What is socially responsible investing?
Socially responsible investing, or SRI, is a way of investing that typically means giving more weight to companies that have made a commitment to social responsibility in the way they do business.
At Nutmeg, we’ve taken this approach a step further because we think socially responsible investing should be about having a clearer idea of where your money goes and where it’s invested too.
So we’ve built 10 new portfolios with environmental, social and governance (ESG) criteria at heart. This means the companies you invest in have shown they take these principles seriously in comparison with other companies in their industry. Find out more here.
How does the scoring work?
We believe our new approach to portfolio scoring gives you a fair and objective way to understand your investments – that's why we’re scoring every single one of our portfolios, not just the SRI ones.
Using company data from MSCI, we’ve scored all of our portfolios against environmental, social and governance (ESG) criteria. You’ll be able to see an overall social responsibility score for any portfolio, and a range of scores for each ESG principle on the desktop site and in the mobile app.
We also provide the portfolio’s current overall carbon impact. Find out more in our blog about scoring.
How do I invest in one of the new socially responsible portfolios?
First, familiarise yourself with the details of socially responsible investing and make sure it’s right for you.
Then, if you’re an existing customer, you can open a new pot or switch one of your pots to a socially responsible style through your dashboard on the desktop site, You can also change the investment style for any of your pots using the Nutmeg mobile app. Find out how to make pot changes here.
New customers should follow our sign-up process on the desktop site and select ‘Socially responsible’ as their investment style.
You can switch any existing ISA, general investment account or Lifetime ISA pot to a socially responsible investment style. So, you could have any mix of these different pots, each with their own investment style.
If you want to, you can set up a new socially responsible ISA, general investment account or Lifetime ISA pot at any time.
Are socially responsible portfolios available for pensions?
We aren’t offering socially responsible portfolios for pensions yet.
How do I compare the different portfolios?
Our socially responsible portfolios will follow the same fundamental investment principles as our existing portfolios and will be managed by the same expert investment team.
The new socially responsible portfolios will also incorporate a social responsibility focus. A social responsibility focus is for people who want their portfolio actively managed with a view to investing in companies that do business in a fair and progressive way.
While they’ll follow the same Nutmeg investment view, there are some differences in the kinds of investments we can make, because some assets aren’t available with ESG characteristics. This may mean we use a more limited range of asset types with our socially responsible portfolios.
Since the mix of assets is different, it’s not helpful to directly compare the ESG scores of the new socially responsible portfolios against the fixed allocation and fully managed portfolio scores.
Instead, we’ve provided a simulated equivalent portfolio without socially responsible screening. Once you invest at least one pot using the socially responsible investment style, you’ll be able to see how our socially responsible portfolios compare to those built without employing ESG principles.
Is there a difference in cost?
The Nutmeg fee for our socially responsible portfolios is the same as our fully managed portfolios.
However, we do expect the average underlying fund costs in these portfolios to be slightly higher than the funds used in our fully managed and fixed allocation portfolios.
You can find our current average costs and charges for any of our investment styles on our website.
Who will look after my money?
Our socially responsible portfolios will be managed by the same in-house investment team as the rest of our portfolios. The team will regularly make strategic adjustments to try and protect against losses and boost returns.
Can I choose what’s included and excluded from my portfolio?
You won’t be able to choose different themes or sectors to invest in or avoid within the portfolios themselves – as with all of our portfolios, these decisions will be taken by our expert investment team.
As with our other portfolios, investors will be able to choose a risk level across a range of available levels. Each of these levels will have different weightings across equities, debt and cash.
What types of companies are excluded?
We use a range of social responsibility-focused strategies when constructing these portfolios, and the types of companies excluded will differ between funds.
At a minimum you can expect the following securities to be excluded from funds held in Nutmeg’s socially responsible portfolios;
- Businesses with significant exposure to the tobacco industry, either as a producer or distributor.
- Companies involved in production of nuclear weapons
- Companies involved in the production of controversial weapons such as landmines, cluster bombs or chemical and biological weapons.
How do the scores relate to each other?
You may notice that the overall ESG score doesn’t represent the sum or average of the individual environmental, social and governance scores. This is to be expected, because when calculating each securities’ overall ESG score, MSCI adjusts to reflect which activities are most important to the sector of operation – for example, pollution may be of higher importance when assessing industrial companies than technology companies. However, the individual ESG scores are absolute and can be compared across sectors.
Are you aiming for the best possible social responsibility score with the new portfolios?
No portfolio will avoid every controversy, and similarly, no company will always be perfect. MSCI compares companies within the same industry to ensure a fair comparison is made between companies with similar operating models.
This means that the most relevant ESG factors can be considered with a higher importance for a given industry. The standards are set deliberately high to encourage improvement in behaviour.