Interactive Investor

ii ACE 40 performance review 2023

Here’s how interactive investor’s sustainable funds performed in the three months to the end of December and in 2023.

12th January 2024 09:22

by the interactive investor team from interactive investor

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Over 2023 the growth style of investing did well in US and therefore in global indices, while the energy sector underperformed. This backdrop helped most funds on the ACE 40 post positive gains.

The strongest performer on the list was the Brown Advisory US Sustainable Growth fund, which focuses on companies with proven, profitable business models. The fund returned 30.6% over the year, benefiting from the strength of the US equity market and from its large-cap growth style bias. This was the top-performing style in the US market as growth-biased, mega-cap names in the IT, consumer discretionary and communications services sectors led the equity market higher.  

These market characteristics also helped propel the UBS(Lux)FS MSCI World SRI USD Adis GBP (LSE:UC44) and the iShares MSCI USA SRI ETF USD Acc GBP (LSE:SUUS) on to the list of top five performers, with returns of 21.6% and 17% respectively. The UBS fund tracks the MSCI World SRI Low Carbon Select 5% Issuer Capped TR Index, and this gives it a slight growth bias versus mainstream indices which helped returns over the year. The iShares exchange-traded fund (ETF) invests in a sub-set of equities within the MSCI USA Index that demonstrate higher ESG ratings than other sector peers, as well as excluding companies involved in controversial businesses such as weapons, thermal coal, tobacco and oil sands. The fund showed positive returns but was slightly behind the S&P 500 index.

Similar elements contributed to the 15.2% return from Baillie Gifford Responsible Global Equity Income. The fund primarily invests in stocks able to provide sustainable growth and resilient dividends. The team focuses on dividend growth and therefore has less exposure to higher-yielding stocks in industries which are cyclical or lack structural drivers. This results in a portfolio that can at times shows a yield only slightly higher than the mainstream MSCI ACWI benchmark. In terms of style the portfolio can show a slight growth bias versus benchmark, but this is persistent and more obvious versus global equity income peers, and resulted in outperformance versus the average Morningstar Global Equity Income Category return in 2023.

The final fund to mention on the top 5 performers list is theM&G European Sustain Paris Alignedfund which posted a return of 17.7%. In 2021, this fund adopted alignment to the Paris agreement, with a focus on identifying companies with meaningful plans to reduce carbon emissions. The underlying stock approach has a focus on companies showing sustainable competitive advantages and this results in a growth bias. As a concentrated portfolio, returns to stock selection can overcome style biases at times, with 2023 highlighting this through strong selection in healthcare and consumer discretionary, while the underweights to energy and consumer staples were also positive.

The weakest performers on the list were those funds with an alternative energy focus. The iShares Global Clean Energy ETF USD Dist GBP (LSE:INRG) posted a negative 25% return, reflecting the impact of the higher rate environment. The fund tracks the S&P Global Clean Energy Index which is also the benchmark for the next weakest fund on the list, the VT Gravis Clean Energy Income fund. The manager of this fund looks to provide an income in region of 4.5% and primarily invests in closed ended investment companies and yield companies that are involved in the provision, storage and consumption of clean energy. This should result in a more stable return profile than that obtained through investing in the S&P Global Clean Energy Index, and this was the case in 2023 with the fund suffering less with a decline of 13.6%.

The next fund on the list of top five underperformers is the Fidelity Sustainable Asia Equity fund. Asia ex Japan has been one of the weaker equity regions over the past year, driven by underperformance from China equities. The core of this portfolio will show quality growth characteristics, but there will also be exposure to turnaround situations where a catalyst is evident. The fund underperformed the market and posted a return of -6.8% in 2023, with attribution versus the MSCI AC Asia Ex Japan Index showing weakness in stock selection, particularly within China where the fund’s mild growth bias was a headwind.   

The relatively muted returns from emerging markets were further reduced by the SRI criteria employed by the iShares MSCI EM SRI ETF USD Acc GBP (LSE:SUES), which fell 3.7% over the year. Versus the mainstream MSCI EM Index the fund underperformed, with attribution showing particular weakness from the more limited exposure to the IT sector.

The final fund on the underperformers list is Impax Environmental Markets (LSE:IEM). The trust showed a positive return of just over 5% on a net asset value basis, but share price returns were impacted by a widening of the discount which resulted in a loss of 3.7%. The portfolio tends to favour growth stocks in the small and mid cap space and show sector bets which deviate significantly from broad global indexes. The underweight to the US, the small and mid cap growth bias and overweights to the utilities and materials sectors, were headwinds over the year versus MSCI ACWI, but longer-term returns from the fund remain good.

Top five ACE 40 funds in 2023

Group/Investment3 months1 year3 years5 years
Brown Advisory US Sust Gr GBP B Inc9.5330.6331.73134.97
UBS(Lux)FS MSCI World SRI USD Adis GBP (LSE:UC44)7.7721.6329.8584.84
M&G European Sustain Paris Aligned I Acc7.3717.6532.0572.10
iShares MSCI USA SRI ETF USD Acc GBP (LSE:SUUS)6.8816.9540.85118.66
Baillie Gifford Rspnb Glb Eq Inc B Acc6.3215.2031.7588.47

Source: Morningstar - Total Return for funds / Market Return for investment trusts - (GBP) to 31/12/2023.

Bottom five ACE 40 funds in 2023

Group/Investment3 months1 year3 years5 years
iShares Global Clean Energy ETF USD Dist GBP (LSE:INRG)2.77-25.01-38.9396.36
VT Gravis Clean Energy Income C GBP Acc9.42-13.55-10.2853.15
Fidelity Sustainable Asia Equity-0.45-6.81-15.8827.73
iShares MSCI EM SRI ETF USD Acc GBP (LSE:SUES)1.15-3.71-11.5012.95
Impax Environmental Markets Ord (LSE:IEM)7.82-3.71-3.3565.57

Source: Morningstar - Total Return for funds / Market Return for investment trusts - (GBP) to 31/12/2023.

Top five ACE 40 funds over five years

Source: Morningstar - Total Return for funds / Market Return for investment trusts - (GBP) to 31/12/2023.

Bottom five ACE 40 funds over five years

Group/Investment3 months1 year3 years5 years
Amundi Glb Aggt Green Bd ETF Acc GBP (LSE:CLIM)6.174.18-16.89-7.43
CT UK Social Bond Z Grs Acc£5.517.71-5.733.98
PIMCO GIS Global Bond ESG Instl GBPH Inc6.116.74-8.004.70
RLBF II Royal London Ethical Bond M Inc7.429.54-9.846.87
Liontrust Sust Fut Corp Bd 2 Grs Inc10.6112.99-10.357.25

Source: Morningstar - Total Return for funds / Market Return for investment trusts - (GBP) to 31/12/2023.

Most-bought ACE 40 funds in 2023

Most-sold ACE 40 funds in 2023

Changes to the ACE 40 list (under review/developments)

November: ACE 40 Annual Review

Global Equities

Removal of Baillie Gifford Positive Change Fund

Removal of Montanaro Better World Fund

Inclusion of Wellington Global Stewards Fund as a Core option (Considers)

UK Equities

Removal of Unicorn UK Ethical Income Fund

Removal of Aegon Ethical Equity Fund from Adventurous UK Equities category

European Equities

Removal of Montanaro European Income Fund

Inclusion of EdenTree Responsible and Sustainable European Equity Fund as an Adventurous Option (Considers)

Asian Equities

Removal of Impax Asian Environmental Markets Fund

Inclusion of Fidelity Sustainable Asia Equity Fund as a Core option (Considers)

Mixed Asset

Removal of Climate Assets Balanced Fund

Inclusion of Royal London Sustainable Growth Fund as a Core option (Considers)


Removal of FP Foresight Global Real Infrastructure Fund

Inclusion of Polar Capital Smart Energy Fund as an Adventurous option (Embraces)

ACE 40 videos in Q4

None in Q4.

The ACE 40 investments list is selected and managed by our independent research partner Morningstar and reviewed by our in-house investment experts to help narrow down the wide choice of available investment products. We believe it represents a set of high-quality choices, across different asset classes, regions, and investment types.

However, you should note that the selection of ACE 40 investments list is not a ‘personal recommendation’. This means we have not assessed your investment knowledge, your financial situation (including your ability to bear losses), your investment objectives, your risk tolerance, or your sustainability preferences.

You should ensure that any investment decisions you make are suitable for your personal circumstances, and if you are unsure about the suitability of a particular investment or think you need a personal recommendation, you should speak to a suitably qualified financial adviser.

The past performance of an investment is not a reliable indicator of future results, and ii does not guarantee or predict the future performance of the ACE 40 investments list as a whole or the constituent investments.

Risk Warning(s)

The value of your investments may go down as well as up. You may not get back all the money that you invest.

Investing in emerging markets involves different risks from developed markets, in many cases the risks are greater.

The value of international investments is affected by currency fluctuations which might reduce their value in sterling.


All funds listed are the Accumulation version of the fund, where available, where any income generated within the fund is reinvested automatically. Income versions of these funds may also be available for investors looking for income generated to be paid directly into their account.

Annual performance can be found on the factsheet of each fund, trust or ETF. Simply click on the asset’s name and then the performance tab.

Any changes to the ACE 40 investments list and the rationale behind those decisions will be communicated through the Quarterly Investment Review.

Details of all ACE 40 recommendations issued by ii during the previous 12-month period can be found here.

ii adheres to a strict code of conduct. Members of ii staff may have holdings in one or more ACE 40 investments, which could create a conflict of interest. Any member of staff involved in the development of research about any financial instrument in which they have an interest are required to disclose such interest to ii. We will at all times consider whether such interest impairs the objectivity of the recommendation.

In addition, staff involved in the production of the ACE 40 investments list are subject to a personal account dealing restriction. This prevents them from placing a transaction in the specified instrument(s) for five working days before and after an investment is included or amended and made public within the ACE 40 investments list. This is to avoid personal interests conflicting with the interests of investors in the ACE 40 investments.

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