Ethical Performance
inside intelligence for responsible business


£6bn worth of British SRI funds get the star treatment

July 2007

A star rating system for UK ethical investment funds has been announced by Ethical Investment Research Services.

The ratings, which cover the 90 retail ethical funds domiciled in the UK, are intended to show how each performs in various areas so that investors can compare the approaches taken by each fund.

Funds will be awarded up to three stars, taking into account the quality of their approach to engagement and the strength of their policies on animal testing, human rights and other issues.

Funds setting out ethical criteria no better than mainstream funds will receive no star, while those performing slightly better will get one. Two stars indicate that a fund takes a position on a particular issue that is ‘suitable for an investor with an average level of concern’, while three stars show it is good for those who are ‘really concerned’ about an issue.

The star ratings apply in 16 investment policy areas, from alcohol to intensive farming, and are derived from the ethical performance of around 87 per cent of the stockholdings in the portfolios of each fund. The ratings also take account of the emphasis a fund puts on screening, engagement, corporate responsibility and the environment. However, Eiris is not issuing an overall star rating for a fund.

The ratings will be updated twice yearly in fact sheets costing £99 ($197) a year, with the initial target audience being independent financial advisers. The fact sheets also cover a fund’s research processes, voting policy and transparency, although these areas are not star-rated. About £6.1billion is invested in the funds covered by the ratings, which is a record high.

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