Hargreaves Lansdown (HL)’s lead ESG analyst has revealed his top three funds taking a different approach to responsible investment.

Ahead of the ISA deadline on 5 April, HL’s Dominic Rowles said responsible investment can be “good for your conscience, and good for your wealth”.

Here are his three fund picks:

Global – wide ranging investments in global stock markets

“We think a global ESG tracker fund could act as the backbone for lots of responsible portfolios.

“The Legal & General Future World ESG Developed Index fund aims to track the performance of the Solactive L&G ESG Developed Markets Index. It’s made up of almost 1,500 companies based across global developed markets, such as the US, the UK and Japan, and diversified across lots of sectors, including technology, healthcare and financials.

“The index increases investments in companies that score well on a variety of ESG criteria – from the level of carbon emissions generated, to the number of women on the board and the quality of disclosure on executive pay. It also reduces exposure to companies that score poorly on these measures. The fund won’t invest in persistent violators of the UN Global Compact Principles (a UN pact on human rights, labour, the environment and anti-corruption) or companies involved in controversial weapons, or those with significant exposure to controversial weapons, civilian firearms, thermal coal and oil sands.”

An option for income

“The UK is a world-renowned income market, so if income is your priority, you could consider investing in a UK-focused responsible income fund.

“The Janus Henderson UK Responsible Income fund aims to give a good level of income, alongside capital growth over the long term. Andrew Jones has been at the helm since January 2012 and has over 20 years’ experience managing UK equity income funds.

“His investment process starts with a screen which excludes companies involved in areas some investors consider unethical, such as alcohol, armaments, gambling, non-medical animal testing, nuclear power, tobacco and fossil fuel power generation (although companies generating power from natural gas may be allowed if the company’s strategy includes a clear plan to transition to renewable energy power generation). All investments must also be compliant with the UN Global Compact.

“From the remaining universe, Jones looks for companies with proven and understandable business models, high-quality management teams and strong positions in their industries. He also likes companies in a strong financial position with plenty of cash flow, allowing them to reinvest for future growth, while at the same time rewarding shareholders with rising dividends.”

A more conservative option

“Bonds are generally less volatile than shares, so they can help with diversification. They also tend to grow more steadily over the long term.

“We think the Liontrust Sustainable Future Corporate Bond fund could be a reasonable option for investing in corporate bonds. Managers Stuart Steven, Kenny Watson, Aitken Ross and Jack Willis form a view on the outlook of the economy and then invest in bonds issued by companies that can hopefully thrive in that environment.

“Sustainability and ESG analysis is fully integrated into the team’s investment process. They aim to identify bonds issued by high-quality companies whose core products or services make a positive contribution to society or the environment. The fund  avoids companies that makes more than 5% of their revenues from alcohol, animal testing services, coal, oil & gas, gambling, intensive meat and fish farming, nuclear, ozone depleting substances, pornography, tobacco or weapons systems.”