Build a more sustainable portfolio for your client

Lonsec’s new Sustainability Score helps you build a portfolio that truly aligns with your client’s values based on underlying asset holdings.

Go beyond ‘ethical’ and ‘ESG’ labels to give your client a clearer picture of how their portfolio is contributing to a better world based on your product recommendations.

Providing greater clarity for investors

At the request of advisers, Lonsec’s new Sustainability Score is designed to give end investors (and their advisers) the ability to identify investments that align with an investor’s values.

While the concept of ESG as part of the investment selection process has been around for some time, there has been a lack of clarity for the end investor (and indeed for advisers) as to what that really means.

Lonsec’s investment ratings reflect a range of factors that contribute to investment outcomes, including an assessment of the fund’s ESG process. End investors and advisers aren’t, however, asking about what the ESG process is – they are asking about the investment portfolio and its impact on society, the planet and future generations –  the ‘goodness’ of a portfolio.

Sustainability and the FASEA standards

All financial advisers are required to comply with the Financial Adviser Standards and Ethics Authority (FASEA) Code of Ethics Standard.

The Code’s standards require advisers to act in the best interests of their clients, which means that product recommendations must be appropriate to meet the client’s objectives, and consider the client’s broader, long-term interests. This includes any social or ethical preferences the client might have.

The Financial Planning Association (FPA) guidelines on the FASEA Code of Ethics states: “Financial advisers should ask their clients if there are any environmental, social or ethical considerations that are important to them”.

For an adviser to then take account of their client’s preferences, they need to be able to understand what a fund manager’s portfolio looks like. That goes well beyond a view on ESG process.

The Lonsec Sustainability Score

In order to bridge this understanding gap, Lonsec has partnered with Sustainable Platform, a leading provider of sustainability data for investment managers and institutions.

This data is used to undertake a detailed analysis of the underlying holdings within a portfolio, compare them against the United Nations’ 17 Sustainable Development Goals (SDGs), and screen them against ten controversial industries. The result is a detailed report that shows how a fund rates on each measure, along with an overall Sustainability Score symbolized by between one and five bees, with five being the top-scoring.

The score is a measure of the portfolio ‘goodness’ and does not constitute a rating in itself. It should be used in combination with the Lonsec Rating.

Our Score

The score is a relative ranking compared to the funds peer group

Bottom 10%

Next 20%

Middle 40%

Next 20%

Top 10%

Report Availability

The Lonsec Sustainability Score report is available to all Lonsec Research clients with a paid subscription to our Managed Fund research library.

Initially, availability of these new sustainability score reports is limited to the funds that were previously covered within our Ethical investing category. It will be progressively rolled out to additional funds as they nominate themselves for assessment.

Want to find out more?

Get in touch today to find out more about the Lonsec Sustainability Score.

Call us on 1300 826 395 or email info@lonsec.com.au.

Sustainability Report

The Sustainability Report is a two-page report detailing the relative success of a fund in supporting the United Nations Sustainability Goals together with any exposure to the ten controversial industries. The Lonsec Sustainability Score reflects the net impact of these measures, which is peer ranked and results in a score of between 1 and 5 bees. A scatter chart indicates a fund’s position relative to the broader market.

The report also provides a snapshot of the environmental impact of the fund, as calculated using the Sustainable Platform data.

Many funds utilise negative screens and the Lonsec Sustainability Report details any industry exclusions imposed by the fund manager. The industry exclusions are the most common industry exclusions utilised by the funds rated by Lonsec.

The United Nations Sustainable Development Goals

The 2030 Agenda for Sustainable Development, adopted by all United Nations Member States in 2015, provides a shared blueprint for peace and prosperity for people and the planet, now and into the future. At its heart are the 17 Sustainable Development Goals (SDGs), which are an urgent call for action by all countries – developed and developing – in a global partnership. They recognize that ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth – all while tackling climate change and working to preserve our oceans and forests.”

Controversial Industries

Exposure to ten controversial industries (listed below) is assessed relative to the broader market and considers the products and services of the companies held in a portfolio

Get a Sustainability Score for your investment product

Learn more about how our investment research team can work with you to ensure your investment product has a Sustainability Score, allowing ethical investors oversight of your funds investments.

Contact: Tom.Akay@lonsec.com.au or +61 437 418 477

Important information: Any express or implied rating or advice is limited to general advice, it doesn’t consider any personal needs, goals or objectives.  Before making any decision about financial products, consider whether it is personally appropriate for you in light of your personal circumstances. Obtain and consider the Product Disclosure Statement for each financial product and seek professional personal advice before making any decisions regarding a financial product.