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Fund EcoMarket

the sustainable, responsible and ethical investment information hub

SRI Styles update – ‘ethical’ funds now in single category

March 16th, 2021

We have today updated our Fund EcoMarket ‘SRI Styles’ fund classifications to combine ‘Negative Ethical’ and ‘Balanced Ethical’ funds into a single style now called simply: ‘Ethical’.

When we created Fund EcoMarket back in 2010 by far the largest proportion of funds in this area were referred to as ‘ethical’ – and focused significantly on values based issues – alongside environmental and social issues.

At the time, we felt it was important to help people to differentiate between ethical fund strategies because stock selection varied.  Most notably, we wanted people to understand that ethical funds that focused on ‘negative exclusions’ were likely to invest differently from funds with more complex, ‘balanced’ or ‘best in sector’ type strategies – which were more likely to hold larger cap companies and be accompanied by extensive engagement (stewardship) strategies.

The rise in ‘deep dive’ sustainability focused funds (that we call ‘Sustainabilty Themed’),  funds with a ‘Sustainability Tilt’ (that ‘overweight’ sustainability leaders) – and funds based around often extensive ESG integration strategies (that we call ‘ESG Plus’ – as only those with additional SRI strategies are eligible for inclusion on our site) – has shifted the dynamics over recent years.

It is also now relatively rare for highly regarded screened ‘ethical’ funds to only exclude companies as most also focus on the opportunities presented by ‘positive’ stock selection and therefore favour sustainability leaders.  Many also have stewardship (engagement and voting) policies wrapped around them.

  • The pie chart shows that there were, until today, 16 ‘Negative Ethical’ funds and 19 ‘Balanced Ethical’ funds on Fund EcoMarket
  • This revised ‘Ethical’ group (35) matches to the number of funds with a ‘Sustainability Tilt’ (35) and is similar to the number of ‘ESG Plus’ funds (40) .  It is however far smaller than the group we label ‘Sustainability Themed’ funds (86) .
  • Fund EcoMarket users should keep in mind there are no hard and fast rules in this area – although there are multiple initiatives aimed at creating universal labels. For example:
    • Most ethical funds pay close attention to sustainability issues and most sustainability themed funds consider ethical issues (eg by excluding armaments and tobacco).
    • The difference between these strategies is largely one of degree. Ethical funds focus more on values related issues (typically by avoiding more areas of business) and aim to cater for clients who wish to avoid certain areas.  Sustainability Themed funds often exclude ‘unethical’ practices also – sometimes simply because they are considered inconsistent with helping to deliver more sustainable lifestyles.  However in practice there is much variation – fund histories, reasoning and therefore investment strategies vary.
  • These numbers are based on ‘primary’ funds.

To see which funds are classified in which SRI Style please use the ‘SRI Styles’ filter on the Fund EcoMarket database or App.

To see the different environmental, social, governance and ethical issues covered by different funds please use the ‘Policies, Issues and Themes’ filter (noting that different funds consider different issues).

Fund approaches (methodologies) and the ways in which they might focus on helping to deliver positive ‘impacts’ – and how they work in practice – are listed on the ‘Approaches and Application’ filter.

Please see individual fund details before recommending or selecting funds.

You can go to our revised ‘SRI Styles Directory’ here.

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