An interview with:
Daniel Babington
Portfolio Manager at TAM Asset Management (TAM)
Daniel joined in TAM in 2020 after graduating with first-class honours in Economics. Recognised as a 2024 Citywire Top 30 Under 30 and multi-award finalist, Daniel combines expertise and passion to deliver impactful sustainable investment strategies, addressing global challenges while driving financial returns for investors.
About TAM
Part of the Amber River Group, TAM is an award-winning discretionary fund manager (DFM) with over 16 years’ active investing and fund research experience. They have developed a diverse range of model portfolios for clients, including active, passive, sustainability-focused and Sharia-compliant investment strategies.
Daniel explains why TAM’s more broad-based approach to sustainable investments has served the boutique investment manager and investors well for more than a decade.
What is sustainable investing?
It’s a term that can mean different things to different people. For TAM, it’s about building portfolios that drive positive environmental and social outcomes, within a robust investing framework that suits the financial needs of our investors.
Investors play a crucial role in driving our approach, which is about finding the “best ideas” that could help meet some of the world’s biggest challenges.
But we think sustainable investing is about much more than just trying to tackle the climate emergency, so we work hard to make our investment approach real for people, by talking about and including the type of issues we all worry about on a day-to-day basis
We believe it’s important to use our investment capital to address other issues in society that get less attention, and TAM’s portfolios cover everything from addressing global warming, food and nutrition, minimising the use of plastics, even promoting positive mental health.
"Finding the “best ideas” that could help meet some of the world’s biggest challenges"
A four-step approach
At TAM, our job is to balance the long-term case for each fund we invest in with the short-term needs of our investors. Our fund selection approach starts with forming the core building blocks of each investment portfolio. The aim is to build a comprehensive portfolio of funds that meet our sustainability criteria and are capable of delivering positive investment outcomes.
Step one: Do no harm
The first step is to consider funds from a ‘harm avoidance’ perspective. This effectively weeds out any funds invested in companies or sectors that its clients would consider a poor use of their capital.
This will involve having conversations with the fund managers to determine what the fund manager is trying to achieve, and whether their views on sustainability are aligned with our views.
We use a third-party sustainability screener called Clarity AI, which offers reliable data-driven insights into funds and their underlying investments.
Using Clarity AI allows us to look into every fund that it potentially wants to invest in, and carries out independent, accurate analysis on the characteristics of the fund’s investment portfolio.
Step two: Doing good
The next stage of the process asks the question: can this investment do good? We want to know whether the fund is investing in a way that is aligned with positive environmental and social outcomes.
A fund that is doing good will usually be linked to the United Nations Sustainable Development Goals (SDGs) and will be seen as a leader in environmental, social and governance (ESG) practices.
Step three: Driving change
The third part of the process involves finding funds that are actively driving change. Companies that demonstrate a meaningful commitment to positive change are often market leaders, helping to bring competitors with them.
These companies tend to be the most resourceful and adaptable, which are good indicators of longer-term financial outperformance.
Step four: Delivering returns
The fourth step asks whether the fund being considered can deliver the required level of financial return.
Sustainable investments have drawn criticism in the past that they lead to investment returns being sacrificed, but our selection approach is based on ensuring investors can expect to receive a level of return that helps them achieve their financial objectives.
Protecting investors against ‘greenwashing’
Much of our research centres on keeping the fund managers we engage with “honest” by fact-checking each statement and claim they make – with the aim of avoiding potential greenwashing.
All funds are put through a sustainability screener, to provide investors with full transparency. But aside from data-driven insights, often the best way to judge a fund’s credentials is by talking to the manager directly.
We like to work with fund managers who passionately believe in what they are doing, and share our ambition to be doing more.
Engagement is critical – and it works
Engagement is an essential part of sustainable investing. Recently, we published a case study that examined ultra-processed foods, which are designed to be more appealing with salt, sugar, fats and additives, and offer little in the way of nutrition.
A number of health studies have linked ultra-processed foods to obesity, cancer and heart disease. The case study led to engagement with a fund manager that owned shares in one of the world’s largest manufacturers of ultra-processed food products.
After direct engagement with us, the fund manager sold the position.
Identifying key sustainable investment opportunities
The relationship TAM has with financial advisers is also a great mechanism for delivering input and feedback on what matters to investors.
For us, it’s essential to make sure investors feel they get value for money when investing sustainably, which involves keeping portfolios affordable and delivering consistent returns, even during challenging market conditions.
Time to look again at sustainable investing?
The last few years have been difficult for sustainable investments, many of which struggled to keep up with ‘traditional’ competitors.
But this means there are lots of exceptional investment opportunities to be had that are available at arguably underpriced valuations.
At the same time, more people are recognising that collectively society cannot afford to keep putting off addressing those challenges.
The investment case for sustainability centres on the belief that companies actively addressing society’s problems will become market leaders while also delivering long-term returns for investors. At TAM, we believe that’s a cause worth investing in.
Get in touch
If you’re Interested in exploring sustainable investment opportunities, speak with an Amber River financial planner today. They can provide expert advice tailored to your goals, ensuring your investments align with both your financial objectives and sustainability values.
To speak to one of our team, arrange an appointment or find out more, call 0800 915 0000, or alternatively use our contact form here.
Disclaimer
The information within this article was correct at the time of publishing, but laws and tax rules are subject to change. Your circumstances and where you live in the UK may also have an impact on your tax treatment.
To learn about the government’s most recently-announced changes, please read our latest budget roundup: 2024 Autumn Budget Update
