Square Mile improves like-for-like comparisons for sustainable funds

25 June 2024

The rapid growth of responsible investment funds, differing ways of expressing sustainability philosophies and a range of approaches to assessing funds can prove challenging for advisers to make like-for-like fund comparisons, says Square Mile.

To address these difficulties, the investment consultancy has unveiled a new approach to its 3D fund reports. All funds will now be categorised into four classifications; 3D Mixed Goals, 3D Improver, 3D Focus or 3D Impact. They will be awarded a gold, silver, bronze or reviewed medal, depending on the strengths of their credentials within their respective group.

All funds undergo a detailed examination of their holdings to determine the extent of their exposure to social and environmental solutions, whilst identifying any controversies. Fund managers are responsible for supplying a wealth of information including SDR label, their approach, exclusions, ESG integration, voting practices and engagement as well as the company’s research process, advocacy and stewardship and corporate culture.

The firm said the revised methodology will help to create a standardised sustainability profile and rating profile, making it easier for advisers to review and compare funds against the 3D assessment process.

Jock Glover, strategic relationships director at Square Mile, said: “Square Mile’s fund research has always been squarely focussed on helping advisers make better informed investment decisions to help their clients achieve their long-term financial objectives.  However, making fair comparisons between funds with responsible and sustainable mandates has become increasingly challenging as the universe of these strategies has rapidly expanded.  This has created a potentially baffling array of options of funds with nuanced approaches to sustainable investment.

“The introduction of the SDR labelling regime aims to provide greater clarity, but there is still the need for fund analysis that applies a standardised methodology to better enable comparisons between strategies.”

Professional Paraplanner