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‘Ethical’ investment funds ranked

Ethical Consumer ranks worst and best sustainable investment funds to tackle climate crisis
Katie Hill - Editor-in-Chief, My Green Pod
'Ethical' investment funds ranked

Ethical Consumer has released its rankings of the best – and worst – performing ethical investment funds in the wake of the climate crisis.

The consumer watchdog, which ranks and recommends products and services based on their ethical performance, introduced new carbon reporting ratings in its assessments to scrutinise the extent to which so-called ethical investment funds were taking sufficient action to reduce their climate impact.

Top-scoring ethical funds

Ethical funds awarded ‘Best Buys’ were FP WHEB Sustainability Fund and Triodos Pioneer Impact Fund.

They scored joint-highest ratings due to good financial performance, being fossil free and demonstrating a clear commitment to carbon reduction targets in line with international agreements.

WHEB was commended in the study for its strong and public commitment to be a Net Zero Carbon business by 2025, with a further commitment to invest 10% of its investment strategy in businesses that pledge to be carbon neutral by 2030.
Researchers heralded the other joint top scorer Triodos for not investing in projects that could be damaging, such as fossil fuel companies
Triodos also achieved Ethical Consumer’s highest rating for carbon emissions reporting for its partnership with Dutch Partnership for Carbon Accounting Financials (PCAF), which included those of its loans and investments.

A key measure also used to determine top rankings was transparency and engagement, which specifically relates to how ethical policies and voting are publicly declared – with a clear statement that such policies will also apply across the fund’s portfolio.

‘Ethical’ funds harming the planet

Researchers were keen to investigate not just the named funds in the study but how parent companies operate when it comes to their impact on climate change. The researched asked two key questions of brands:
Does it invest in unethical sectors? If a fund does not have a clear screening and exclusions policy then it is likely to be invested in unethical sectors such as fossil fuels or arms.
Is it owned by an unethical company? Some funds may appear ethical, but are owned by a company which also manages unethical funds. Choose a fund owned by a company that is wholly focused on ethical investment.

‘Moving your money around is one of the best ways to reduce your carbon footprint.

‘We all have a responsibility to take action against climate change, however what this report shows is that consumers could be misled in trying to do the right thing.

‘Transparency featured heavily in our analysis and it is clear that by saying very little some so-called ethical investment funds can get away with a lot.

‘The good news is that ethical impact investing is starting to hold its own and in many cases out-perform traditional funds. While we hope this trend continues, consumers should choose fossil-free funds with good performance to ensure local and global economies are rebuilt on the right financial products.’

Report author and researcher at Ethical Consumer

Funds to avoid

The following five ethical investment funds were named companies to avoid:

LF Heartwood Growth Sustainable Multi-Asset

  • Invests in fossil fuels
  • Parent company Svenska Handelsbanken AB received a vague/unsubstantiated transparency rating for its investments and their impact on climate change
  • Worst rating for Carbon Management and Reporting – it does not include indirect emissions from its investments

Legal & General Ethical

  • Invests in fossil fuels
  • Worst rating for Carbon Management and Reporting – no defined targets
  • No full commitment to divest away from fossil fuels
  • Named in the 2019 ‘Unfriend Coal’ report that highlights insurers who invest in coal and tar

Liontrust SF European Growth

  • Invests in fossil fuels
  • Worst rating for Carbon Management and Reporting – it has no specific targets for its scope 1 and 2 (direct) emissions and does not include scope 3 (indirect emissions by its investments) in its reporting
  • Investments in companies criticised on Ethical Consumer’s database for climate change impact

Royal London Sustainable Leaders

  • Invests in fossil fuels (via their investments in power producers)
  • Worst rating for Carbon Management and Reporting – does not report on ‘scope 3’ emissions, considered inadequate as this includes the emissions of its investments

SVM All Europe SRI

  • Invested in fossil fuels
  • The company did not appear to report on its carbon emissions
  • The company did not appear to have carbon reduction targets in line with international agreements – therefore it received Ethical Consumer’s worst rating for Climate Change
  • Rated as ‘getting there’ in terms of transparency and engagement and investments in companies criticised on Ethical Consumer’s database for climate change impact

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