Rathbone Ethical Bond Inst Inc

Asset Manager Overview

Rathbone Investment Management (RIM) is the discretionary wealth arm of Rathbones Group PLC, a FTSE 250 firm dating to 1742. The Group has three pillars: Wealth Management (bespoke portfolios and planning), Asset Management (specialist funds), and Sustainable and Ethical Investing (via Greenbank). Following the completed merger with Investec Wealth & Investment (IW&I) UK in 2025, Rathbones Group assets under management (AUM) now exceeds £115 billion. This merger boosted scale and research, bringing Investec Group in as a strategic shareholder with a 41.25% economic interest.
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At RIM, they blend the flexibility of an investment boutique with the resources of a large parent. Highly experienced teams have the autonomy to follow unique processes, believing that small teams build a culture of engagement, motivation, and accountability.

Fund Manager/Team Overview

Bryn Jones is the lead manager of the fund, and he is supported by fund manager Stuart Chilvers and assistant fund manager Christie Goncalves. Bryn has been running the fund since he joined the firm in 2004. He is also lead manager on the Strategic Bond fund, Head of Fixed Income at Rathbones, a member of the Strategic Asset Allocation Committee, Non-Executive Chairman of Rathbones' Fixed Income Committee, and an adviser to the Rathbone Banking Committee. Stuart joined Rathbones in September 2017, as a fixed income research analyst. He was subsequently promoted to assistant fund manager in January 2020 and became a fully fledged fund manager in January 2022. He is also lead fund manager on the High Quality Bond fund. Christie joined Rathbones in January 2024, bringing a wealth of experience in fixed income markets, having spent 7 years at Vanguard as an assistant portfolio manager on global corporate ESG funds and ETFs, and as a senior trader focused on EUR and GBP rates and credit.

The team is also supported by a credit analyst team, as well as the wider resources available at the firm, which include the investment committee and the dedicated ethical research team.

Investment Philosophy & Process Overview

The process begins with a thematic approach in which a list of themes is produced in order to provide a general framework for idea generation. Within this process, the team will look at macro, technical factors, as well as regulation. This is followed by an in-depth credit analysis, which combines both quantitative and qualitative techniques, and a proprietary valuation model is used to determine the best risk-adjusted returns for potential holdings to further condense the number of investible opportunities. While the fund utilises both top-down and bottom-up methods as part of the process, the fund is primarily bottom-up focussed. That is, there is less emphasis on shifting the fund's duration and credit risk allocations to fit some macroeconomic outlook, rather the team will identify specific credit opportunities based on valuations, risk, and fundamentals.

Once the above fundamental analyses and processes have been completed, the team then apply an ethical overlay which includes both a negative and positive screen. In order to be included in the portfolio, the bond must pass the negative screen and have at least one attribute from the positive screen. These are detailed in the Responsible Approach section below.

This is generally a high beta fund in comparison to funds of a similar ilk within this sector. However, there will only be small allocations to high yield and non-rated bonds, the higher beta comes from the fact that the managers favour BBB rated bonds and financial subordinated debt. As a result, the fund will likely underperform in falling credit markets.

ESG Integration

Asset Manager ESG Integration

Rathbones Asset Management Limited (RAML) is an active fund management business focusing on collective investments. Rathbones Group has been a signatory of the UN Principles for Responsible Investment (PRI) since 2009 with a current score of 4 out of 5 for Investment & Stewardship policy. The group also became a signatory to the UN Global Compact in July 2021 and is a signatory to the UK Stewardship Code. In 2021 RAML established their own Responsible Investment Committee separate to the wider group's committee, to further represent RAML's interests in this area at the group level.

RAML makes ESG analysis available to their fund managers across the business through a range of tools including MSCI, Sustainalytics and most notably, through the expertise of Rathbone Greenbank, which is a dedicated ethical, sustainable and impact investment unit within the Rathbones group. The group manages a small number of sustainable and exclusion-based strategies which Rathbone Greenbank is heavily involved in the structure and maintenance of, inclusive of which stocks are investable. RAML is also in the process of implementing the Charles River front office system which will further improve access to, and aggregation of, ESG data for their fund managers.
 
Whilst ESG risks are integrated, RAML's central focus remains on their fiduciary/ investment responsibilities, and ESG factors are considered as risks to be compensated for, rather than to necessarily avoid. That said, funds are classified into one of four groups with regards to ESG risk (low, medium, high, or severe) and ESG factors are considered to varying degrees by the investment teams. All portfolios are then assessed on their ESG risk characteristics by RAML's investment performance and risk committee. Funds are assessed based on their companies' average ESG ratings and involvement in controversies. Portfolio managers must then defend holdings when requested to by this committee. 
 
Engagement with underlying companies is governed by a formal engagement policy and prioritised by its level of ownership. For example, it is more likely to engage directly where a material stake is held in a company; this is defined as holding more than 2.5% of a company's share capital. Furthermore, RAML is more likely to engage with companies where it has a deeper understanding of the local legal framework. The area where the business is most proud of their engagement success over time has been that of Modern Slavery and its leading role in the Votes Against Slavery initiative. 

Fund ESG Integration

Rathbone have access to a dedicated ethical, sustainable and impact research team. Rathbone Greenbank's research team works with the manager of the fund to make sure that investments are only made in bonds issued by approved organisations. As well as actively avoiding companies that do not pass a broad range of factors on ESG grounds, each bond must pass contain at least one attribute from the positive screen.

Responsible Investing Approach

The negative screening on this fund includes alcohol, animal welfare, environmental or high-carbon impact, gambling, human rights, nuclear power, pornography, predatory lending and tobacco. They have a zero-tolerance policy for these companies, meaning any involvement with these activities will not be included in the portfolio. The ethical criteria also prohibit investment in Gilts.

The managers incorporate limitations to the financials they hold in the portfolio, for example, no more than 10% revenues can be derived from fossil fuel financing (several US banks are excluded on this basis) and some banks are excluded on the basis of corporate culture.

The positive screening includes workplace diversity, involvement with programmes that benefit the community, compliance with national and local human rights standards, management of environmental impacts, provision of products or services that have a positive impact on the environment or society, ring-fenced bonds such as green, social, climate and sustainability bonds. Note that while the managers will not invest in these ring-fenced bonds on the basis of their labels (as this relies on the issuing company's analysis of what they consider to be ‘green' or ‘sustainable'), they will do their own company research. The fund typically invests c.15-20% in high impact holdings, which include social housing, renewable energy, care homes and affordable housing. The remainder of the portfolio is primarity populated by financials.

Positive factors that qualify a financial company for inclusion into the portfolio's remit include: Long-term commitment to corporate community investment programmes; Comprehensive human rights policy; Clear policy for managing, monitoring & reporting on direct environmental impacts; Full range of social & environmental lending policies; Social change: evidence of support for financial inclusion/access to finance; Economic development: support for SMEs & local/regional economies; Managing risk in project finance (Equator Principles signatory).

While this process has been in place since inception, additions on the negative screening side since then include burning of waste, animal welfare and predatory lending. Hence, it's a dynamic process that will change, and the criteria are not set in stone.

Risk Summary

This is an investment grade corporate bond fund and the major risks will therefore include credit risk and interest rate risk. The managers carry out thorough and detailed credit research in order to ensure that the issuers of the bonds in the fund will be able to meet their obligations. Nonetheless, there remains a small risk that a bond in the fund could default on its interest or final maturity payments. However, as the fund is sufficiently diversified, the impact of any one bond defaulting should be small. High quality corporate bonds will carry interest rate risk. Whilst the manager is careful to control this risk, it will always be present to a greater or lesser degree. Should UK government bonds sell off it is likely that this fund will too. On the responsible side, perhaps the greatest risk is that the bonds that pass through the manager’s screens but subsequently do not deliver on environmental, social or governance grounds to the level which the manager expects. If, after further evaluation, a bond no longer screens up to the manager’s standards, it will be removed from the portfolio. The investment process is credible and has been tested over more than a decade. The fund is backed by a solid investment and credit analyst team and is also supported on the responsible side by a dedicated ESG research department called Greenbank. This gives us confidence that the fund should deliver on its ESG and investment outcomes.

Additional Information

(3 years data to last month end unless otherwise stated)

Qualitative Risk Assessment

	Significant	Potentially Significant	Not Significant
Equity Risk
Interest Rate Risk
Credit Risk
Exchange Rate Risk
Liquidity Risk
Emerging Markets Risk
Derivative Risk
Manager Risk
Gearing Risk
Discount/Premium Risk

For the full summary of the risks, click here

3 Year Rolling Sector Outperformance

Source: Square Mile and LSEG Lipper (all rights reserved), Data as at: 12th March 2026. Share price total return.

Maximum Drawdown (Rolling 12 Months)

Source: Square Mile and LSEG Lipper (all rights reserved), Data as at: 12th March 2026

Calendar Year Performance To Quarter End

Source: Square Mile and LSEG Lipper (all rights reserved), Data as at: 30th March 2026

Value for Money

The Ongoing Charges Figure (OCF) and Transaction Costs (TC) are above the median for this fund. The Total Cost of Investing  as a result is above the peer group median for the clean share class. However, we believe that the fund still offers fair value for money given the strength of the team, the proven investment process and the strong track record within an ethically managed mandate.

Source: Square Mile and LSEG Lipper (all rights reserved), Data as at: 31st January 2026.

Rating Changes

The Square Mile ratings are reviewed every 6 months. For full details on the methodologies, click here.
For a full list of all Square Mile rated funds, click here.