Responsible fund ideas

A UK-focused fund with a focus on higher-risk small and medium-sized companies. It combines stewardship, ESG integration and exclusions. It doesn’t invest in companies with significant revenue exposure to areas like tobacco, arms and gambling.

The fund's investment universe is filtered for 'sin stocks' by Aegon's ESG Research Team. This negative screening process is kept separate from manager Audrey Ryan and the rest of her team, leaving them free to focus on stock selection and portfolio construction. ESG is key to the fund's investment process. Ryan and her team aim to identify and understand the main environmental, social and governance risks of each company, industry and sector they invest in. They believe companies that lead the way in governance and sustainability could outperform over the long run.

Audrey Ryan has been at the helm of this fund for more than 25 years and is a knowledgeable and passionate ethical investor. This gives us confidence in the fund’s long-term prospects, although past performance is not a guide to the future.

This fund holds shares in Hargreaves Lansdown plc.

This fund aims to provide a resilient income by investing across a diversified range of assets. It combines stewardship, ESG integration and exclusions.

The fund invests globally and is diversified across 200-300 investments. There are three broad categories of investments in the fund: shares, real assets and bonds. The amount invested in each asset changes over time based on the managers’ long and shorter-term views of the world. However, over the long term the fund will have roughly a third of its assets in each of these sections.

The fund applies a screening process to avoid companies that are subject to UN Security Council sanctions or are non-compliant with the UN Global Compact initiative. They also screen out companies that have revenues above particular thresholds coming from fossil fuel extraction and production, thermal coal distribution, tobacco production, controversial weapons and armaments.

As part of their company assessments, the managers also consider a number of different sustainability metrics and assign each company an overall score. This helps them to compare different companies’ sustainability credentials. Those that are considered leaders within their sector are preferred. However, they won’t invest in the lowest scoring companies.

The managers have the flexibility to invest in emerging markets, high yield bonds and derivatives, which adds risk. The fund also takes charges from capital, which could boost the income, but reduces the potential for capital growth.

The fund aims to dampen volatility by providing some shelter during market wobbles, while also delivering some long-term growth in a responsible way. It combines stewardship, ESG integration and exclusions.

This fund launched in April 2018 and is managed by BNY Mellon's Real Return team. They invest in a variety of assets, such as shares, bonds, commodities and cash, and adjust their exposure to each depending on their economic outlook. They also have the flexibility to invest in emerging markets, high-yield bonds and derivatives which, if used, adds risk.

The fund's sustainable ‘red lines' mean companies that violate the UN Global Compact Principles (a UN pact on human rights, labour, the environment and anti-corruption) are not considered for the fund. It also won't invest in any company that makes more than 10% of its revenues from tobacco, gambling, weapons and several other controversial areas.

The team’s experience and time-tested investment process give us confidence they can deliver good returns in a responsible way with this fund, although there are no guarantees.

This fund aims to provide a good level of income alongside capital growth over the long term. It combines stewardship, ESG integration and exclusions. It mainly invests in the UK, but the manager also invests up to 20% overseas.

Andrew Jones has been at the helm of this fund since January 2012 and has over two decades of experience managing UK equity income funds. The fund doesn’t invest in companies with significant exposure to products and services some investors consider unethical, such as alcohol, armaments, gambling, non-medical animal testing, nuclear power, tobacco and fossil fuel power generation (although companies generating power from natural gas may be allowed if the company's strategy includes a clear plan to transition to renewable energy power generation).

All investments must also be compliant with the UN Global Compact Principles (a United Nations pact on human rights, labour, the environment and anti-corruption), and before adding any company to the fund, the manager carries out detailed ESG analysis, engaging with company managers if he feels there’s room for improvement.

Please note the manager has the flexibility to invest in smaller companies, which adds risk. The fund also takes charges from capital, which could boost the income, but reduces the potential for capital growth.

This fund aims to replicate the performance of the Solactive L&G Enhanced ESG Emerging Markets Index. It combines stewardship, ESG integration and exclusions.

This fund provides broad exposure to emerging markets by tracking the Solactive L&G Enhanced ESG Emerging Markets Index. The index is made up of around 1,700 companies spread across a range of countries including Taiwan, India and China. These markets are higher risk as they're at an earlier stage of development, so this fund should only be considered for a portfolio with a longer investment outlook that can accept periods of high volatility. The fund also invests in smaller companies, which adds further risk.

The index increases investments in companies that score well on a variety of ESG criteria – from the level of carbon emissions generated, to the number of women on the board and the quality of disclosure on executive pay. It also reduces exposure to companies that score poorly on these measures.

The fund won't invest in persistent violators of the UN Global Compact Principles or those with significant involvement in tobacco, civilian firearms, thermal coal and oil sands. Controversial weapons makers are also excluded.

On top of this, the fund adopts a decarbonisation pathway. This means it aims to reduce emissions by 7% per year until 2050. Despite this though, emerging markets tend to be more carbon intense than developed ones, making this one of the more carbon intense funds under our research coverage. Companies with higher carbon intensity may face increased scrutiny from investors and regulators, as well as higher costs associated with carbon emissions management and potential carbon pricing mechanisms, potentially impacting the fund’s performance.

This fund aims to perform broadly in line with the UK stock market by tracking the Solactive L&G Enhanced ESG UK Index. It combines ‘stewardship’, ‘ESG integration’ and ‘exclusions’.

The Legal & General Future World ESG UK Index provides broad exposure to the UK stock market, while being mindful of ESG issues. Its benchmark, the Solactive L&G Enhanced ESG UK Index, is made up of around 300 companies spread across the whole of the UK market.

The index increases investments in companies that score well on a variety of ESG criteria – from the level of carbon emissions generated, to the number of women on the board and the quality of disclosure on executive pay. It also reduces exposure to companies that score poorly on these measures.

It avoids investing in companies involved in controversial weapons, and those with significant involvement in tobacco, civilian firearms, thermal coal and oil sands. It also avoids persistent violators of the UN Global Compact Principles (a UN pact on human rights, labour, the environment and anti-corruption).

On top of this, the fund adopts a decarbonisation pathway. This means it aims to reduce emissions by 7% per year until 2050.

The fund’s tracked its index closely since launch in April 2019, and we expect this to continue given the quality and scale of the investment team, although there are no guarantees. Investors should note the fund invests in smaller companies, which adds risk.

This fund aims to perform broadly in line with the UK stock market by tracking the Solactive L&G Enhanced ESG UK Index. It combines stewardship, ESG integration and exclusions.

The Legal & General Future World ESG Tilted & Optimised UK Index provides broad exposure to the UK stock market, while being mindful of ESG issues. Its benchmark, the Solactive L&G Enhanced ESG UK Index, is made up of around 300 companies spread across the whole of the UK market.

The index increases investments in companies that score well on a variety of ESG criteria – from the level of carbon emissions generated, to the number of women on the board and the quality of disclosure on executive pay. It also reduces exposure to companies that score poorly on these measures.

It avoids investing in companies involved in controversial weapons, and those with significant involvement in tobacco, civilian firearms, thermal coal and oil sands. It also avoids persistent violators of the UN Global Compact Principles (a UN pact on human rights, labour, the environment and anti-corruption).

On top of this, the fund adopts a decarbonisation pathway. This means it aims to reduce emissions by 7% per year until 2050.

The fund’s tracked its index closely since launch in April 2019, and we expect this to continue given the quality and scale of the investment team, although there are no guarantees. Investors should note the fund invests in smaller companies, which adds risk.

This fund aims to deliver a combination of income and capital growth over the long term by investing mostly in sterling-denominated, investment grade corporate bonds. It uses a Sustainability Focus label, and also incorporates stewardship, ESG integration and exclusions.

The fund’s managed by a team of four: Kenny Watson, Aitken Ross Jack Willis and Connor Godsell. They aim to identify bonds issued by high-quality companies whose core products or services make a positive contribution to society or the environment. The fund also employs negative screening. This means it won’t invest in any company that makes more than 5% of its revenues from alcohol, animal testing services, coal, oil & gas, gambling, intensive meat and fish farming, nuclear, ozone depleting substances, pornography, tobacco or weapons systems.

Investors should be aware that the fund's exposure to utilities makes it one of the more carbon-intense funds under our research coverage. Companies with high carbon intensity may face growing scrutiny from both investors and regulators, as well as increased costs related to carbon emissions management and potential carbon pricing mechanisms, which could impact the fund's performance. However, the managers are prepared to invest in companies that may have a higher carbon intensity today if they are supporting the transition to a net-zero economy.

The managers have the flexibility to invest in derivatives and emerging markets which, if used, adds risk. The fund takes charges from capital, which can increase the income on offer but reduces the potential for capital growth.

This fund focuses on the Indian Subcontinent, with the aim to provide long-term investment growth. It mainly invests in Indian companies, though it can also invest in Pakistan, Sri Lanka and Bangladesh. It combines stewardship, ESG integration and exclusions.

Sashi Reddy and David Gait invest in quality companies they believe can deliver sustainable and predictable growth over the long term. They like cash-generative businesses, which are in good financial health and could withstand periods of economic volatility. Stewardship and sustainability are a core part of the investment strategy. The duo focus on companies they believe could benefit from and contribute to the sustainable development of the countries they’re based in. They also avoid companies that make a significant proportion of their revenues from controversial areas like alcohol, tobacco and gambling.

Investing in emerging markets is higher-risk, and we think this fund should make up just a small portion of a well-diversified portfolio. Companies in emerging markets like India also tend to have higher ESG risk profiles. As a result, the companies within the fund could face increased regulatory scrutiny, reputational damage, and operational challenges, potentially impacting the fund's future performance. The fund also invests in smaller companies, which increases risk further.

This fund invests in companies across the globe that help to address long-term demographic, environmental and resource challenges. They must also have strong prospects in their own right and be available at an attractive price. It uses a Sustainability Impact label, but also incorporates stewardship and ESG integration.

The team behind this fund invests in high quality companies whose products and services provide solutions to key sustainability challenges. It focuses on nine sustainable investment themes, which range from resource efficiency and sustainable transport to education and wellbeing.

The fund hasn’t performed as well as the broader global stock market over the past few years. The managers’ stock selection amongst companies in the technology, healthcare and industrials sectors dragged on returns according to our analysis. This proved particularly painful because the fund is focused on these areas.

The managers’ flexibility to invest in emerging markets and smaller companies adds risk.

The fund invests globally in companies that have a positive emphasis on society, the environment and health. It combines stewardship with ESG integration and exclusions.

Nick Edgerton’s sustainable approach means he doesn’t invest in companies with significant exposure to harmful products and services, or those that fail to meet their environmental stewardship and human rights responsibilities. That means, like other Stewart Investors funds, the fund doesn’t invest in companies making significant revenues from controversial areas like alcohol, tobacco and gambling. Investors should note the fund has some exposure to emerging markets, which adds risk, as does the concentrated nature of the portfolio.

The manager benefits from the support of a team we have long held in high regard. We believe the fund could deliver reasonable returns over the long term, although there are no guarantees.