1. Integrated approach to ESG assessment reflected for all companies and funds in the Square Mile Academy of Funds
2. Square Mile Responsible ratings recognise best-in-class funds across the 3 main categories; Exclusion, Sustainability and Impact
Square Mile ESG Integration assessment
Square Mile has formalised its approach to assessing environmental, social and governance (ESG) factors across its analysis of all asset management companies and funds within its Academy of Funds with the launch of the Square Mile ESG Integration assessment, with effect from 1 October 2019.
The Square Mile ESG Integration assessment has been introduced to meet market demand and grades companies and funds between zero for those companies or funds which have no explicit approach to ESG, and three where ESG considerations play an integral role within a company's or fund's processes. These assessments, which will be listed with each fund and company entry within the Academy of Funds, recognise an increased awareness of the importance of environmental, social and governance factors and how they are used as a tool both for risk and return and are aimed at helping advisers understand how the investment process in companies and funds is managed. This will enable them to form their own judgement on the appropriateness of an investment partner and its funds based on specific client preferences.
Square Mile's ESG Integration assessments are applied at two levels:
· An assessment at a company level of how a business integrates ESG considerations across all its investment processes, referencing specialised ESG resources, any formal policies incorporating ESG factors across its business, and the monitoring of ESG within processes, engagement and voting practices.
· An assessment at a fund level of how ESG is adopted (if at all) by fund managers, analysing the extent to which ESG is used as an input in the process, which factors are considered, how these factors impact research and portfolio construction and how, if relevant, the use of ESG is reflected in fund reporting.
At both company and fund level, assessment is qualitative and carried out by Square Mile's team of analysts, acknowledging that each company and fund manager may adopt a distinct interpretation of ESG investing. Analysis is based on primary data sourced directly from both companies and fund managers. Square Mile's analysts then overlay this information with their own expert insight to neutralise any ambiguous or misleading terminology.
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Square Mile Responsible ratings
In addition to the above, Square Mile Responsible ratings will be awarded to active and passive funds which adopt a responsible investment approach to portfolio construction and which Square Mile's team of analysts feel confident can deliver on their articulated outcomes and objectives. These new ratings complement the ESG Integration assessment allocated to each asset management company and investment fund currently within the Square Mile Academy of Funds.
Square Mile Responsible ratings, while directly comparable to ratings currently carried by other funds within the Square Mile Academy of Funds, will be awarded to funds which include an element within their stated objectives which explicitly aims to have a positive impact on society or the environment or where such an element is present in their mandate, as well as offer attractive returns. As with the existing ratings, each fund undergoes rigorous assessment and is subject to the scrutiny of Square Mile's analysts before being awarded an A, AA, AAA, P+ (Positive Prospect) or R (Recommended) rating. However, Responsible ratings also acknowledge a fund's ability to meet both the financial and the responsible elements of its objectives and are in direct response to client demand for greater clarity over the terminology, differing objectives and the types of responsible funds available.
At launch, 18 funds qualify for Responsible ratings.
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