Unicorn Ethical Income Fund (OEIC/Unit Trust)
SRI / Ethical Overview
The Unicorn UK Ethical Income Fund aims to achieve an historic yield in excess of 110% of the FTSE All Share yield, over a 3 year period, by investing primarily in UK companies which meet the ACD’s ethical guidelines. The fund may also invest, at its discretion, in other transferable securities, money market instruments, deposits, cash and near cash and collective investment schemes. The fund may also enter into certain derivative and forward transactions for Hedging purposes.
The MSCI screens are supplemented with additional areas of avoidance as there are a number sectors Unicorn does not invest in through any of its funds. These 'avoided' sectors are as follows:
- Oil & Gas,
SRI / themed / ethical assets under management – overview
- Fund Size (GBP): £7.5m
- Total value of SRI/ethical/environmental/ social/ environmental or sustainability themed funds under management: £7.5m
- Total assets under management: £1.1bn
SRI Policies (Primary strategy in bold)
- Environmental policy Find investment funds with environmental policies - ie that consider issues such as pollution, climate change, resource management, environmental impact. This will include options from all of the different SRI Styles, including funds where their core strategy is to focus on other areas such as ethical funds. See fund information for fund specific policy details.
- Ethical policies Find funds with 'traditional' ethical investment policies. These typically focus on avoiding companies that are involved in the armaments industry, tobacco, gambling and/or pornography. Options will include funds where their core strategy or style may be to focus other issues - like sustainability or the environment, not just 'ethical funds'. Strategies vary significantly. Check fund literature for details.
- Social policy Find fund options that consider social issues (e.g. human rights, labour standards, equal opportunities, child labour and adherence to internationally recognised codes such as the UN Global Compact). This will include funds in most of the different SRI Styles as this is considered a core issue. See fund information for detail.
- Governance policy Find fund options that have policies that relate to corporate governance issues such as board structure, executive remuneration, bribery and/or corporate corruption. These funds will typically avoid companies with poor practices.
- Animal welfare policy Find ethical fund options that have policies that require specific animal welfare standards to be adopted by investee companies in order for them to be considered for inclusion within the fund.
- Animal testing exclusion policy Find ethical investment options that avoid companies that are involved in testing their products on animals. Ethical fund strategies vary - some exclude all companies that test on animals, others allow companies that test for medical purposes or where required by law. Read fund details for fund specific information.
- Tobacco production avoided Find fund options that exclude manufacturers of tobacco (or related) products. This typically relates to ethical funds however funds from other SRI Styles commonly avoid this area also. Strategies vary and funds may invest in retailers of such products (e.g. supermarkets or hotels.) See fund information for further information.
- Armaments manufacturers avoided Find ethical fund (and other SRI) options that avoid avoids companies that manufacture products intended specifically for military use. Fund strategies vary - particularly with regard to non strategic military products. Read fund literature for specific details.
- Nuclear exclusion policy Find ethical funds (and other options) that have a published policy that sets out the fund's position on avoiding or limiting exposure to nuclear power. See fund literature for details of their policy.
- Coal, oil &/or gas majors excluded Find sustainable investment and ethical fund options that avoid significant involvement in coal, oil and/or gas producing companies. Funds vary. See individual fund literature to confirm details.
- Alcohol production excluded This filter helps you to find ethical funds - and other options - that avoid investment in alcohol production. See fund literature for further information.
- Gambling avoidance policy Find ethical fund options (and other options) that avoid companies with significant involvement in the gambling industry. See fund policy for details.
- Pornography avoidance policy Find ethical fund option - and in some cases other options - that avoid companies that derive significant income from pornography. See fund details for further information.
- Available via an ISA Find funds that are available via a tax efficient ISA product wrapper
- Over 50% small/mid cap Find funds where more than half of the funds' assets are invested in smaller or medium sized companies (ie below around £5 -10 billion).
SRI / Ethical Policy
There are three principal strands to the ethical screening process:
1) MSCI negative screen (monthly)
2) ESG Impact Monitor (quarterly)
3) Unicorn Assessment
MSCI negative screen
Adult Entertainment - Zero tolerance (absolute exclusion) - To companies with an industry tie to adult entertainment, including producer, distributor, retailer, and ownership categories
Alcohol - 5% maximum revenue threshold - Based on the recent-year % of revenue, or maximum estimated %, a company has derived from manufacturing, distributing, retailing, licensing, and supplying alcoholic products
Animal Welfare - Zero tolerance (absolute exclusion) - To companies involved in animal testing (including those on the PETA and USDA lists), factory farming, exhibiting animals, breeding animals, and ownership of or by a company in these categories
Defence and Weapons - 5% maximum revenue threshold - The recent-year % of revenue, or maximum estimated %, a company has derived from weapons systems, components, and support systems and services. Profiles are provided for companies that meet MSCI’s Global Weapons definitions but not for companies that are classified as US DOD Weapons Producers only
Nuclear Power - 5% maximum revenue threshold - The recent-year percent of revenue, or maximum estimated percent, a company has derived from nuclear power activities
Genetic Engineering - Zero tolerance (absolute exclusion) - To companies involved in the production of genetically modified organisms
Gambling - Zero tolerance (absolute exclusion)- To companies that have an industry tie to gambling through the operation, support, licensing or ownership categories
Tobacco - Zero tolerance (absolute exclusion) - To companies that manufacture tobacco products, such as cigars, blunts, cigarettes, beedis, kreteks, smokeless tobacco, snuff, snus, and chewing tobacco. This also includes companies that grow or process raw tobacco leaves
ESG Impact Monitor
- MSCI ESG Research analysts investigate and assess controversies involving the impact of company operations and/or products and services that allegedly violate national or international laws, regulations, and/or commonly accepted global norms.
- The ESG Impact Monitor analytical framework organizes controversies within the three pillars of Environment, Social, and Governance.
- In addition to the negative screens, the ESG Impact Monitor identifies cases which may have a reputational risk for a company
- Controversies are organised into three pillars (Environmental, Social and Governance) and are measured according to 28 underlying ‘Key Performance Indicators’
- Any controversies are highlighted via the MSCI ‘flagging system’
- Regular company meetings
- Daily monitoring of news flow
- Open dialogue with management teams
- All company ethical statements and policies reviewed by ethical officer
- Investments made in line with Unicorn corporate governance policy
Resources, Affiliations & Corporate Strategies
Unicorn specialises in smaller and mid cap UK equities / equity income funds.
This fund is an 'ethically screened' version of the Unicorn UK Equity Income fund.
Simon Moon & Fraser Mackersie are Co-Managers; they are also lead managers on the Unicorn UK Income fund since 31/12/13. They have worked on the UK Income fund since the summer of 2008. Alex Game acts as the Ethical Officer and is responsible for the oversight of the screening process and Max Ormiston offers support to the investment and ethical screening process as Junior Fund Manager.
MSCI are used for third party screening capabilities. MSCI performs a negative business involvement screen on the portfolio on a monthly basis and an ESG screen on a quarterly basis, which helps to identify any potential conflicts that are not picked up by the initial strict negative screen. The ethical screening process in re-enforced by an internal assessment, whereby the investment team, through open dialogue with the investee company, may decide not to include a stock in the portfolio.
All stock research is conducted internally by the investment team and then trades are placed by the investment team, directly to the broker/dealers. The company does not make use of a specified dealing desk, either internally or externally.