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Square Mile’s 3D investing: new AA impact ratings in January for Jupiter, Rathbones, Ninety One and Pictet

 

  • Four funds awarded AA 3D Impact ratings 
  • Three funds awarded A 3D Impact ratings 
  • Six new 3D Fund Certifications 

3D Investing, Square Mile’s subsidiary dedicated to providing independent evidence that funds meet their Responsible investment claims, today announces the new Certifications awarded to funds in January 2021.  3D Investing confirms that it certified 13 funds, seven of which qualified for a 3D Impact rating.

3D Fund Certifications are detailed analysis and audit of Responsible investment funds to determine how strictly they adhere to 3D Investing’s governing philosophy of ‘doing good’, ‘avoiding harm’ and ‘leading change’. In addition, all holdings are scrutinised using objective date and critical analysis.  The results of this research are delivered in a high quality, data rich report.

3D Impact ratings recognise certified funds which meet a minimum threshold for positive social and environmental impact based on a detailed analysis of their composition at an individual security level.  Most holdings must demonstrate a significant positive contribution to UN Sustainable Development Goals (UN SDGs) via their core products and/or service while negative contributions must be limited and lead change through investee engagement.

Both 3D Fund Certifications and Impact ratings complement Square Mile’s Responsible ratings which are awarded to funds with a responsible outcome or target incorporated into their objectives or mandate.

New AA Ratings 

Jupiter Global Sustainable Equities fund 

Jupiter was a pioneer of sustainable investing with its Jupiter Ecology fund and the Jupiter Global Sustainability Equities fund is a more recent addition, with a different investment philosophy.  This is based on identifying companies benefiting from long-term sustainability drivers across a range of environmental and social themes.  There are no ethical exclusions as such, and this does mean that there is some exposure to stocks that may raise some ethical issues.  However, a thorough impact report demonstrates very significant positive social and environmental impacts, with a clear sustainability rationale for each stock held in the fund. This gives rise to our AA rating. (Rating awarded on 20.1.21)

Rathbones Global Sustainability fund 

This fund combines ethical exclusions with a thematic focus on the UN SDGs and a high level of corporate governance.  It is a high conviction fund using Rathbone Greenbank Investment’s ethical research team to engage with companies and to provide ethical research.  This fund provides exposure to a broad spread of sectors, delivering social impact in combination with ethical screening. However, the fund should be thought of as a sustainable thematic fund rather than an impact fund.  The clear focus on SDG solutions, lack of exposure to ethical controversies and justification of underlying holdings substantiates our AA rating. (Rating awarded on 19.1.21)

Ninety One UK Sustainable Equity fund 

This fund is a leader amongst Responsible Investment UK equity funds, with a clear focus on making a positive social impact.  The manager has a clear commitment to, and understanding of, sustainability.  This is considered from three perspectives – internal (the way businesses are run), financial (long term delivery on financial expectations) and external (positive social and environmental outcomes).   The fund exhibits clear leadership in its advocacy of Responsible Investment, reports on its impacts in detail and invests the majority of the fund in solutions to social and environmental challenges, thus substantiating a AA rating. (Rating awarded on 19.1.21)

Pictet Global Environmental Opportunities fund 

Pictet is a pioneer of thematic investing and this fund embraces multiple environmental themes in the belief that these offer an attractive investment proposition.  Originally run under a different strategy, it now is managed in way that has both been more successful and more focused on environmental solutions.  ESG risks are monitored to avoid ethical controversies as evidenced by a lack of exposure to any such issues. Uniquely, the fund measures the sustainability of the portfolio with reference to sustainable limits, represented by a framework of nine environmental challenges.  The AA rating reflect the fund’s status as a leading sustainability fund. (Rating awarded on 5.1.21)

New A Ratings 

Fidelity Sustainable Water & Waste fund 

This fund is one of the first in Fidelity’s sustainability range, with a clear thematic focus on the water and waste management sectors, selected for their strong demographic drivers.  At least 70% of holdings have to score favourably on ESG characteristics, with engagement being used to improve the performance of the remainder.  This is first and foremost a thematic fund with sustainability characteristics, with Responsible investment reporting focused on the environmental and footprint of the portfolio, rather than impact per se.  The clear focus on environmental solutions and the evidence of selected engagement underpins our A rating. (Rating awarded on 19.1.21)

Pictet Clean Energy fund 

This fund adopts an environmentally themed strategy, focussing exclusively on companies that provide goods and services that are supportive to a low carbon economy, including renewable energy, energy efficiency or enabling technologies and infrastructure such as energy storage, power semi-conductors, the smart grid and power transmission.  The fund’s emphasis is on these types of solutions justifies its impact rating.  There is some exposure to significant controversies which fall outside the fund’s exclusion criteria, and although there is a clear engagement process, evidence of clear outcomes is limited.  Our A rating reflects these factors. (Rating awarded on 5.1.21)

Pictet Nutrition fund

This fund seeks to invest in companies that both contribute to, and benefit from, improving quality, access and sustainability of food production.  Ethical controversies are monitored as part of the ESG assessment ensuring that its exposure to them is limited, especially compared to other similarly themed funds.  The fund is also monitored according to Pictet’s Planetary Boundary Framework to ensure that negative environmental impacts are mitigated.  The A rating reflects the positive impact of the fund’s investments in sustainable food solutions, the limited exposure to ethical controversies and the clear intentionality of the fund. (Rating awarded on 5.1.21)

New Fund Certifications 

Rathbone Ethical Bond fund 

This fund is marked out by its proven track record, higher than average yield, comprehensive exclusion criteria, and inclusion of high social impact investments.  The inclusion of charity bonds and significant exposure to social housing bonds is especially welcome.  The majority of the fund is invested in financial stocks with a consequent lack of social impact. However, unlike many other bond funds, there is no exposure to fossil fuels and the breadth of exclusionary screens makes it widely suitable for ethical investors. (Fund certified on 19.1.21)

BNY Mellon Sustainable Global Dynamic Bond fund 

As the name suggests, this fund adopts a dynamic, absolute return approach, investing in securities that the manager believes to adopt sustainable business practices.  The Responsible investment approach focusses on encouraging improved corporate behaviour through active engagement.  Sovereign debt is assessed on the degree to which a country is improving its ESG performance, as well as in absolute terms.  A regular Responsible Investment Report evidences this approach, as does the in-house Stewardship tracker and a detailed carbon report. (Fund certified on 6.1.21)

BNY Mellon Sustainable Global Equity fund 

This fund aims to invest in businesses that both have durable financial and competitive positions and also positively manage the material impacts of their operations.  In addition, the fund avoids investments that the manager considers to carry high social or environmental costs.  The Responsible investment approach also focusses on encouraging improved corporate behaviour through active engagement.  A regular Responsible Investment Report evidences this approach, as does the in-house Stewardship tracker and a detailed carbon report. (Fund certified on 6.1.21)

BNY Mellon Sustainable Global Equity Income fund 

In common with the Sustainable Global Equity fund, this fund aims to invest in businesses that both have durable financial and competitive positions and also positively manage the material impacts of their operations whilst avoiding investments that the manager considers to carry high social or environmental costs. Likewise, the Responsible investment approach also focusses on encouraging improved corporate behaviour through active engagement   However, the fund is differentiated by its mandate to generate equity income.  The Responsible investment objectives are evidenced by the regular Responsible Investment Report and an in-house Stewardship tracker. (Fund certified on 6.1.21)

BNY Mellon Sustainable Real Return fund 

This fund has an absolute return style strategy, chiefly investing in corporate and government bonds, derivatives and equities, but also with a mandate to invest in real estate, infrastructure and currencies and commodities.  This is combined with a Responsible investment approach that seeks to positively manage the material impacts of investee companies’ operations whilst avoiding investments that the manager considers to carry high social or environmental costs. The Responsible investment approach also focusses on encouraging improved corporate behaviour through active engagement.  The Responsible investment objectives are evidenced by the regular Responsible Investment Report and an in-house Stewardship tracker. (Fund certified on 6.1.21)

Pictet Global Sustainable Credit fund 

This is an ESG driven fund that seeks to invest in companies that are regarded as ‘best in class’ on the most relevant ESG metrics for their sector.  The fund seeks to select issuers with strong financial sustainability and ESG credentials to navigate the credit cycle and ESG risks.  The managers act as responsible lenders rather than traders and the concentrated portfolio enables the managers to actively engage with issuers.  Although the fund is exposed to some ethical controversies, there is clear evidence that companies associated with controversial activities are ESG leaders in their sector. (Fund certified on 5.1.21)

 

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