This article is from the latest Good Investment Review, which you can download free here.
Asking for information about what a fund is invested in and clarity on exposure to negative activities such as fossil and tobacco is perfectly reasonable but can be hard to find.
The FCA Sustainable Disclosure Rules (SDR) aim to provide this information from July this year when a range of four labels are will be introduced to help consumers navigate the sustainable funds market.
What the labels do not ensure is that the investment platform on which the funds are hosted is also sustainable and presents an easy to navigate journey for customers who wish to invest according to their values.
Often customers land on an investment platform with thousands of funds which may or may not be sustainable, with no clear way to navigate through the maze of options. Aligning their values with the funds on offer is difficult as they are overloaded with choice yet with no clear user journey.
This is where the Big Exchange (TBE) comes in with its mission to support customers who have the primary intention to invest with a conscience for the benefit of people and planet. Since it was established, TBE has championed maximum impact, transparency and anti-greenwashing.
We also go a step further in mandating the managers who have funds on our platform to disclose their full holdings (not just the top 10) so that our impact analysts can review exactly what each fund invests in. We provide extra information on how a fund might rank highly on measures such as being female led and make it super easy for customers to find whether a fund is fossil free, through the filters on our website. The filters are constructed and backed up by a detailed dialogue with the fund manager on an ongoing basis.
Top-rated positive impact funds at a glance
In addition, fund managers joining the platform face a rigorous and detailed due diligence onboarding process as follows:
- meeting with managers to check that they meet TBE’s requirements
- completion of our detailed questionnaire
- provision of a full list of current fund holdings
- an independent third-party assessment
- passing the assessment and with a minimum of a bronze medal under our process
- reassessment once a year
- notification to TBE of any material changes
- oversight from an independent investment committee
We don’t leave it there though, many of our asset managers join our movement to achieve the greatest impact by participating in our impact committee which is our independent forum for advocacy aimed at driving continuous improvement in the industry.
Customers who come to TBE do so in the main because they want to invest their money according to their values and the desire to do good with their money. They care about the world and often do not want their money funding things like fossil fuel, tobacco, and a range of other controversies such as human rights abuses, gambling, weapons, pornography, and alcohol etc.
Of course, customer preferences vary, but TBE displays as much information as possible about controversies that our customers are likely to care about so they can decide what is important to them. We are also always happy to answer questions from customers who want to dig deeper on how their money is being invested and be sure that it is a good match to their values.
Let’s look at a couple of examples from our customers to show how this works in practice:
Fossil fuels
Many of our customers care passionately that their investment does not go to fund fossil fuel companies. We screen for fossil exposure by checking the holdings, which we are happy to share with customers, through our independent assessment process and our liaison with the fund manager at least annually.
Tobacco
The doctor who has no wish to fund tobacco as its their life’s work to treat patients with tobacco related illnesses is a real-life question from a customer that TBE received recently.
The customer was invested in a fund which has a cap of less than five per cent revenue from tobacco. One of our impact analysts investigated the exact nature of any potential exposure so we could go back to our doctor with a detailed response. The fund the customer was invested in held a bond issued by a property company which had let a site to a tobacco distribution company. The manager also provided a good example from the retail sector of their stance on tobacco; they sold Tesco when they acquired Booker because it then exceeded the five per cent threshold.
In summary, when investing according to values, it’s also important to consider whether the investment platform facilitates that choice and strives to provide all the relevant information customers need to make sure their investments match their values.
Important information: Please remember that when investing, making money is not guaranteed and your capital is at risk. The value of your fund can go down as well as up. Tax treatment depends on an individual’s circumstances and may be subject to change.
This article does not constitute investment advice. If you are unsure whether an investment is suitable for your circumstances, you should contact an independent financial advisor.
