Square Mile’s 3D investing – April fund certifications announced

by | May 10, 2021

  • One new 3D Investing A Impact rating 
  • Four new fund Certifications 

3D Investing, Square Mile’s subsidiary dedicated to providing independent evidence that funds meet their Responsible investment claims, today confirms that one new A Impact rating and four further Fund Certifications were awarded in April.

New fund rating 

Sarasin Tomorrow’s World fund: awarded an A Impact rating 

The Sarasin Tomorrow’s World fund is positioned as Sarasin’s most rigorously screened fund. It combines a clear sustainable thematic approach with exclusion criteria and ESG traffic lighting to limit exposure to ethical controversies. The themes, which include digitalisation, ageing, evolving consumption, automation and climate change, all have positive social and environmental impacts, although some are weaker than others.  It is a multi-asset fund mainly invested in global equities with most of the balance in fixed interest securities. The fund’s A rating recognises the fact that it is primarily invested in solutions to social and environmental challenges. (Rating awarded on 23.04.2021)

New fund certifications 

The Davy Low Carbon Equity fund 

Since its launch in 2018, the managers of this global equity fund have been seeking to invest in quality companies which could be considered leaders in their approach to climate change mitigation. The managers aim to contribute to the transition to a low carbon world in two ways: first, by excluding all companies involved in or strongly aligned to the production and distribution of fossil fuels; second, by investing in companies which demonstrate sound operational practices with respect to the environment. This is achieved through stringent ESG analysis and via engagement with company management teams. Although not enough to merit an Impact rating, the fund has a relatively high exposure to 3D Investing’s defined positive climate solutions, such as enabling infrastructure and resource efficiency, and evidences this well. (Certification awarded on 06.04.2021)

The Morgan Stanley Sustainable Fixed Income Opportunities fund  

This global fixed income fund combines a limited exclusions policy with an ESG tilt and some investment in sustainable bonds. The Responsible investment approach applied has three main facets. It applies a negative screen which is relatively limited in scope but aims to avoid companies posing ESG risks or causing harm to society and the environment. It then applies a positive screen which tilts the fund towards the top 80% of securities based on their ESG score. Finally, the managers seek to invest in companies which align to the UN SDGs and can contribute to the fund having a lower carbon intensity than the benchmark. This is underpinned by proprietary ESG analysis and company engagement, activities which are relatively well-documented. Although this fund falls below the threshold needed to trigger an Impact rating, the managers do invest in sustainable bonds and can demonstrate via the fund’s ESG report that it is meeting their aim to deliver a lower carbon intensity than the index. However, it is unclear how exactly the managers are mapping the investee companies to the UN SDGs. (Certification awarded on 25.04.2021)

The Morgan Stanley Global Balanced Sustainable fund 

This multi-asset fund has exposure to more than 800 holdings split between equities and fixed income.  It applies a limited exclusions screen with an ESG tilt that favours companies with better than average ESG scores. In addition, between five and 30 per cent of the fund is invested in impact assets. The fund largely aims to meet a volatility target, whilst adopting an ESG tilt, which is determined with reference to externally generated scores.  (Certification awarded on 16/04/2021)

The TwentyFour Sustainable Short Term Bond Income fund  

Launched in 2020, this is the sister fund to the popular TwentyFour Absolute Return Credit fund and is managed by the same team. The managers’ primary aim is to deliver superior risk-adjusted returns, whilst maintaining volatility at a suitable level. They believe that they can achieve this goal through the application of both a negative and positive screen. The negative screen is relatively limited in scope, although it does filter out companies within coal intensive industries and those that violate the UN Global Compact. The positive screen, meanwhile, is based on scores produced from reasonably granular ESG research that has been well-embedded into the group’s proprietary Observatory system. However, the threshold for inclusion is quite low at a score of 34 out of 100.  (Certification awarded on 05.04.21)

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