Sustainable investing FAQs

What is your selection process for the sustainable investment long list?

Our starting point was to compile a list of all funds, investment trusts and exchange traded funds available on the interactive investor platform by screening for names that suggested they have some form of sustainable, environmental, social or governance bias. We then reviewed various industry databases, including SRI Services and Morningstar which monitor for investment styles and sustainability. This gave us a starting point where we had a full list of potential sustainable options. This list was then further edited by industry experts at SRI Services to help confirm and classify relevant funds. This list is our long list. We have tried to ensure that the list is as complete as possible and shows all funds that set out to significantly include sustainable and ESG issues into their fund management strategies. We have listed these as: Avoids (funds that simply exclude certain areas – in varying degrees); Considers (funds that give careful consideration to a wide range of issues and may apply a range of different strategies including positive stock selection); Embraces (funds that are primarily focused on delivering solutions and may concentrate on a single issue or outcome). However, within these groups there is very significant variation and no single fund will appeal to everyone. Investors should do their own independent research to make sure that any choices meet their own personal views on sustainable, social and environmental issues.

We welcome comments. These can be sent to us on ethicalinvesting@ii.co.uk Please note that we will not be able to reply to all individual queries, however, we will consider the points raised when updating the list.

What is the purpose of the sustainable investment long list?

The absence of an sustainable sector means that these funds can be hard to find. We have taken the decision to bring investments which identify themselves as sustainable options and/or appear to have some sustainable screening into a single list to make them easier for investors to find. This list is however only a starting point, it is up to individual investors to identify which options most closely reflect your views on sustainable , social and environmental issues.

Does ii impose its own view on what should be on the sustainable long list?

No. We screened our tradable universe using commonly used sustainable terms and by reference to two independent industry databases, and then consulted further with industry experts. We have created our ii ACE sustainable style categories (Avoids, Considers, Embraces) in conjunction with industry experts to identify the general approach taken by the fund manager. Investments which identify themselves as sustainable options and/or appear to have some sustainable screening are included on our long list. However, other than making sure all investments have some sustainable ethos, we have not made any subjective determination as to whether an investment should be on the list or not.

What is your selection process for the ACE 40 list?

We have chosen to partner with Morningstar’s Manager Selection Services group to enhance our fund selection process and they will follow the principles summarised below.

It’s made up of eight steps:

1. Initial screening
2. Cost assessment
3. Performance analysis
4. Risk profiling
5. Qualitative assessment
6. Sustainability assessment
7. Selection and approval
8. Review and refresh

Here’s more detail about the eight steps:

• We start with the extensive list of sustainable investments we identified for the long list, removing investments which don’t trade daily or are less than one year old etc.
• We then look at cost and remove investments with an initial charge or those that are too expensive relative to their peer group unless their performance makes them compelling.
• With performance, we look at both long and short-term performance of active investments and try to identify those that deliver superior performance consistently.
• From this shortlist we identified a final set of investments that we believe to be the most suitable candidates for the asset groups and investment categories described below. Ideally we would populate the list with 60 rated investments, but there are limited sustainable choices in some categories. We hope to add to this list over time.
• The process, selection and ongoing management of the ACE 40 is also monitored and ratified by the ii Investment Committee.

What are the different Asset Groups and Investment Categories?

We have created clearly defined, easily understandable asset class groups and investment categories within which investments can be categorised. This aims to clarify the choices available to private investors.

Our 15 asset groups include some dedicated to UK investments: UK equities, UK equity income, UK smaller companies and sterling bonds. Others include broad global investment options: global equities, global equity income, global bonds and property. For those seeking specific regional exposure to equities we have asset groups dedicated to Emerging Markets, Asia, Europe, Japan and the US. There is also a specialist group, containing investments which focus on a specific environmental or social theme. For those seeking a more diversified investment strategy we have a mixed asset group.

Within each asset group there are five possible investment categories: low cost, core, income, smaller company and adventurous. Each category is briefly explained within the table below and has a different meaning depending on whether the relevant asset group is equity or fixed income. The specialist asset group and the adventurous investment category are designed to appeal to the more expert investor.

Our objective is populate the matrix as far as possible. However, at present, the total number of suitable funds stands at around 40. In future as the sustainable investment sector matures, we would expect to be able to add new investments in asset groups and investment categories that are currently under-represented, such as US and Japanese equities, property and smaller companies.

How is your list any different from everybody else's rated lists?

Our screening process begins with the entire sustainable collective investment universe rather than just the funds universe. Including investment trusts and ETFs is essential to making sure we include the best possible options. Choosing to only concentrate on funds would overlook two thirds of the collective market, which can’t be optimum for investors.

Cost to the investor is one of our principal considerations, but it is a factor in relation to the underlying success of the investment rather than the only thing that matters or even a mandatory requirement for getting on a list at all.

Our selection process is rigorous and independent and cannot be influenced by potential conflicts of interest.

How do I use the table?

Our table has three categories:

• ii ACE sustainablestyle (Avoids, Considers, Embraces), which gives a broad investment approach of the fund manager, for example whether it is purely negatively screened, focused on delivering positive impacts or a combination of different approaches.
• Fund EcoMarket (FEM) category, which delivers a more granular steer to the approach taken by the manager.
• Morningstar Sustainable Attributes, which classifies the sustainable funds landscape by using funds’ own stated objectives. If a fund states it has a focus on sustainability, impact or environmental, social and governance (ESG) the fund is deemed by Morningstar to invest sustainably.

Investors may already have a favoured approach – for instance, they may want to avoid certain sectors, look for options that follow sustainability themes or blend avoidance with positive stock selection - or alternatively find a fund that is perhaps more specialist or focused on trying to make substantial positive impacts.

Definitions of the style and names used can be found here. Please note: our list and the categories should be a starting point for further research.

Are all the investments listed sustainable?

Sustainable values are very personal and so is sustainable investment. An sustainable investment policy that is ideally suited for one person will be inappropriate for another. The information we provide should go some way to help you find funds that suit your personal aims and opinions, however choosing a fund based on its style or approach is no guarantee it will match your personal investment criteria.

For example, investors who are looking to screen out the ‘sin stocks’ from their portfolios may be happy to look at the Avoids ii ACE sustainable style category or the Ethical category from Fund EcoMarket. However, while some funds avoid oil stocks, others may include them if the company is believed to be transitioning towards focusing on renewable energy. Another example is where environmentally friendly companies need to use certain minerals such as cobalt for electric car batteries or silver for solar panels. These minerals are mined, but mining is a sector that is traditionally perceived as controversial.

These conflicts are inherent in the sustainable investment world as some fund policies are more pragmatic than others. Some will balance the pros and cons of different business strategies and focus on themes that can help support growth and encourage progress, whereas others have more binary in/out policies. Many also blend all of these elements, particularly in the ‘Considers’ category.

We have tried to list sustainable options so that investors can create a short list for further research and identify those investments that fit in with their own personal beliefs.

How many changes do you expect to the long list?

We hope to update continuously the long list of sustainable investments as new ESG (ethical, social and governance) investment options become available. We will also be reviewing existing investments on the list to make sure they maintain their sustainable criteria.

How many changes do you expect to the ACE 40 list?

We hope to update continuously the ACE 40 list as new ESG (ethical, social and governance) investment options become available. We will also be reviewing existing investments on the list to make sure they maintain their sustainable criteria and remain high quality options for the ACE 40 list.

Which sustainable investment style is best?

No style is inherently better than the others, however most individuals will have a personal preference. For example if your aim is only to avoid making ‘accidental’ investments into companies that are controversial (such as tobacco or weapons producers) then look for ‘Avoids’ style investments; if you are looking for investments enabling and facilitating change across all areas of industry and want to focus on growing themes such as sustainability, then the ‘Considers’ style may work best for you; but if your primary aim is to make a tangible positive impact on the environment or society, you will probably prefer investments in the ‘Embraces’ style category.

Are investments on the long list truly sustainable , or have they been ‘greenwashed’?

Greenwashing is a term that typically means that something is claiming to be more sustainable or environmental than it is. Opinions vary to some extent with regard to what is and is not ‘sustainable ’ or ‘green’. For example some may regard banks, pharmaceutical companies and/or airlines as unacceptable whereas others would say they provide valuable services that are part of life today and that it is important to encourage them to raise their standards.

As this list brings together all funds in this area we leave it to you to decide what you like and do not like. We recommend you carry out your own research, particularly if you have specific areas of interest.

Why are there so few fund managers listed on the sustainable long list?

We have attempted to identify sustainable options for the list, irrespective of the fund management group. However, some fund managers actively integrate sustainable and ESG criteria into their investment process or have a range of sustainable options run by teams focusing on specific sustainable criteria, which is likely to result in them having more sustainable investment options available. Other fund managers may have bespoke sustainable options and have less investments on the list. We have attempted to include all potentially relevant fund options. We do not however include funds that are not publicly available.

What is the difference between the Morningstar Sustainable Attributes and the Morningstar Sustainability Rating?

The Morningstar Sustainable Attributes classifies the sustainable funds landscape by using funds’ own stated investment objectives, while the Morningstar Sustainability Rating (also known as the “Globe rating”) is a holdings-based rating. The Morningstar Sustainable Attributes use indicators around intentionally sustainable strategies, such as positive screening, active engagement with companies, specific impact goals as well as exclusionary screens. – ruling out certain companies that do not meet the fund’s sustainable criteria Positive screening, on the other hand, is a strategy employed by funds that seek to do good – by searching out companies that are taking positive action, whether that is to improve or limit damage to the environment, engage with local communities or improve conditions for workers. The Morningstar Sustainability Rating, however, provides an objective way to evaluate the fund’s ESG profile based on underlying company ESG Ratings from Sustainalytics. 

Are there any hidden commercial considerations to be aware of?

Generally sustainable funds are priced the same as other comparable funds. These are regular investment funds and aim to deliver competitive financial performance. Although some fear that fund performance may suffer if companies are excluded it is increasingly recognised that companies with high ESG standards are typically well-run companies. In addition, environmental and sustainability issues are increasingly important to business as well as society - so companies that take issue of that kind seriously are often regarded as well placed to benefit in the changing world we now live in.

Our flat-fee pricing means that our investors do not need to have to have any concerns about vested interests of ii. There are never any hidden commercial considerations or other conflicts.

We ensure that the selection process for all our lists, including the sustainable list and any rated lists we have, is rigorous, independent and underpinned by the key principles of transparency, choice and fairness.

Why don't we ask for discounts?

We are happy to obtain discounts from fund management groups, and our aim is to provide the keenest prices in the market. However, we do not allow such commercial considerations to affect the selection process for any of our lists. Investments don’t become ‘sustainable ’ just because they have additional discounts.

If we are subsequently able to achieve better prices for our customers for any of our investments, then this will be an additional bonus. Even without discounts, the cost of buying a fund is usually cheaper for ii customers than obtaining a discount and paying a percentage-based platform fee elsewhere.

How do flat fees benefit our customers?

Flat fees are typically more advantageous for those customers who already have assets more than £20,000. For those with more substantial assets, the benefit is even more pronounced, enabling investors to save thousands of pounds each year in costs.

For an investor who chooses to invest in low-cost passive funds, it makes no sense to pay a large percentage-based platform fee on top of the small management fee.

Are these recommendations?

No, as an execution-only provider we do not provide advice involving personal recommendations. Our objective is to develop a broad universe of sustainable investments from which our customers can choose their own investments.

In our experience, individual investors tend to know their own investment preferences, so will be able to decide on whether to invest in funds and trusts that have a particular style, including those that avoid particular investments and sectors or those that actively embrace new, clean technology or other investments. Investors also have product types they prefer, be they ETFs, funds or investment trusts, and can be primarily active or passive investors.

Factsheets for each of the investments listed are updated regularly. They contain current performance and valuation metrics, as well as key statistics to help investors make their own judgements.

The sustainable investment list does not form a personal recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in the rated investment list may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

How much does it cost to buy any investments on the sustainable list?

Our customers pay a monthly fee, depending on the Service Plan they choose. There are also charges for buying and selling investments. Monthly regular investing is free. View our full rates and charges.

What is a fund?

A fund is a pool of investors' money run by a fund manager who invests on behalf of the customer, invested into different assets and professionally managed by the fund manager and their research team. Each investor receives units, which represent a portion of the holdings of the fund.

What is a trust?

Investment trusts are listed companies that invest in the shares of other companies or fixed income securities, unquoted securities or property.

As a listed company its shares are quoted on the London Stock Exchange and the share price is determined by demand and supply.

What is the difference between a fund and a trust?

Investment trusts are closed-ended companies. This means they have a fixed number of shares in issue, unlike Funds that are open-ended investment companies ('OEICs') or Unit Trusts. Investment Trusts are also listed companies and must have an independent board of directors that are obliged to answer to their shareholders.

What is an ETF?

Exchange-traded funds (ETFs) are collective funds that trade on a stock exchange. They are designed to track the movements of an index, commodity or basket of assets. They will do this by taking positions in the underlying securities that make up an index in the same weights that they appear in that index.

ETFs are offered on a vast range of indices and commodities and usually have a lower annual management fee than other types of collective investment fund. They are also bought and sold in the same way as normal shares, but because they are a basket of stocks like a fund, you do not pay stamp duty on the purchase of ETFs, as stamp duty has already been paid on the underlying investments held by the ETF. However, you will be subject to tax on any gains made from your investment in an ETF.

What is the difference between active funds and passive funds?

An actively-managed investment fund has an individual fund manager or a team of managers who make investment decisions for the fund. They seek to deliver a higher return than the relevant market index.

Passive management of a fund intends to track the returns of an index, it doesn't have a fund management team making decisions.

Passive funds typically cost less than actively managed funds.

How can I invest in the investments on the sustainable list?

Customers who already have an account with us can simply click on the investment name to get through to the relevant factsheet and then select the buy buttons and login to their account. Customers who do not have an account with us yet can apply for an account. Applications take just a few minutes.

What information do I need to open an account?

To open a Trading Account you must be 18 or over and either a UK, Channel Islands or Isle of Man resident. You will need the following information.

•    Your address details (last three years)
•    Your National Insurance number
•    Your debit card details.

Can I invest in these sustainable investments in an ISA or SIPP?

Yes. All these funds can be held in a Stocks and Shares ISA or a SIPP and being tax-efficient is hugely important over the long term.

Click here to check all of our charges.

Can I set up a regular investment and buy these investments monthly?

Yes.  Our account allows you to invest regularly for free. This allows you to build up your investment portfolio in a simple, low-cost way to achieve your investment goals. It also ensures that you can balance your returns over the longer term, removing the worry of investing a lump sum.

Click here for more details.

Can I hold other investments in my account?

Yes. Once you have an account with us you can choose to invest across a wide range of investment options including funds, investment trusts, ETFs, equities, including both the UK and a wide range of international markets, and bonds.

We also offer a range of tools and filters to try and make it easy for you to decide what investment options suit you.

Which investment is right for me?

We don’t offer advice and any decision to invest is based on your own personal circumstances, including how long you intend to invest for and the amount of risk you are willing to take.

Each investment has a factsheet detailing its asset allocation and objective.

How can I look at alternative investment options to invest in?

We offer a fund search option that allows you to filter the range of available funds and search options that allow you to explore the whole range of available investments including shares, investment trusts and ETFs.

Sustainable investing
Overview | Sustainable Investments | Table definitions | FAQs