Find managed funds that align with your values

A sub-set of Managed Funds research, find the managed funds that have obtained a Lonsec Sustainability Score

  • Go beyond ethical & ESG labels
  • Find the “net goodness” of a fund
  • Register for free insights

Aligning your investments to your values

For a number of years now, the has been an increased demand by investors to understand the extent to which their portfolios are contributing to, or detracting from the key environmental and social challenges facing society and the environment. Lonsec’s Sustainability Score has been designed to help investors to assess managed investments in this way.

The Lonsec Sustainability Score assesses managed funds against the UN’s Sustainable Development Goal (SDG) framework. The SDGs are 17 individual goals which are a “universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity” (UN, 2016).

Traditionally, ESG measures, scores and analysis focus on how ESG risks might impact the economic value of a company or stock. Whilst Lonsec believes that this type of ESG analysis is an important element in the overall investment process, it generally fails to capture the broader ramifications of portfolios and companies on addressing the sustainability related risks facing our society and the environment.

Lonsec’s Sustainability Score aims to address the opportunities and risks not captured in traditional environmental social and governance (ESG) assessments. The Sustainability Score, updated quarterly and available to members in the Members Research Portal, is separate to the fund’s investment rating and readers should use this report in conjunction with the Product Profile and/or Viewpoint Report.

The Lonsec Sustainability Score

Lonsec’s Sustainability Score (“Score”) is a quantitative estimate of the net ‘goodness’ in a portfolio. The Score nets the positive contributions to the 17 SDGs against the negative impact of exposures to controversial industries from the activities of the companies held in a fund’s portfolio. The 10 controversial industries are: fossil fuels, gambling, alcohol, tobacco, deforestation, defence, nuclear, opioids, genetically modified organisms (GMO) and adult industries.

The Score is a peer relative assessment of a fund at a point in time. It is not an ESG negative screen, however for comparison, in the report we have included the most common industry exclusions as provided by the manager. These exclusions do not contribute to the calculation of the Score.

Lonsec recognises that today there is no global standard measure of sustainability or controversy. Given the technologies available today and the structure of our current world, there is a reliance on certain industries, such as mining and fossil fuels, and it is expected that most portfolios would have some exposure to them.

Measuring contribution to SDG and Controversial Industries

Lonsec has partnered with Perth-based data provider Sustainable Platform to obtain environmental and social information on over 17,000 global listed companies. Sustainable Platform uses artificial intelligence and proprietary algorithms and fundamental sustainability methods to assist its research team to obtain and process data from publicly available documents, such as government departments, company reports and news sources.

Sustainable Platform applies its proprietary Sustainability Classification Standard (SCSR ) to process the information. SCSR is a probabilistic classification taxonomy that categorises a company’s contribution to sustainable development by what it makes, how it operates and how its products and services are utilised by the end user. SCSR looks through the standard industry classifications for companies, capturing it’s entire range of products and services. For example, the fossil fuel exposure of a company considers any emissions and emission offsets and provides a single, quantitative method to compare any other company (or portfolio) on carbon pollution, regardless of the reported industry that the company is in.

The SDGs provide a framework for government action and intergovernmental and supranational cooperation and are not a direct blueprint for corporate activity. Corporations do, however, provide the essential goods and services necessary for these goals to be implemented and it is through the provision of these various products that the mapping has been created.

The Sustainability Score Bees

Lonsec’s Sustainability Score is symbolized by between one and five bees, with five being the top-scoring.

5 Bees: A Sustainability Score of “five bees” is the highest a fund can achieve. This signifies that the fund’s holdings are ranked within the top 10% of peer universe, on a net ‘goodness’ basis.

4 Bees: This signifies that the fund’s holdings are ranked within the top 20% of peer universe, on a net ‘goodness’ basis.

3 Bees:  This signifies that the fund’s holdings are ranked within the middle 40% of peer universe, on a net ‘goodness’ basis.

2 Bees: This signifies that the fund’s holdings are ranked within the bottom 20% of peer universe, on a net ‘goodness’ basis.

1 Bee: This signifies that the fund’s holdings are ranked within the bottom 10% of the peer universe, on a net ‘goodness’ basis.

Latest Research & Insights

Strategy: flash PMIs show the business cycle uptrend still intact, and why it matters

Flash PMIs from Markit IHS have just been released for a variety of countries, and despite some small decreases from previ...

Read article

Company Updates: ALU, WGX, SHL, WHC, IAG, ASB, NXL, PMV, DMP

21/06/2021 Altium Limited (ALU) on Friday announced a trading update, anticipating revenue for FY21 to be at the low end o...

Read article

Latest Corporate Actions Journal

Lonsec’s latest Corporate Actions Journal has been updated. It includes information and corporate action recommendations...

Read article

Register for our FREE newsletter to receive investment insights, education, and SMSF trustee updates