Blog by John Fleetwood – July 2018


The IMA Global Equity sector is perhaps the most important for the positive impact investor since it is a keystone of many portfolios.

Gone are the days when global equities were considered to be a peripheral investment to a mainstay of UK equities, and with widespread recognition of the extra opportunities afforded by global markets, they are now a core investment.   This is particularly so in the sustainable investment arena, where many, if not most, of the best opportunities lie outside of the UK.

Over time, there has been a move from a predominantly negative (avoidance) approach to a more positively oriented focus on companies with a strong sustainability profile.  Caution is required, however, as positive labels can gloss over significant ethical controversies and major differences in the positive impact of funds.

 74 funds

 £29.39 billion assets under management

 2.59 average star rating

Data from the IMA – 31st March 2018

From these funds, we compile a shortlist of funds by first excluding funds that have significant exposure to major ethical controversies, notably companies subject to widespread boycotts, oil and coal producers, weapons manufacturers, tobacco producers, miners and other companies that are associated with high levels of environmental or social controversy.  We then eliminate funds which have a very poor track record or which remain very small on the basis that they are at high risk of failing to meet the financial objectives of investors.  The third screen identifies those remaining funds that are likely to prove problematic to trade in widely used model portfolios. These include funds denominated in currencies other than sterling and funds with high minimum investment levels.

The remaining 18 funds which invest in more than one theme have been analysed according to the 3D Investing classification system to see which funds have most positive impact.  We have also compared the funds with the benchmark index to determine the relative impact with comparable unscreened funds.

3D funds are funds that qualify for our preferred list of funds for use in the Positive Pennine portfolios.  The analysis is based on classifying each stock held by the funds according to its social impact:

Solutions Based – Core products and services are of direct social or environmental benefit (clean energy, resource efficiency, clean air and water, healthcare, education, enabling infrastructure, low carbon transport, safety, sustainable food and agriculture, social infrastructure and inclusive finance

ESG Leader – Social and/or environmental practices are amongst the best in its sector

Limited Positive Impact – Core activity confers few clear social or environmental benefits

High Negative Impact – Stock has a major negative impact (include tobacco, mining, fossil fuel extraction, air transport, cement production, gambling and armaments, subject to widespread boycott)

It can be seen that the average shortlisted fund has a much higher exposure to companies providing social and environmental solutions than the MSCI World Index, without the exposure to controversial stocks.  This means that the Positive Pennine Portfolios really do make a positive difference!

These are the opinions of John Fleetwood and do not necessarily reflect those of Pennine Wealth Solutions.