ii ACE 40 Annual Review

The ACE 40 provides investors with a set of high-quality choices. We select the list from the available universe of sustainable funds. We aim to cover a broad variety of markets and investment types.

The ACE 40 Annual Review has officially been completed. Following a comprehensive review of sustainable fund options conducted by Morningstar's Management Selection Group, we have made the following changes: 

Global Equities

• Removal of Baillie Gifford Positive Change Fund from Adventurous category

• Removal of Montanaro Better World Fund from Smaller Companies category

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

UK Equities

• Removal of Unicorn UK Ethical Income Fund from Smaller Company UK Equity Income category

• Removal of Aegon Ethical Equity Fund from AdventurousUK Equities category

European Equities

• Removal of Montanaro European Income Fund from Income category

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

Asian Equities

• Removal of Impax Asian Environmental Markets Fund from Adventurous category

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

Mixed Asset

• Removal of Climate Assets Balanced Fund from Adventurous category

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

Specialist

• Removal of FP Foresight Global Real Infrastructure Fund from Core category

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

We made these additions following a comprehensive review of sustainable fund options. 

Our process begins with our ii Sustainable Investments Long List. This is a list of all ‘sustainable’ funds, investment trusts and ETFs available to buy on our platform. We update and maintain it with help from SRI Services. We use ‘sustainable’ to encompass a wide range of investment criteria, including socially responsible, sustainable and environmental concerns.

Our original ACE list launched in 2019 had 30 constituents. But there are now a greater number of funds with a long enough track records to consider for inclusion. There are more than 220 funds on the ii Sustainable Long List, compared to 116 funds three years ago. 

What we look for 

We conduct regular performance monitoring of our ACE 40, against general stock market and industry sector trends. We also check our ACE 40 for investment strategy-specific events. 

But we also perform an annual review of the whole list. This makes sure our selections are best in class and have the potential to deliver consistently against their targets. 

We explore the entire sustainable universe and consider a wide range of quantitative and qualitative factors. These include performance, risk and risk-adjusted metrics. We also consider value for money, the manager’s experience and the fund manager’s resource. We put a strong focus on managers’ ESG philosophy, process and implementation. Investments that win a place on our ACE 40 list are then put into one of the following buckets, subject to approach:

• Avoids - funds that exclude specific companies, sectors or business practices, such as tobacco.

• Considers - funds that take into account strict environmental, social and governance (ESG) criteria, such as pollution levels.

• Embraces - funds that focus on companies that deliver positive social and/or environmental outcomes, such as renewable energy.

The ACE 40 list includes 8 funds in the Avoids bucket, 24 funds in Considers and 6 funds in Embraces.

Sustainable funds remain a limited universe, despite increasing levels of investor demand over the past couple of years. A lot of funds have launched recently, so they are relatively small with short track records. 

There is a still lack of sustainable choices in some fund sectors such as equity income. Many sustainable funds tend to have high weightings to healthcare and technology, so-called growth sectors. But they have low weightings to the energy and industrials sectors, which are good sectors for dividends.

We aim to select a range of investments that capture a diverse group of investment styles and approaches. The investment styles and approaches include core vs adventurous, value vs growth, and large cap vs smaller companies. Our ACE 40 contains funds, investment trusts and exchange-traded funds (ETFs). 

Our robust criteria and assessment process are designed to help us make the best possible decisions. We have no conflicts of interest and focus on the best outcome for our customers at all times.