provide digital protection and verification tools.

In some industries, the provision of a ‘best-in-class’ safe workplace is a competitive advantage when it comes to attracting talent. This might not resonate with those of us working in financial services. But for workers in sectors such as oil and gas, industrial manufacturing, and construction, health and safety issues can be a matter of life and death.

For workers in sectors such as oil and gas, industrial manufacturing, and construction, health and safety issues can be a matter of life and death.

From an investment perspective, companies providing safety products and services can benefit from long-term contracts, recurring revenues and high barriers to entry. Safety and compliance are areas where customers may prioritise reliability and quality over price, helping support profit margins and provide resilient cash flow across economic cycles.

For professional investors only. This material is not suitable for a retail audience. Capital at risk. This is a financial promotion and is not investment advice. Past performance is not a guide to future performance. Reference to any security is for information purposes only and should not be considered a recommendation to buy or sell.

The value of investments and any income from them may go down as well as up and is not guaranteed. Investors may not get back the amount invested. Portfolio characteristics and holdings are subject to change without notice. The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change. Forward looking statements are subject to certain risks and uncertainties. Actual outcomes may be materially different from those expressed or implied.