Clients and investments
ESG impact
Responsible investment policies
Rothschild & Co Wealth Management UK Limited and Five Arrows Managers LLP (two of the three Reporting Entities) operate across the Wealth Management and Merchant Banking industries, respectively, and are obliged to abide by the Group’s Fundamental Principles Investment Policies for the Wealth & Asset Management and Merchant Banking business divisions (the “Fundamental Principles Policy”).
Under the Fundamental Principles Policy, the Reporting Entities may exclude certain investment activities1 with companies which, to our knowledge, do not comply with the Fundamental Principles as set out therein. These Fundamental Principles are derived from the Universal Declaration of Human Rights, the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nations Convention Against Corruption. They relate to human rights, labour, environment and anti-corruption. The Fundamental Principles of specific relevance to human rights and labour are as follows:
- Human Rights: General human rights concerns, indigenous peoples’ rights, civil liberties, disputed territories issues, environmental incidents that harm local livelihoods.
- Labour: Child labour, forced labour, union and collective bargaining issues, discrimination.
[1] The investment activities in scope are our various discretionary listed and unlisted investment activities in private equity, private banking and asset management. Assets under advice, execution only accounts, dedicated discretionary accounts, managed accounts, index-linked instruments or index-linked structured products are out-of-scope. A series of additional specific rules applies to listed and non-listed assets under direct management, and assets managed by external financial managers, and listed and non-listed funds or funds of funds.
Global Advisory due diligence
N.M. Rothschild & Sons Limited (our third Reporting Entity), operates principally within the Global Advisory space. Pursuant to the Global Advisory ES Risk Management Standard set out in our Client Due Diligence (“CDD”) Policy, it is prohibited for us to knowingly provide services to clients with any links to serious or systematic human rights violations, without satisfactory evidence that they have taken reasonable countermeasures to prevent this in the future. The CDD Policy also stipulates that background and reputational checks are required for all clients.
Financial Crime due diligence
We are conscious that much of the USD150 billion2 in profits generated by modern slavery practices globally each year is laundered through the financial system. Modern slavery is often a predicate offence and is closely associated with illicit financial flows and other financial crimes. As such, for the first time this year, we have expanded our Modern Slavery Working Group to include our Group Financial Crime team.
[2] Independent Anti-Slavery Commissioner - New joint report on modern slavery and financial services (antislaverycommissioner.co.uk)
Client Onboarding
In the Group’s Financial Crime Policy Statement, we have set out detailed and comprehensive policies and procedures governing the way in which we take on clients and business. These policies and procedures cover matters from initial due diligence and research into the identity, purpose of relationship, expected activity, source of wealth or funds, and reputation of individual clients, to the ownership and governance structure of corporate bodies and other legal structures.
Client due diligence forms a core part of the Group’s approach to fighting financial crime. We have specific new client acceptance processes, including committees which look at all matters relevant to the acceptance of new clients considered higher risk. Information relating to all existing clients is periodically re‑examined, with high-risk clients subject to enhanced due diligence and more frequent review. The Client Acceptance Committees are comprised of senior management, forming part of a disciplined and embedded process to reduce the reputational risk that we face.
Client Risk Grading
New clients being onboarded as well as current clients going through a review or periodic review are subject to the Client Risk Grading methodology (“CRG”) which gives them an overall risk rating. This, in turn, determines the level of due diligence and review cycle required. As a part of the CRG, various risk factors are looked at, including adverse information where, should any historical findings/ allegations of modern slavery be found, this would be taken into consideration in determining whether we should work with a client.
Group Country Risk List
This list, which provides the Group with risk ratings for each jurisdiction, is compiled using a number of internal and external sources which consider, inter alia: levels of corruption, money laundering controls, offshore tax haven status, inclusion in any sanctions lists and each jurisdictions positions around human rights, human trafficking and exploitative labour.