3D Ratings

The 3D Ratings explained

Our ratings are based on objective criteria that are applied to our analysis of all holdings in our universe of funds.  The ratings include 3D Fund Rating, Social Impact, SRI Capability, Risk, Financial Performance, Transparency, Ethical Issues

3D Star Rating

This is an overall assessment based on individual criteria as shown below, but having a subjective element to allow for the failings of any pure numerical system.  A three star rating is usually required for inclusion in the 3D portfolio.  A four star rating indicates excellence in meeting the need of socially motivated investors (SMI).  A five star rating is reserved for the very best funds that demonstrate a particularly high level of understanding of the needs of the SMI and the stock selection reflects this.

Specifically, the star rating translates as follows:

3D Investing One Star

One Star funds are ones to avoid – funds that are so tiny they are in danger of being wound up;  or funds containing stocks that totally undermine our confidence in the ethical integrity of the fund; or serial underperformers

3D Investing Two Star

Two Star funds may be worth considering, although they may have a poor financial track record, contain stocks that are likely to be of ethical concern or else have a low social impact.

3D Investing Three Star

Three star funds are far from average, constituting the top 30% of the sustainable investment universe for UK investors.  They may well rate as best in their sector, have a high SRI capability, or a relatively high social impact, but will also have some weaknesses.

3D Investing Four Star

Four star funds are amongst the best 3D funds.  They are likely to have a high social impact with limited ethical concerns.   Thematic funds are well represented.

3D Investing Five Star

Five star funds are the real pioneers in the industry.  They are required to demonstrate at least a fair financial performance, excellent transparency, a high social impact and a lack of exposure to ethically controversial companies.

Social Impact

063569-green-jelly-icon-people-things-people-man11The fund makes little social impact with < 20% of the portfolio being invested in companies that are of direct social or environmental benefit or which exhibit very clear leadership in their sectors

063569-green-jelly-icon-people-things-people-man11063569-green-jelly-icon-people-things-people-man11A significant proportion (20-39%) of the portfolio is invested in companies that are of direct social or environmental benefit or which exhibit very clear leadership in their sectors.

063569-green-jelly-icon-people-things-people-man11063569-green-jelly-icon-people-things-people-man11063569-green-jelly-icon-people-things-people-man11The majority (40-59%. 75-99% infrastructure funds) of the portfolio is invested in companies that are of direct social or environmental benefit or which exhibit very clear leadership in their sectors.

063569-green-jelly-icon-people-things-people-man11063569-green-jelly-icon-people-things-people-man11063569-green-jelly-icon-people-things-people-man11063569-green-jelly-icon-people-things-people-man11The vast majority (60-79%, 100% real estate funds) of the portfolio is invested in companies that are of direct social or environmental benefit or which exhibit very clear leadership in their sectors.

063569-green-jelly-icon-people-things-people-man11063569-green-jelly-icon-people-things-people-man11063569-green-jelly-icon-people-things-people-man11063569-green-jelly-icon-people-things-people-man11063569-green-jelly-icon-people-things-people-man11Every holding is of direct social or environmental benefit or a large part of the portfolio is invested in organisations that have a very high social impact.

Susstainable investment capability

green starThe fund has a low capability in terms of managing social responsibility issues and simply uses exclusion screening via an external agency

green stargreen starThe fund has a modest capability in terms of managing social responsibility issues and conducts some internal research, and/or adopts a more engaged approach than simple exclusion screening

green stargreen stargreen starThe fund exhibits clear evidence of a social investment strategy and has an internal resource to implement this strategy.

green stargreen stargreen stargreen starThe fund has made a significant investment in an internal research team, with evidence of a clear social investment strategy

green stargreen stargreen stargreen stargreen starSustainability is a key strategy for the manager and a correspondingly large investment has been made in the team.

Risk

pictograms-hazard-signsRelatively low risk of capital loss over the longer term. Corresponds to diversified sterling corporate bond funds.

pictograms-hazard-signspictograms-hazard-signsModest levels of risk. Corresponds to infrastructure funds with yields underpinned by strong covenants and long-term borrowings; real estate funds with similarly strong covenants; and bond funds with a higher risk component.

pictograms-hazard-signspictograms-hazard-signspictograms-hazard-signsSignificant risk to capital and the income stream. Corresponds to portfolios of large cap direct equities, and to diversified equity funds with mid-larger cap bias.

pictograms-hazard-signspictograms-hazard-signspictograms-hazard-signspictograms-hazard-signsHigher levels of risk. Corresponds to more specialist equity funds including emerging markets, single sector sector funds, specialist funds with gearing.

pictograms-hazard-signspictograms-hazard-signspictograms-hazard-signspictograms-hazard-signspictograms-hazard-signsHigh level of risk. Corresponds to small cap specialist funds, unlisted funds, funds with limited liquidity.

Financial Performance

star_gold_256The fund has a poor historical performance and as a result, we have very little confidence in future returns

star_gold_256star_gold_256Unconvincing track record of less than 3 years, or has underperformed against benchmark since launch

star_gold_256star_gold_256star_gold_256Performance in line with benchmark or generates a consistent level of absolute returns

star_gold_256star_gold_256star_gold_256star_gold_256Consistent above benchmark performance

star_gold_256star_gold_256star_gold_256star_gold_256star_gold_256Top quartile performance on a consistent basis over more than 5 years

Transparency

magnifying glass2The fund only publishes the names of holdings in its annual report and accounts with little other public information

magnifying glass2magnifying glass2The fund has clear ethical criteria and communicates the ethical approach in a similarly clear manner

magnifying glass2magnifying glass2magnifying glass2The fund produces quarterly social responsibility newsletters or bulletins and makes an effort to communicate how ethical issues are managed

magnifying glass2magnifying glass2magnifying glass2magnifying glass2The fund publishes regular stock profiles and reports on engagement activities in a systematic manner

magnifying glass2magnifying glass2magnifying glass2magnifying glass2magnifying glass2All holdings in the fund are justified and explained on a stock by stock basis

Ethical Issues

ethical-issues-icons-gridEach fund is examined on a stock by stock basis to identify any holdings that may cause ethical concerns to socially motivated investors.  Typically these include pharmaceuticals (animal testing), fossil fuel companies (climate change), nuclear power, intensive farming, market abuse, banks (unscreened loans), mining, supermarkets, human rights and alcohol.  It should be stressed that our analysis is based on a snap shot in time, but this gives a good indication of how the fund is managed.  Although stocks may have been sold since the research was conducted, similar stocks may be purchased in the future and historical holdings with ethical issues mean that these ethical issues may be prevalent in the future.

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