Do good, avoid bad, make money
3D Investing – An Overview About John Fleetwood Financial adviser 1991 – 2004 Ethical specialist, founded Ethical Investment Association, author of several guides to ethical investment Development Manager, King & Shaxson 2004 – 12 Developed ethical discretionary management services for asset manager 3D Investing 2013 – present Founder of 3D Investing, provision of SRI stock research to King & Shaxson & Smith & Williamson Do good, avoid bad, make money 2
3D Investing – An Overview Do Good – Maximise Social Impact 54% of Brits who hold investments , a record high, want their pensions or savings to have some positive impact on the world beyond just making money* Avoid bad – Minimise ethical compromise Almost a third (32%) of all adults want a fossil free option for their savings or investments, rising to 46% among under-35s* Make money – meet financial expectations Predictability and not losing money is more important than chasing the highest return * YouGov October 2015 Do good, avoid bad, make money 3
3D Investing – An Overview Purpose To move more money into investments that actually make a social or environmental difference Solutions Model portfolios, star rating , research tools Markets Asset managers, advisers and individuals Do good, avoid bad, make money 4
3D Investing – An Overview Why 3D Investing – Practical solutions Problem Solution Model portfolios and support to make it Non core for advisers & asset managers easy and cost effective to run SRI portfolios Perceived lack of impact of ethical funds as a Easy identification of those funds that do whole make an impact Lack of practical, simple tools to identify 3D Star rating best funds Transparent profiling - Identification of Ethical criteria can be misleading potential issues Lack of critical analysis Objective comparison of fund content Do good, avoid bad, make money 5
3D Investing – An Overview Fund Impact: Sheep or goats? “We also use positive screening, where we favour companies that are involved in activities that benefit the environment or society” 6% of fund invested in companies providing social or environmental solutions.* “The fund aim is to ... invest in companies contributing to social well being and the protection and wise use of the natural environment .“ 40.6% of fund invested in companies providing social or environmental solutions.* * 3D Investing analysis of portfolios of leading ethical UK equity funds Do good, avoid bad, make money 6
3D Investing – An Overview Avoiding the ‘ bads ’ “The fund looks to produce long term capital growth by mainly investing in the shares of UK companies whose business is based on ethical, or socially responsible principles, both in the UK and overseas” Holdings include Petrofac (oil), Rio Tinto (mining controversies), Aeroinventory (aerospace)* * 3D Investing analysis of portfolio of a leading ethical UK equity fund Do good, avoid bad, make money 7
3D Investing – An Overview Fund Portfolio Analysis 3D classification Ethical acceptability Little ethical merit, best of class, solutions based Banks, tax avoidance, fossil fuels, mining, supply chains, boycotts Widely acceptable for the majority of investors Check – there may be ethical issues for some investors Take care – fund contains stocks that are likely to be of concern to investors Do good, avoid bad, make money 8
3D Investing – An Overview Making Money – real return that reliably meets objectives * 3D Investing analysis ast at 31 August 2015 Do good, avoid bad, make money 9
3D Investing – An Overview 3D Star Rating – an independent answer to the question “What are the good SRI funds” "At last a powerful and mercifully easy to use online tool that allows me to find the best sustainable, responsible and ethical options for my clients! – Financial adviser Do good, avoid bad, make money 10
3D Investing – An Overview What determines the Star Rating? Social Impact – Percentage of the portfolio invested in solutions to social and environmental challenges SRI Capability – Ability to assess sustainability and ethical issues, and the quality of the sustainability strategy and its implementation Financial Performance – Performance relative to the benchmark for the sector, absolute performance and consistency Ethical Acceptability – exposure to stocks that may be of ethical concern to investors Do good, avoid bad, make money 11
3D Investing – An Overview What does a 3D Star Rating Mean? Avoid - Funds contain stocks that totally undermine our confidence in the fund or have persistent very poor performance or may be in danger of being closed Watch - Low social impact and the fund contains some stocks that may be of concern or has a high social impact or high SRI capability, but a poor financial track record Good- Decent social impact but with weaknesses in suitability , SRI Management or performance; or high SRI capability but some ethical concerns; or high impact and low exposure to controversial stocks compared to other funds in sector Leader-High social impact but weak SRI capability or some limited issues in stock selection ; or decent social impact with excellent SRI management Pioneer-High social impact, fair performance and lack of exposure to companies that may be of ethical concern Do good, avoid bad, make money 12
3D Investing – An Overview 3D Portfolio Universe – leaders in sector 80 70 Best of Sector Solutions 60 50 % of Portfolio 40 30 20 10 0 Alliance Alliance Eden Tree Henderson Jupiter Kames Standard F&C F&C Premier Trust SF UK Trust UK Amity UK Global Care Responsible Ethical Life UK Responsible Responsible Ethical Growth Ethical Equity Income Income Equity Ethical UK Income UK Equity Equity Do good, avoid bad, make money 13
3D Investing – An Overview 3D Portfolios for Advisors & Managers UK Equity Global Equity Specialist Equity Emerging Markets Equity Fixed Interest Microfinance Infrastructure Real Estate Mixed Asset Ethical/Sustainable Environmental Clean Energy Social Property Healthcare Microfinance Other Do good, avoid bad, make money 14
3D Investing – An Overview 3D Investing - Partners Do good, avoid bad, make money 15
Do good, avoid bad, make money
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