ii launches UK's first rated list of ethical funds

by Jemma Jackson from interactive investor |

ACE 30 is interactive investor's new rated list of ethical funds for retail investors wanting to better align their investments with their personal values.

•    New ethical ACE 30 rated funds list is broken down into three key interactive investor ACE 'ethical investment styles': Avoids, Considers and Embraces
•    Like sister rated list Super 60, it is proudly instrument agnostic, featuring investment trusts, funds and ETFs

interactive investor, the UK's second largest retail investment platform, has launched 'ACE 30': the UK's first rated list of ethical funds, ETFs and investment trusts for investors seeking to align their investments with their personal values.

Compiled by interactive investor's Investment Committee, the ACE 30 follows a similar methodology to the popular and successful Super 60, is instrument agnostic and includes actively managed and passive solutions across major markets and asset types. However, it adds an extra layer of methodology to select high-quality ethical options from our recently launched ethical iinvestments long list.*

From its extensive ethical iinvestments long list of over 140 ethical investment options, interactive investor has selected the 30 funds, investment trusts and ETFs that we believe offer the highest-quality choices for investors across a wide variety of markets. Investments are only included if they are, in our opinion, the best option for customers, being managed in a genuinely ethical manner, and having the potential to deliver strong financial performance.

ACE 30, which offers high-quality choices across a wide variety of markets and asset classes, is 30-strong at present – half the size of Super 60. This is because there are notable asset class gaps that the ethical investments sector has yet to sufficiently cater for. 

The intention is to add further options over time as new ethical investments are launched or start to demonstrate a strong record of performance. 

Richard Wilson, CEO of interactive investor, says: "We are immensely proud to have launched the UK's first retail rated list of ethical funds for those who wish to better align their investments with their own ethical values. In putting forward investment ideas, platforms have a duty to ensure that investors' interests are at the heart of their thinking. Impartiality and transparency are crucial. Our customers can have full faith in our recommendations since there are no commercial or other hidden motives for our lists.

"We have led the charge by disclosing our rigorous selection process and methodology for both Super 60 and ACE 30, which are each proudly and passionately instrument agnostic, including funds, investment trusts and ETFs, with both active and passive funds featuring."   

Moira O'Neill, Head of Personal Finance, interactive investor says: "Until we launched the ethical iinvestments long list in early September, there was little guidance to help investors find ethical propositions. Now they also have the ACE 30 list of the 30 best in class - thoroughly researched and monitored by our experts.

"Our objective is to cater to a growing number of investors seeking to invest for good by providing a menu of high-quality ethical choices among the available investments across a broad variety of markets and investment types.

"In future, as the ethical investment sector matures, we would expect to be able to add new investments in asset groups and investment categories that are currently under-represented in the ACE 30, such as US and Japanese equities, property and smaller companies."

Holly MacKay, founder and managing director of consumer finance guidance site Boring Money, says: "There's a clear and growing customer appetite to invest both for profit and purpose. It's great to see a new initiative which makes it easier for investors to filter the market and see a manageable shortlist of choices."

Methodology

There is currently no accepted industry standard for classifying the myriad approaches to ethical investing adopted by investment managers. To help investors to navigate their way through all the confusing technical jargon towards an ethical approach, we have categorised the ACE 30 into three key interactive investor 'investment styles': Avoids, Considers and Embraces, consigning traditional ethical jargon to the recycle bin. Where a manager adopts more than one style, interactive investor uses the strongest ethical category that applies. 

Interactive investor ACE investment style** Definition
Avoids Funds that focus on simply excluding companies, sectors or specific business practices
Considers Funds that carefully consider an often wide range of ethical and/or environmental, social and governance (ESG) issues or themes when balancing positive or negative factors.
Embraces Funds that focus on companies delivering positive social and/or environmental outcomes

Low cost, core, income, small cap and adventurous options

Even within each of these styles there is great variation as funds apply different levels and combinations of avoidance, positive stock selection and engagement activity aimed at delivering higher business standards. Where a fund manager adopts more than one style, we use the strongest ethical category that applies.

Like sister list Super 60, the list includes low cost, core, income, smaller cap and adventurous options. 

The selection process is underpinned by the key principles of Transparency, Choice and Fairness, with the full methodology involved in the fund selection readily available in the ACE 30 section of the interactive investor website.

But this is not the end of the process. The performance of the ACE 30 investments will be monitored on an ongoing basis for any red flags, such as fund manager changes and under performance, which will be communicated to interactive investor's customers. We will also update the ACE 30 list as the sector matures. 

Dzmitry Lipski, Investment Analyst, interactive investor, says: "Constructing a portfolio can be tough, but it is even more difficult if you want to choose ethical investments.  If you are serious about investing with a clean conscience, you should look under the bonnet of the investment proposition to ensure that the investment strategy aligns with your moral values. That can mean a lot of research, but our ethical iinvestments long list and the ACE 30 make the job easier, offering filtered selections appropriate for all investors, whether they are new to investing or experienced.

"Ethical investing is a relatively new yet burgeoning area of investments, with the assets under management in ethical funds doubling from £10 billion to £20 billion in just four years according to Investment Association figures. With demand for such products showing no signs of slowing, we'd like to see the asset management industry not just increase the supply of ethical solutions available to investors, but, crucially, the depth and breadth available to them too."

*The ACE 30 investments are selected from ii's ethical investments long list, which was compiled by interactive investor in association with SRI Services, a specialist independent company devoted entirely to advancing retail Sustainable and Responsible Investment (SRI), using its Fund EcoMarket list. 

The ethical iinvestments long list is also informed by data provider Morningstar, which has identified investments that, by prospectus, either state that they use ESG criteria as a key part of their security-selection process or indicate that they pursue a sustainability-related theme or seek measurable positive impact alongside financial return. 

**For full definition of the interactive investor ACE investment styles, see here

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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