I’ve been advising on ‘ethical’ investments since 1991. Since then, the number and variety of funds has proliferated and the ability to construct a balanced portfolio with a clear social impact is higher than it has ever been.
However, the multiplicity and diversity of funds has created its own problems. Many have been driven by institutions keen to track benchmarks and without an obvious empathy with investors wanting to make the world a better place.
This has resulted in strange anomalies whereby highly controversial companies are held (think Monsanto, Exxon, Bayer) in seeming contradiction of the mandate of the fund.
It’s about investing in solutions to real world challenges whilst avoiding the companies that contribute to the problems in the first place.
At the same time, positive criteria have tended to be aspirational rather than mandatory, meaning that the actual positive impact of portfolios can be disappointing.
This has been compounded by a lack of clear impact reporting with piecemeal reporting of social impacts.
3D Investing is a response to this lack of clarity, aiming to identify those investments that actually do good, avoid harm and deliver on financial expectations.
Our ratings aim to make the identification of the ‘best funds’ simple and to enable the construction of balanced portfolios that actually achieve our threefold aims.
This doesn’t always make us popular, as only the top 30% of funds achieve a rating of 3 stars or more, but then not every fund can be good. We don’t aim to be everything to every man (or woman). Instead, we set out to demonstrate the funds that best meet our definition of what constitutes a good fund.
This isn’t traditional ethical investment, nor is it just about corporate responsibility – it’s about investing in solutions to real world challenges whilst avoiding the companies that contribute to the problems in the first place.
3D Investing is starting to have an impact. We are part of a movement of positive investing, using listed investments to make a positive impact in the real world.
A growing number of fund partners have chosen to work with us including Columbia Threadneedle, Foresight, Impax, Pictet, Sarasin, Triodos and WHEB, whilst we have helped Pennine Wealth Solutions and King & Shaxson to develop 3D portfolios.
Most encouragingly, the star rating has acted as a tool to drive improvement in impact reporting, with funds having been awarded a better rating following satisfied requests for more transparency in reporting.
I regard 3D Investing as a journey. There will never be a perfect solution and we will never get to the final destination, but hopefully, we advance with time. This review is just the latest snapshot of where we have got to on that journey. Bon voyage!
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