New quarterly ratings from impact investment specialists, Worthstone, adds seventeen new funds worth £4.2 billion to the pool of impact investment funds available to UK retail investors.
This quarter they include funds that help diversify sustainable portfolios, including Japanese equities and macro alternatives.
Founder and CEO of Worthstone, Gavin Francis explains: “Each quarter we analyse the retail investment funds which have a sustainable mandate against five key metrics using 250 data points to collate the definitive list of funds qualifying as impact investments – this is currently around 400 funds.
“Our community of progressive financial planners tell us their clients are increasingly seeking investments that contribute positively to the planet and people – funds that ‘do no harm’ are no longer enough.”
The top ten rated funds for this quarter are:
- FP WHEB Sustainability
- Impax Environmental Markets
- Triodos Pioneer Impact Fund
- Federated Hermes Impact Opps Equity
- Mirova Europe Environmental Equity
- Impax Asian Environmental Markets
- Mirova Global Sustainable Equity
- BNPP Aqua Privilege
- BNPP Climate Impact
- Alquity Future World Fund
Each fund is scored on five key measures – making up their overall impact score:
- Positive impact – we rate a fund’s contribution towards positive social and environmental outcomes by mapping underlying company revenues against the investable UN Sustainable Development Goals to articulate impact.
- Active Agent – we assess asset managers based on their actions across four components to measure their level of commitment to stewardship, active engagement and transparency.
- Avoidance of harm – scores are based on the extent of a fund’s exposure to stocks commonly associated with harmful environmental and social impacts.
- ESG – operational impact measuring the Environmental, Social and Governance (ESG) practices and opportunities associated with a fund’s underlying holdings, providing insight into resilience to long-term, financially-material ESG risks.
- Carbon risk – the material financial risk associated with a fund due to the implications of projected environmental policies and transitional and physical impacts of climate change.
It’s time financial planners had the tools to look beneath the label of a fund, says Francis: “ESG screening aims to mitigate the financial risks of investing in some of the most damaging sectors. But, it doesn’t help tackle some of the world’s most pressing problems. Impact investment goes that step further, by generating a positive and measurable impact on society and the planet, alongside a financial return. For planners that matters because ESG just doesn’t answer all the questions clients have.”
Two of the newly added funds have come in with the highest impact rating, 5 stars: Columbia Threadneedle’s (Lux) Sustainable Outcomes Global Equity and BMO’s Sustainable Opportunities European Equity.
Gavin Francis says: “We’ve seen an encouraging number of funds score exceptionally quarter on quarter, with a high calibre of new entrants too. It demonstrates a positive shift in the investment industry. The issue remains that too many funds are masquerading as sustainable and without the right tools, it can be hard for financial planners to cut through the greenwash.”