Investment rationale

Our thinking behind the 3D investing strategy

3D Investing is based on the premise of maximising social impact whilst minimising ethical compromise, and all within the context of meeting an investor’s financial expectations.  This translates into the following strategies:

Core holding of funds

The mainstay of the 3D portfolio selections are funds, as these benefit from a high level of management expertise, are well diversified and their performance can be readily monitored. The majority of the funds are thematic, since these focus on social and environmental solutions and make a clear social impact. More general ethical or sustainability funds are included to provide exposure to specific markets or asset classes including fixed interest, UK equities and emerging markets.

Predictable revenues from infrastructure

One of our strong themes is infrastructure, since investing in better infrastructure makes a vital contribution to society, whether this be by way of schools, medical centres, wind farms, solar installations or care homes. Rather than investing directly in volatile shares, we prefer investment companies that target a high and index linked yield which is underpinned by predictable and government backed income streams. Given the low volatility, clear social impact and attractive yield, infrastructure is a key part of our investment universe.

Impact investments for social ‘cutting edge’

We also seek out impact investments that take thematic investing one step further by investing for the primary purpose of making a social or environmental difference. These are illiquid, often carry high levels of risk and are not usually available on fund platforms. Unlike listed investments, however, they directly enable social initiatives by providing new capital. They represent the ‘cutting edge’ of social investment. We prefer investments that seek capital on an ongoing basis as these allow detailed due diligence to be undertaken.

Equities for income

Direct equities complement the funds where there is a dearth of suitable investments. Income is important for many investors and although there are a number of ethical corporate bond funds, there is little in the way of income producing equity funds, and those that do make significant ethical compromises. We have therefore identified companies offering an above average dividend yield whilst demonstrating social leadership in their sector. These may be suitable for investors seeking income or a lower risk approach, since any ethical compromise is readily identifiable and is minimised.

Game changer equities

Many ethical funds focus on small to medium sized companies, or else make major ethical compromises in selecting large companies. In response we have identified a selection of ‘game changers’ – a universe of companies whose shares are easily trade-able and that are key players in moving to a more sustainable world. Small companies carry high levels of volatility and often prove to be disappointing investments without excellent management.  By way of contrast, these game changer stocks have proven track records, have the capacity to make a big social impact and have a clear social vision.

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