Interactive Investor has dropped the L&G Ethical Trust from its ethical buy list after the index tracker changed its mandate from UK to global.
The unit trust had tracked companies in the FTSE 350 index whose businesses meet the ethical and environmental guidelines of the fund, but on Thursday its benchmark switched to the MSCI World SRI Index and it has been renamed the Legal & General MSCI World Socially Responsible Investment Index fund.
II said the fund had been classified within its ethical funds list, the Ace 40, as a UK equity “low cost” option, but the shift to a global benchmark raised a “red flag event” which can include a change in policy.
II head of funds research Dzmitry Lipski said: “The objective of the fund historically was to provide growth by tracking the performance of the FTSE 350, excluding shares of companies whose business does not meet a range of ethical and environmental guidelines determined by an external agency chosen by the manager.
“In broad terms the fund had a higher weighting in telecoms, media, retail and financial services than the full FTSE 350 index. This came at the expense of the tobacco and defence sectors.
“This change in rationale also increases the sector and geographical diversification of the fund and reduces the concentration as the new index covers 23 countries and 385 constituents. The result of this change is that the fund will go from 100% to under 5% invested in the UK, meaning the fund no longer has a UK focus and therefore is no longer appropriate for its position on the ACE 40 within UK equities.”
