SRI Style name changed to ‘Negative Ethical’

In order to better reflect the activity that takes place within the funds we survey sriServices has changed from using the name ‘Traditional Ethical’ to the new name ‘Negative Ethical’ . 

This is now also used within the Fund EcoMarket SRI style classifications.

The two ‘ethical’ segments within Fund EcoMarket and the StyleFinder client questionnaire tool are now called:

• Negative Ethical – funds that primarily apply negative ethical screens and set out clear areas of avoidance
• Balanced Ethical – funds that combine or ‘balance’ positive and negative ethical criteria and factors when deciding which companies to invest (or avoid)

These are the two main SRI segments which consider ‘traditional ethical issues’ such as tobacco, armaments, alcohol and gambling and continue to reflect the origins of this field.  In many cases these issues are considered alongside a range of other issues such as environmental and social criteria.

sriServices has separated these two groups of ethical options because although they are similar clients are often keen to know which funds are most likely to apply clear or extensive exclusions.  Balancing different issues and ‘pros and cons’ can be too nuanced (or otherwise unappealing) to some ethical investors – whereas for others a more pragmatic approach is far more appealing – particularly when accompanied with other responsible investor or investment stewardship strategies – such as ‘Responsible Engagement’.

Funds within other SRI Styles sometimes also consider issues of this kind (eg some Environmental and Sustainability Themed options also screen for ethical criteria).  In such funds ‘ethical’ issues (as listed above) are not however generally considered to be the fund’s core SRI strategy or therefore the main reason an investor might be interested in the fund.

If issues of this kind are important to your clients or you are unsure how they might feed through to where a fund actually invests it is always a good idea to check with the fund manager prior to making an investment recommendation as fund strategies vary.

Advisers should also be aware that most regulated ethical funds have exposure to areas that are considered to be contentious by some investors.