Square Mile Investment Consulting and Research has revised its 3D fund assessment methodology for sustainable funds to reflect incoming regulation.
All funds will now be categorised into four classifications to reflect the fund labelling framework outlined under the Financial Conduct Authority’s (FCA) Sustainability Disclosure Regime, which asset managers can adopt from the end of July. The categories are 3D Mixed Goals, 3D Improver, 3D Focus or 3D Impact.
Funds will then be awarded a Gold, Silver, Bronze or Reviewed medal, depending on the strengths of their credentials in this respective classification, so each fund will have a sustainability profile as well as a rating enabling advisers to review and compare funds against the 3D assessment process. Square Mile will also continue to underpin the methodology by identifying whether a fund sits in one of three pillars: ‘Do Good’, ‘Avoid Harm’ and ‘Lead Change’.
Jock Glover (pictured), Square Mile’s strategic relationships director, commented, “Making fair comparisons between funds with responsible and sustainable mandates has become increasingly challenging as the universe of these strategies has rapidly expanded. This has created a potentially baffling array of options of funds with nuanced approaches to sustainable investment. The introduction of the SDR labelling regime aims to provide greater clarity, but there is still the need for fund analysis that applies a standardised methodology to better enable comparisons between strategies.
“Our revised methodology means that our analysis supports advisers in a constantly evolving market and regulatory backdrop. It offers a multitude of benefits to advisers and investors, including enhanced transparency, research-led opinion with a standardised sustainability profile and rating framework at its core.”
The FCA published the final version of SDR measures in November last year. From July, UK funds can be labelled:
