The financial services industry is full of acronyms. ISA, JISA, SIPP, CIC, PMI, GPP, SSAS, FIB, MPA – these are just a few that spring to mind but there are countless others which you are probably thinking of right now, and as a blast from the past – anyone remember PEPs?
The same applies to the world of ethical investing where SRI (Socially Responsible Investing) and ESG (Environmental, Social and Governance) sometimes also referred to as sustainable investing, are terms that can get used interchangeably, albeit in practice there are differences. The main objective of ESG still being financial performance with ethical overlay, and SRI actively seeking out or eliminating investments according to specific ethical guidelines.
Whichever the preferred approach, there are some useful functions to support advisers using Synaptic Product and Fund when researching ethical funds.
Ethical Fact Find
On the software Home page you can access the 'Resource Centre', containing an SRI/Ethical Support section with useful links to the SRI Services website from industry expert Julia Dreblow (which includes a helpful jargon buster). There's also a link to the UKSIF homepage, an organisation with members committed to sustainable and responsible finance as well as a copy of the Synaptic Ethical Fact Find that was produced in conjunction with Julia Dreblow.
Having ascertained that ethical investing is of importance to your client, the Fact Find will help to prioritise whether your client wants to invest in companies that focus on activities such as equal opportunities, clean energy, sustainable development etc (positive criteria), or whether they wish to avoid investing in companies with activities that can be perceived as negative, such as animal testing, gambling, alcohol production and so on.
The questions on the Fact Find directly correlate to research filters available in the software.
From the Home page, within the Investment tab you will see the 'Fund data' section. Select 'Unit trusts/OEICs' (another acronym) and enter the client details to view the feature filter options.
You won't be able to see any funds yet – click on the 'Sectors' tab and select from the IA or FE Global range in order to build up an initial list of funds using the tick box next to the desired sectors.
Move to the 'Features' tab. 'Primary' and 'Open fund' are pre-ticked for optimum software performance. Directly underneath these two features there is an 'Ethical fund' feature.
Click on the words 'Ethical fund'. This adds this feature to a grid of data in the main window of the screen. This will indicate whether the fund is flagged as ethical or not by our fund data supplier FE fundinfo.
Build the data grid further by clicking on the text of any of the filtering options. For example, under 'Conditions' you can select launch date; from 'Stats' you can select annualised, cumulative or discrete past performance along with different fund charges.
Use the 'Feature' filtering tab to tick the box next to Ethical fund. This has now eliminated any funds that are not flagged as ethical and has also opened up a host of sub features for selection, which correlate with the Ethical Fact Find (additional filtering 'sub features' are indicated where the feature name is in bold). Tick the boxes alongside each option to select fund managers who avoid investing in companies with activities considered as negative and actively seek to invest in companies with positive ethical criteria.
Further down in the sub features, additional qualitative policy information is available for selection such as whether the fund manager is a member of the afore-mentioned UKSIF; Shareholder and Advocacy Engagement, Investment Monitoring and the like.
Having created a shortlist of ethical funds in keeping with the clients' ethical stance, continue through the research process in the normal way by going through to Ranking and then Report.
If you just want to view the ethical policy data, without eliminating funds, just click on the criteria text rather than using the tick box and this will add those fields to the data grid.
It's possible to view the ethical policy of an individual fund via a factsheet. One way to view a factsheet is to select the name of the fund from the data grid.
Fund Factsheet Link - Image 4
This loads a fund factsheet and indicates the fund has an ethical policy as shown in Image 5.
Fund Has Ethical Policy - Image 5
The words in blue text indicate a link to further information. Click on the words 'ethical policy' to view the full policy for the fund.
Individual Fund Ethical Policy - Image 6
Ethical policy data can also be researched in this way for other fund types with mirror funds (Life & Pension funds). The ethical policy data is all obtained by the Synaptic research team working directly with fund promoters.
A feature that is specifically available within the Unit Trust/OEICs area is the Rayner Spencer Mills Research (RSMR) SRI Rated filter. From the 'Features' tab, tick the 'Rated By RSMR' heading to open up the sub features. Tick the box alongside 'RSMR SRI Rated' to identify funds rated by RSMR.
RSMR SRI Rated - Image 7
The RSMR filter is further supported by RSMR investment process and opinion available by ticking the box shown in Image 8 from the top of a fund factsheet. This will load the RSMR content towards the bottom of the factsheet.
Load RSMR Content - Image 8
An alternative approach to fund research, would be to research a product type such as a pension. Towards the bottom of the product 'Features' tab there is also an 'Ethical funds' feature. This does not drill down into the positive and negative ethical policy criteria but if ticked, will only retain products with at least one ethical fund available and any past performance ranking calculations would only take into account the ethical funds.
Synaptic Product and Fund software therefore allows you to provide a full ethical research process, from the Fact Find right through to selection reporting, making it easy to combine granular ethical policy requirements alongside other investment factors. So, whether you just want an ethical overlay to compliment fund charges, past performance, volatility and the like or whether you need to specifically avoid / seek investment in line with an ethical stance, Synaptic Product and Fund software is able to support you.
Note: All funds listed in screen shots are for demonstration purposes only and in no way imply recommendation.