How our Lonsdale financial advisers measure a fund’s sustainability rating

Friday 7 May, 2021

Many of our clients want to invest in sustainable funds, but how can we be sure the funds we recommend, or those that state they are ‘sustainable’ invest in companies that consider social, environmental and governance factors alongside financial considerations when assessing investment opportunities?

Lonsdale Services financial advisers use Morningstar Sustainability Rating

Our Lonsdale independent financial advisers subscribe to Morningstar an investment research firm that analyses mutual funds, individual stocks and general market data. In 2016 Morningstar released the Morningstar Sustainability Rating which helps investors measure the environmental, social and governance risks in a fund relative to the fund’s peer group. The sustainability rating is based on historical holdings within a fund and uses company ESG information from Sustainalytics a respected ESG research provider to calculate a fund’s sustainability rating.

Simon Prestcote, Chartered Wealth Manager, Barnet, North London, said:

‘We are finding many clients want to invest sustainably. If a client wants to invest solely in sustainable funds, as we are independent, we offer a choice of different sustainable funds, and through Morningstar we can check each fund’s sustainability rating, so we are confident that the companies the fund invests in are also sustainable. For any clients that want to invest in a range of funds with different objectives or geographic locations, we can check their sustainability rating too. The fund information provided by Morningstar, although historic is very detailed and even allows us to identify a fund’s exposure to specific companies. The data has highlighted that some traditional funds that don’t market themselves as ‘ethical funds’ are actually very sustainable when compared with their peers. As our financial advisers are impartial, we offer a variety of funds that invest sustainably so you have several sustainable fund options to choose from.’

Understand more about Sustainable or ESG investing?

ESG investing involves focusing on environmental, social and governance factors when assessing investments. It can also be referred to as socially responsible investing, sustainable investing, impact investing, or values-based investing.

We’re finding that clients of all ages are interested in sustainable investing. For more information read our Sustainable Investing brochure.

What do fund managers consider when investing sustainably?

Below we review environmental, social and governance factors that affect a company’s sustainable rating.

Environmental factors refer to how companies perform in their stewardship of the environment, for example:

Carbon footprint
Energy consumption
Greenhouse gas emissions

Social factors determine how companies manage relationships with employees, suppliers, customers, and the areas where they operate, for example:

Human rights and social justice
Working conditions and employee relations
Health and safety standards

Governance factors focus on company leadership. For example:

Board diversity, structure and pay
Avoidance of bribery and corruption
Management & culture

Simon Prestcote, member of the North London financial planning team continued:

‘If you are interested in sustainable investing, we recommend that you contact your local Lonsdale financial adviser to discuss ESG investing. Our independent financial advisers will assess your risk profile and review your income and expenditure and your assets before offering financial advice. We offer an ESG approach to investing through active investment or passive investing, which also allows you to invest your ISAs and your pensions sustainably. If you are new to investing, we recommend you read our Beginner’s Guide to Investing. ‘

In Summary...

The Morningstar Sustainability Rating allows our financial advisers to review individual funds if you want sustainable investing options. Complete our booking form now and your local Lonsdale financial adviser will contact you for an initial review to discuss your finances, sustainable investing and our charging structure.

The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested. The contents of this article are for information purposes only and do not constitute individual advice..

Need financial planning advice?

If you would like a free initial financial planning review, complete the form below, or contact our St Albans, Barnet, Harpenden, Leeds & Bradford, Stafford, Ringwood, Ware, Wimbledon or Chippenham office.

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Simon Prestcote, Lonsdale Wealth Management Chartered Wealth Manager, Barnet, North London