Style Name:  Limited Exclusions

Investment funds which exclude a relatively small number of companies as a result of ethical screens of ESG risk mitigation strategies.

Brief description of Style

Funds with ‘Limited Exclusion’ strategies exclude a small number of companies as a result of their published ethical or ESG strategy.

They may for example, have one or two areas of ‘ethical’ exclusion, such as ‘Avoid tobacco companies’ or ‘Avoid companies involved in the manufacture of cluster munitions’.

Alternatively, they may exclude for example the worst 20% of companies (across all sectors) when assessed against a named ESG rating methodology. The aim of strategies of this kind is typically to reduce ESG (environmental, social and governance) related risks for investors.

These funds may be complimented by engagement (stewardship) strategies – where fund managers use their position as shareholders (or bond/property holders) – in order to encourage the companies they invest in to adopt higher standards.

Impact on investment strategy

These exclusions tend to have a relatively minor impact on where a fund can or can not invest – meaning that they may appear to be ‘unscreened’ funds.

Who is this Style most likely to appeal to?

This SRI Style is most likely to suit clients who want to avoid only the industry the fund excludes – or only funds that are considered to be ESG laggards.

Strategies vary.  You should read individual fund information carefully before considering this style if your client has asked to invest in an ‘ethical’ or ‘sustainable’ fund.