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Ratings agency adds ethical funds

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Written by:
13/10/2015
Ratings agency FundCalibre has added a new ‘Responsible Investing’ sector to help investors identity best of breed ethical funds.

At launch four ethical funds have been elite-rated, meaning the ratings firm believes the manager can consistently deliver positive value over time.

The four are: EdenTree Amity UK, Rathbone Ethical Bond, SLI Ethical Equity and First State Asia Pacific Sustainability.

Responsible investing in the UK has been around for almost three decades, with the advent of ethical investment funds.

During these 30 years, the range of funds available has grown and the investment process, in many cases, has also evolved.

Today there are ethical funds, socially responsible investing funds, funds which give money back to the regions in which they invest, and many more variants.

Darius McDermott, managing director at FundCalibre, said: “To us, responsible investing covers a number of areas including, but not exclusive to, sustainable, socially conscious, environmentally responsible or ethical businesses.

“Funds which gain an Elite Rating in this category may invest in any asset class and their level of ‘responsibility’ will vary. Some funds will use negative screens – avoiding certain investments. Some will have positive screens – looking for, and encouraging, good practice. Others will have a combination of both. Some will look instead to invest back into the region or asset class for the benefit of local people and business development.

“At launch we have four Elite Rated Responsible Investing funds and a possible two more to follow shortly.”

The launch of the new service coincides with Good Money Week which looks to promote ethical investing.

However, according to analysis by investment and financial planning firm Tilney Bestinvest, interest in ethical investment continues to “flat line” despite current favourable market conditions for such strategies.

‘Ethical’ mandates total just £9.95bn of assets more than 30-years on. This represents only 1.2% of total industry assets.

Jason Hollands, managing director at Tilney Bestinvest, said: “The lack of cut-through for ethical investment over many years is really quite surprising when you look at other industries, where it is clear that sections of the public are willing to adjust their economic activity to reflect their values.”


FundCalibre’s Elite Rated funds in the Responsible Investing Sector:

EdenTree Amity UK

EdenTree has put ethical investing at the very core of its business. It is charity owned and was one of the pioneers in socially responsible investing in the UK. Sue Round is one the country’s longest running ethical managers, with more than 25 years’ experience in the industry. She has been at EdenTree since 1984 and running this fund since 1988 and, as such, knows her stocks inside out.

FundCalibre view: As pioneers of responsible investing, EdenTree offers even the most discerning client a justifiable investment opportunity. Having a large number of smaller companies makes the fund very different from its peers.

Rathbone Ethical Bond

This fund invests in quality investment grade bonds. It has a higher income target than most of its peers at 5-7%. Ethical exclusions are simple: no mining, arms, gambling, pornography, animal testing, nuclear power, alcohol or tobacco, which rules out about one third of the index. All positions must also have at least one positive environmental, social or corporate governance quality.

FundCalibre view: This fund typifies stable management, with the manager having been there for over 10 years. It has managed to outperform regardless of its ethical constraints, illustrating that income and ethics can be combined without sacrifice. It is a solid core investment grade fund.

SLI Ethical Equity

This fund encapsulates the best ideas from the experienced team at Standard Life Investments, which manager Lesley Duncan uses alongside a ‘no compromises’ ethical screening. The ethical screen is influenced by an ethical committee and the results of a regular survey of investors. This will give acceptable and preferred stocks, from which Lesley will discuss ideas with the rest of the team, and pick her best stock ideas.

FundCalibre view: With a yield of nearly 3%, this fund offers something different from other ethical funds. It is still invested in UK equities, and has the weight of Standard Life’s considerable research team behind it, plus a consistent and conscientious manager in Lesley Duncan.

First State Asia Pacific Sustainability

First State puts its sustainability screen at the start of its investment process, highlighting firms which have a positive impact on society, the environment and health, have a responsible financial model and credible infrastructure in place. It will then assess the quality of the company, plus its current and future valuation. It will regularly engage with corporate management to get a full understanding of the above criteria.

FundCalibre view: As with many First State funds, this fund has enjoyed excellent performance, and covers an under-utilised area of the market. The mandate may not provide the depth of ethical cover of other funds, but the pragmatic approach still provides responsible investors an outlet to the Asian markets. It is currently closed to new investments.

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