InvestmentWeek, James Baxter-Derrington, 03 November 2020
The suite, intended to aid financial advisers meet client expectations and requirements, reflects the increased research output of the firm, following its acquisition of Ethical Money Limited in July 2020.
Within the expanded array of metrics are in-depth qualitative insights, brought by Square Mile, and evidence-based audit approaches, offered by 3D Investing.
From Square Mile are ESG Assessments, applied at the fund and company level for all products within the Academy of Funds, not only those with an explicit Responsible Investing mandate, and Responsible Ratings, which recognise best-in-class funds with an explicit Responsible Investing mandate.
The ESG Assessments are created based on a questionnaire given to fund managers and senior executives, along with qualitative intelligence garnered from face-to-face meetings with the firms.
The Responsible Ratings are tested against “against a set of explicit outcomes which managers aim to achieve, demonstrating a well-articulated philosophy, a proven and repeatable process, a sound management team, a stringent risk management framework and fair costs,” which is also assessed through face-to-face meetings.
From 3D Investing comes Corporate Certifications, Fund Certifications and Impact Ratings, the first of which correspond to ESG Assessments and Responsible Ratings respectively, while the final metric offered reflects an even higher standard of positive social and environmental impact.
3D Corporate Certifications will provide independent verification and audit of a fund manager’s commitment to responsible investing through a data-driven annual report, while 3D Fund Certifications will scrutinise funds with explicit responsible investing objectives of an individual stock level through objective data and critical analysis.
3D Impact Ratings will only be given to funds which hold a 3D Fund Certification and also meet a minimum threshold for positive social and environmental impact.
To qualify for a 3D Impact Rating, a fund must demonstrate that the majority of its holdings make a “significant positive contribution” to the relevant United Nations Sustainable Development Goals, while the contributions which are negative must be limited.
Additionally, there should be evidence the fund manage is leading change through investee engagement.
Steve Kenny, Square Mile’s commercial director, said: “This upturn in interest by the investing community has led to a proliferation of funds purporting to do good, but it is evident that there is no one-size-fits-all metric to help advisers ensure that the funds and fund groups charged with managing their clients’ money are suitable and match expectations.
“The acquisition of Ethical Money has brought together Square Mile’s expert qualitative research with 3D Investing’s deep dive, evidence-based assessments.
“The result is a suite of ratings and accreditations which offer advisers a 360° perspective on the investment universe, enabling them to make valid comparisons between funds and fund groups to ensure a close fit with an individual client’s objectives.”