How we offer sustainable and responsible investment

As a firm of independent financial advisers, we firmly believe in freedom of choice. We would be working against one of our fundamental principles if we were to promote a particular investment strategy – so we don’t…

Deciding to use sustainable and responsible investment as a strategy adds an additional layer of complexity to choosing an investment fund as, of course, information about the fund’s green and ethical credentials are needed. To obtain this, we’ve found the best source of information currently available is offered by SRI Services and, in particular, their Fund EcoMarket website.

SRI Services

SRI Services (www.sriservices.co.uk) is an independent, award-winning consultancy dedicated to promoting sustainable and responsible investment by improving investor access to sustainable and responsible investment funds, and offering adviser-friendly tools to help the process.

The consultancy was formed in 2010 and has become recognised throughout the investment world as an expert in the field of sustainable investment. SRI Services were finalists in Investment Week’s ‘Best SRI Research Provider’ and won the magazine’s prestigious ‘Best Sustainable & ESG Support Service Provider or Consultancy’ in 2021.

The company is not regulated and is not authorized to offer investment advice, nor does it deal directly with individual investors; its self-avowed aim is “to help change the way people invest” by providing relevant investor information to make the process as easy as possible.

Fund EcoMarket

Central to SRI Services’ offer is the Fund EcoMarket website (www.fundecomarket.co.uk), a comprehensive, ‘whole of market’ database that contains extensive, generic information about all known sustainable, responsible and ethical funds. Although it’s designed for use by financial service professionals, it’s free to use and open to everyone.

Classification methodology

SRI Services uses a system of ‘approaches’ and ‘styles’ to classify funds into similar categories. Considering different aspects of an individual fund, and then classifying it accordingly, makes it easier for an investor to select a fund that meets their individual criteria.

Those keen to know more about the assessment and classification process should visit the Fund EcoMarket website, but, in summary:

Approaches

The initial assessment / classification is referred to as an ‘SRI approach’, with funds being categorized into one of three basic groups – funds that are either:
1. …supporting companies that are doing positive, beneficial or desirable things – by buying into them;
2. …avoiding companies that do things the fund has committed to exclude – by not buying into them;
3. …or engaging with them for positive change. This uses investment ownership as a method of encouraging progress on environmental, social or governance issues where there is a business case for change.

These three basic levels allow investors to easily determine those funds they may want to invest in because they are sustainable, or, alternatively, avoid, because they are not.

Styles

SRI Services then use nine, key ‘SRI styles’ to further classify the funds appearing on the Eco FundMarket website. These are based on research into the individual funds, and use their ‘similarities and differences’ as a method of categorising them.

It isn’t a precise science as, naturally, there are overlaps, but the classification does help investors recognise ‘ethically similar’ funds and help identify those that meet their individual sustainable and responsible investment objectives.

The nine styles are listed under five headings^*:

Funds that focus on a specific issue or theme

1. Sustainability themed funds
… these focus on (environmental and social) sustainability issues, opportunities and themes when selecting investment.

2. Environmentally themed funds
… which significantly integrate environmental issues into their investment strategies.

3. Socially themed funds
… these focus on ‘people issues’, investing in assets that help to address social challenges such as employment, education and housing.

Funds that focus on ethical or ‘value based’ issues

4. Ethically focused funds
… these focus on ‘value based’ issues, typically alongside ESG and sustainability related issues.

5. Faith based funds
Investment is made in line with specific religious principles, eg: Shariah Law.

Strategies that significantly integrate issues

6. Sustainability tilted funds
… which integrate environmental and social sustainability considerations into their investment processes.

7. ESG Plus
… these funds combine environmental, social and governance risk-mitigation strategies alongside other strategies for clients with an interest in ESG issues.

Limited avoidance

8. Limited exclusions
… these exclude only a very small proportion of an index or allowable universe and invest in a ’conventional’ way.

Fund Manager company listings

9. Responsible Ownership
… funds managed by investment managers who use share / asset ownership as a means to encourage more responsible business practices – mainly through dialogue and voting.

Additional SRI styles

A small number of funds may not fit into any of the nine principal styles. To avoid misleading investors by ‘forcing a fit’, those funds that fall outside the nine, main styles, are flagged ‘Other’, ‘Unclassified’ or ‘Pending’.

^*Six, if you include the ‘Additional SRI styles’ heading.
 

How can One Financial Solutions help you?

Every investor wants to put their money into a fund that will return a profit, but a growing number consider their own personal values to be equal to, if not more important than profit alone.

Deciding to use ‘sustainable and responsible investment’ as a value-led investment strategy adds an additional layer of complexity to choosing an investment fund as, of course, information about the fund’s environmental, social, ethical and governance credentials need to be considered.

One Financial Solutions is here to help you. We can explain how it works and, with access to information that will allow you to decide exactly which of the various sub-strategies and funds best meet your values, make it a very straightforward process.

So, if you’d like to know more about ‘value-led’ investment strategies as a method of investment, please call us on 020 3714 9565, or ask us to call you by sending an email to admin@onefinancialsolutions.co.uk.