Interactive Investor

Sustainable investing table definitions

How to use the sustainable investments table.

Get to the heart of sustainable investing

Our sustainable investments table has three categories.

  1. The ii ACE sustainable style, (Avoids, Considers, Embraces), which gives a broad approach to the sustainable investment style of the fund manager.
  2. The Fund EcoMarket (FEM) category, which delivers a more granular approach to the sustainable style adopted by the manager.
  3. The Morningstar Sustainable Attributes, which classify the sustainable funds landscape by using funds’ own stated objectives.

Sustainable values are very personal and so is ethical investment. An sustainable investment policy that is ideally suited for one person will be inappropriate for another. The information we provide should go some way to help you find funds that suit your personal aims and opinions, however choosing a fund based on its style or approach is no guarantee it will match your personal investment criteria. 

For example, investors who are looking to screen out the 'sin stocks' from their portfolios may be happy to look at the Avoids ii ACE category or the Negative Ethical category from Fund EcoMarket. However, while some funds avoid oil stocks, others may include them if the company is believed to be transitioning towards focusing on renewable energy. Another example is where environmentally friendly companies need to use certain metals such as cobalt for electric car batteries or silver for solar panels. These minerals are mined - but mining is a sector that is traditionally perceived as controversial. 

These conflicts are inherent in the sustainable investment world as some fund policies are more pragmatic than others. Some will balance the pros and cons of different business strategies and focus on themes that can hep support growth and encourage progress, whereas others have more binary in/out policies. Many also blend all of these elements, particularly in the 'considers' category. 

Our long list includes funds that publicly state that they have ethical, social, environmental, sustainability screened, themed or responsible investment strategies as well as others we believe to be relevant to this area. We do not impose a view as to whether or not an investment should be on this list or not. 

We will continue to monitor the market for new launches and for managers who have formally adopted additional ESG and/or sustainable strategies and those who have will be added to our list. Our independent sustainable experts at SRI Services will be monitoring this list to ensure its completeness and to help us with the classification of these funds into our ACE styles. 

Definitions of the different styles and categories can be found below:

Morningstar Sustainable Attributes

Our data provider, Morningstar continues to evolve its data, research and analytics to help investors assess the ESG risks and attributes in their portfolios. Using indicators around intentionally sustainable strategies such as positive screens and specific impact goals as well as exclusionary screens, they have built an Attributes Framework which offers investors a system that classifies the sustainable funds landscape using funds’ own stated objectives.

  • Employs Exclusions: Strategies exclude certain sectors, companies or practices. This indicator is marked if any exclusions are employed by the strategy. Exclusions include areas such as: adult entertainment, alcohol, animal testing, controversial weapons, gambling, thermal coal and tobacco, among other things.
  • ESG Fund: These are sustainable strategies that incorporate ESG criteria throughout the investment process. Strategies that use ESG incorporation typically have explicit sustainable criteria that invested companies must meet, and some may use a combination of positive screening, negative screening and active engagement.
  • Impact Fund: These strategies seek to make a measurable impact alongside financial return on specific issue areas. Impact funds often focus on specific themes or use the 17 U.N. Sustainable Development Goals as a framework for evaluating the overall impact of the portfolio. Some areas include: gender and diversity, low carbon/fossil-fuel free, community development and environmental.
  • Environmental Sector Fund: These are strategies that intend to invest in environmentally orientated industries. Such as renewable energy (companies involved in the renewable energy sector) water focused (companies with clean water practices) and general environmental sector (strategies invest in other environmental industries without a primary focus on renewable energy or water).

ii ACE sustainable style definitions


Funds that focus on excluding companies, sectors or specific business practices in line with the published fund criteria that may focus on sustainable, social and/or environmental issues. Funds in this group vary significantly. Some will exclude only a small number or companies (for example perhaps only a small percent of their possible universe), others have extensive exclusions (50% or more of their possible universe). The most common areas of exclusion are tobacco companies, weapons manufacturers and companies that breach internationally agreed standards - some include multiple additional issues. Passive funds typically fall into this group, generally with limited exclusions. 

Pros: Fund managers that screen out unethical companies may give peace of mind to investors who are actively looking to avoid certain sectors.

Cons: There is huge disparity in relation to the range of sectors and companies that are excluded from funds that apply negative screening. Some very sustainable funds can exclude over 60% of available investments, while others only avoid 3%. Customers should do further due diligence to ensure any investment option fits with their personal sustainable criteria.


Funds that actively consider sustainable and/or environmental, social and governance (ESG) issues as part of their investment strategies. Funds in this group vary significantly but typically consider multiple positive and negative issues when deciding where to invest - with many emphasising positive stock selection. Most avoid controversial business practices and focus on sectors, themes and activities that the managers believe to be both financially sound and sustainable, socially and/or environmentally beneficial. Many funds also have responsible ownership (stewardship) strategies and aim to improve companies' environmental and/or social practices. 

Pros: Managers who consider sustainable issues will often invest in ‘best in sector’ companies that they consider to be operating more sustainably than their peers.

Cons: This is a wide-ranging group covering many different approaches. Each fund manager will consider some sustainable criteria as part of their analysis of individual companies, so investors will need to do further research to determine whether a particular fund meets their sustainable requirements.


Funds that focus on companies or other investment types (eg infrastructure, property) where delivering positive social and/or environmental outcomes is integral to their existence. These funds often refer to focusing on 'delivering positive impacts' as a major element of their investment strategy and purpose. Alternatively they may simply be entirely invested in a sector (such as renewable energy or social housing) where the potential to help deliver positive benefits is widely recognised. Fund strategies vary and you should be aware that unlike the other two styles additional sustainable factors may not always be considered by funds of this kind. 

Pros: The fund manager’s primary aim is to make a tangible, positive impact on the environment or society. They proactively support & 'encourage' companies either through stock selection, responsible engagement, or an impact focus.

Cons: These managers will choose investments based on their sustainable criteria above all else - and financial considerations may be secondary to sustainable requirements. This may result in the investment being more volatile and less likely to match the performance of standard indices over time.

Fund EcoMarket (FEM) category definitions

Funds which focus on ‘sustainable/values based’ negative and/or positive screening based strategies:

  • Sustainable: Funds focus on ‘values based’ issues typically alongside considering ESG (environmental, social and governance) and sustainability related issues.  These funds set out where they aim to invest and avoid in their published criteria. Some have extensive exclusions others may make more balanced decisions – balancing pros and cons. Fund strategies are often complemented by responsible ownership (stewardship) activity.
  • Limited Exclusions (a sub style of Negative Ethical) funds exclude only a tiny fraction of their potential universe (e.g. only avoid tobacco, or the worst UN Global Compact offenders). These funds should not be confused with other ESG/sustainable funds that have significantly more comprehensive strategies.
  • Faith Based investments invest in line with specific religious principles (e.g. Shariah Law)

Funds which focus on ‘thematic’ strategies, often alongside screening strategies:

  • Sustainability Themed funds integrate sustainability considerations into their investment process in order to help to make better investment decisions but investments are not driven by sustainability themes. These funds may invest in most company types and may be ‘overweight’ in companies with higher standards and ‘underweight’ in companies with poor practices – rather than necessarily excluding them. They may work to encourage more sustainable business practices through stewardship activity.
  • Sustainability Tilted: funds integrate sustainability considerations into their investment process in order to help to make better investment decisions but investments are not driven by sustainability themes. These funds may invest in most company types and may be ‘overweight’ in companies with higher standards and ‘underweight’ in companies with poor practices – rather than necessarily excluding them. They may work to encourage more sustainable business practices through stewardship activity.
  • Environmental Themed funds significantly integrate environmental issues into their investment strategies, sometimes alongside sustainable avoidance criteria. Their focus is often around longer term environmental and resource related issues.
  • Social Themed funds focus on ‘people issues’ (such as employment and basic necessities of life). Social themed fund managers focus significantly on societal benefits when analysing companies for investment.

Strategies that may apply to an individual fund or across all fund manager assets:

  • ESG Plus can be a ‘fund theme’ or a ‘corporate’ (fund management company-wide) strategy. Fund managers with strong ESG strategies consider ‘Environmental, Social and Governance’ risks (and opportunities) as part of their investment research process. Applied on its own ESG does not normally indicate that there is additional SRI activity (screening or stewardship/responsible ownership), however the Fund EcoMarket ‘ESG Plus’ listing indicates that that the fund has a strong ESG strategy PLUS addition SRI/ethical/stewardship related activity.
  • Responsible Ownership is a ‘corporate level’ strategy – applying across all or most of a fund manager’s assets. Fund managers with Responsible Ownership or Stewardship strategies work with the companies they invest in to encourage better environmental, social and governance practices – when change is in the best interest of (all) longer term investors. (This strategy often forms a significant part of SRI-screened and themed fund activity.)

Risk Warning: The price and value of investments and their income fluctuates: you may get back less than the amount you invested. If you are unsure about the suitability of a particular investment or think that you need a personal recommendation, you should speak to a suitably qualified financial adviser. Please note, the tax treatment of these products depends on the individual circumstances of each customer and may be subject to change in future. If you are uncertain about the tax treatment of the products you should contact HMRC or seek independent tax advice.

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