In March, ESG Clarity reported that data provider MSCI would be downgrading many of its ESG funds.
Changes to its methodology meant 31,000 funds received a one-off ratings downgrade as MSCI looked to raise the requirements for a fund to be assessed as AA or AAA, and improve stability and transparency in fund ESG ratings.
In a statement, MSCI said removing the adjustment factor would mean a fund’s ESG ratings would be “based solely on the ESG scores of its underlying holdings”, while the decision to exclude swap-based funds comes as it “actively explores” methods to provide a rating for swap-based ETFs based on the underlying index.
The changes will mean the proportion of funds rated as AA will fall from 32.8% to 22.4% and those rated AAA will fall from 19.9% to 0.2%.
As a result, ESG Clarity has rebalanced its Responsible Ratings Index (RRI) earlier than planned and, while index funds rarely are chart-topping, changes to the top spots dominated by active funds can clearly be seen.
Most notably, Royal London’s Sustainable World Fund has dropped from first to 10th place to be replaced by Morgan Stanley’s Global Brands Fund – a £17.2bn strategy weighted heavily to the US.
The RRI was launched in 2020 to provide a one-stop-shop for readers looking for the top-rated ESG funds. It uses research from our in-house data team at Mark Allen Financial to collate the sustainable ratings from housings such as Morningstar, MSCI and Square Mile and find the best-rated funds. To compare this month’s ratings (below) with those from the last rebalancing in January 2023, click here.
Here are the top 25 funds in June 2023:
| Name | RRI | Morningstar Sustainability Rating | MSCI | Square Mile | Global Category | Sustainable Investment – Overall | Fund Size £M |
|---|---|---|---|---|---|---|---|
| MS INVF Global Brands | 5 | 5 | 5 | Global Equity Large Cap | No | 17213 | |
| BGF ESG Multi-Asset | 5 | 5 | 5 | Moderate Allocation | Yes | 5741 | |
| LF Lindsell Train UK Equity | 5 | 5 | 5 | UK Equity Large Cap | No | 4638 | |
| Nordea 1 – Alpha 10 MA Fd | 5 | 5 | 5 | Multialternative | No | 3989 | |
| Nordea 1 – Alpha 15 MA Fd | 5 | 5 | 5 | Multialternative | No | 3907 | |
| LF Ruffer Absolute Return | 5 | 5 | 5 | Flexible Allocation | 3670 | ||
| Royal London Sustainable Div | 5 | 5 | 5 | Moderate Allocation | Yes | 3353 | |
| CCLA COIF Charities Investment | 5 | 5 | 5 | Aggressive Allocation | 3290 | ||
| Royal London Sustainable World | 5 | 5 | 5 | Responsible A | Aggressive Allocation | Yes | 2742 |
| Liontrust Sust Fut Mgd 3 | 5 | 5 | 5 | Aggressive Allocation | Yes | 2705 | |
| Robeco Sust Global Stars Eqs Fd | 5 | 5 | 5 | Global Equity Large Cap | Yes | 2643 | |
| Brown Advisory US Sust Gr | 5 | 5 | 5 | US Equity Large Cap Growth | Yes | 2597 | |
| BNY Mellon Mlt-Asst Balanced | 5 | 5 | 5 | Aggressive Allocation | No | 2355 | |
| GuardCap Global Equity | 5 | 5 | 5 | Global Equity Large Cap | No | 2254 | |
| BNY Mellon Mlt-Asst Growth | 5 | 5 | 5 | Aggressive Allocation | No | 1969 | |
| Janus Henderson Global Sust Eq | 5 | 5 | 5 | Global Equity Large Cap | Yes | 1771 | |
| Schroder ISF Glbl Engy Tnstn | 5 | 5 | 5 | Energy Sector Equity | Yes | 1564 | |
| Schroder ISF Hong Kong Eq | 5 | 5 | 5 | Greater China Equity | No | 1561 | |
| JPM Pacific Equity | 5 | 5 | 5 | Asia Equity | No | 1517 | |
| Legg Mason CB US Eq Sust Ldrs | 5 | 5 | 5 | Responsible A | US Equity Large Cap Blend | Yes | 1312 |
| Morgan Stanley UK Global Brands | 5 | 5 | 5 | Global Equity Large Cap | No | 1161 | |
| Schroder ISF EM Dbt Abs Rt | 5 | 5 | 5 | Emerging Markets Fixed Income | No | 991 | |
| BlackRock Continental Euro | 5 | 5 | 5 | Europe Equity Large Cap | No | 968 | |
| BA Beutel Goodman US | 5 | 5 | 5 | US Equity Large Cap Value | No | 894 | |
| Thesis Juniper | 5 | 5 | 5 | Aggressive Allocation | 770 |
