Zenith Investment Partners has classified all funds on its approved product list (APL) according to their adherence with responsible investment (RI) guidelines and will now provide information on the extent to which an investment fund has incorporated those factors.
Zenith responsible investment committee chair and head of real assets and listed strategies Dugald Higgins said the research house has applied the classification across 878 funds on its APL and labelled them as traditional, aware, integrated, thematic or impact.
Higgins said each category was related to how much consideration was given to RI factors in the fund and would allow advisers to identify funds that were suitable for clients wanting environmental, social and governance (ESG) overlays to their portfolios.
“Each category has varying levels of ESG factor consideration within its investment process,” he said.
“The classifications go beyond simply identifying which ESG strategies a fund uses, which is essential given many funds combine more than one approach.
“Instead, the classifications have been applied across all asset classes, which allows advisers to identify the level to which any fund incorporates ESG and not just those funds branded as pursuing responsible, ethical or sustainability aims.”
He said the classifications, when combined with Zenith’s existing fund data on exclusions around controversial industries, would create a “powerful set of tools for advisers”.
“These tools are becoming more vital as investor attitudes change and regulations increase, as we’re seeing with the recent announcement that ASIC is conducting a review to establish whether funds focusing on ESG considerations are aligning with the way they’re being sold,” he said.
He added the classifications were made possible by Zenith using its own qualitative analysis combined with access to each fund’s portfolio, and also revealed some sectors had a stronger focus on RI and ESG.
“Among Zenith-rated funds, listed property and infrastructure, as well as unlisted real assets, have the largest proportion of funds classed as Integrated, meaning they expressly take into consideration RI and ESG factors,” he said.
“While Australian and international shares funds did have a large number of funds incorporating RI and ESG factors, just over half of the universe incorporated ESG.
“We feel that is a logical outcome of the process given real estate and infrastructure assets have a long history of incorporating E, S, and G issues, particularly around sustainability.”
