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December 16, 2020

An introduction to investing on The Big Exchange

Read a bit more about why investing on The Big Exchange is different and what it could mean for you.

For those of you who don’t know, a main part of The Big Exchange is an online investment platform: a place where you can invest your money online by selecting different investments, managed by professionals, that we rate and present to you. We’re a bit like a digital shop window for investments.

But not just any shop window… The Big Exchange is different in two ways to the other online “shops” out there where you can already invest.

Firstly, we’re founded by The Big Issue Group. We have a social and environmental mission embedded in our very being and it affects everything we do, and…

Secondly, our approach is to only give our customers access to actively-managed investments that have the intention to make a positive contribution to society or the environment. The word intention is key — it means a positive contribution can’t just happen by accident. The people managing the investment on your behalf (investment managers) have to have a clear strategy and process in place to make this change happen! The investments you choose are there because they aim to make both a financial return for you and a social and environmental one at the same time.

This is great, right?! (We think so too!) But, how does that work in practice?

At The Big Exchange, we are not content with just taking the investment manager’s word for it, we needed to come up with a test. So, we created what we have called our Impact Methodology.

A fancy title, yes, we know. But in reality, our impact methodology’s aim is to put funds through their paces so customers can have an independent view of how much positive contribution the investments are making. And importantly, putting it in a language that is a little more… well, normal. It isn’t perfect but it is a start. The fact we are the first actively-managed platform in the UK to build its own methodology for retail investors means we’re creating a new way for people to access investments and a new way for investment managers to be scrutinised and put to the test.

How does The Big Exchange rate investments for their sustainability or impact?

There are so many ways to measure positive impact that a lot of the time companies, policymakers, and well-intentioned committees can get stuck in the weeds. Our impact methodology focuses on a lot, but there are 4 main things which we will think are important to now explain briefly:

1. Positive Stock Selection. The What

What do we mean by this? Well, an investment manager of a fund chooses what stocks (typically “equity” or “a bond” of a company ) to invest in that align with their investment objective. They choose a number of these stocks to make up the fund that you can see on The Big Exchange. In turn, we take a look at all of these stocks that make up the fund and look at how much the money made by these companies actually comes from making or doing things that contribute positively towards the UN Sustainable Development Goals. This gives us a good indication of the positive or negative impact these companies have on people and the planet and we can total it up.

2. Level of transparency. The Why

Transparency is paramount, this looks at the ‘why’? We all want to see the outcomes and the actual impact that is being made with our money. We rate investment managers' openness to sharing information with the public around impact reporting, engagement, strategy documents, and even to the point of whether the investment managers were able to provide a reason behind why they were invested in each stock in the fund. To summarise crudely, in doing this we can be more sure that the fund is doing what it says on the tin.

3. Positive influence. The How

We don’t just want to know the ‘what’ and the ‘why’, we want to know the ‘how’ too. We look at how investment managers encourage or advocate positive change within the companies they invest. This could be things such as highlighting weaknesses in a supply chain to increasing the number of women on the board, and much, much more. This is of particular interest to equity funds where the investment manager is an “owner” of the company and has a right to vote for or against management’s key decisions and even hold them to account at General Meetings (AGMs)

4. Raising any potential issues. The “you-might-want-to-know”

We know not everyone’s idea of positive contribution can be met and we know there is no perfect fund out there. However, regardless of that, we wanted to make sure that if there was any potential issue within a fund, we can let you know about it. We don’t take an opinion on whether things are good or bad for individuals. Instead, we provide the information to you to help make your mind up. For example, — there can be many reasons for an issue to be called out i.e. a pharmaceutical company producing cancer treatments may legally be required to test on animals.

You can see the full document here.

How we show you the results?

As we said above, we base our impact methodology around the 17 United Nations’ Sustainable Development Goals (UN SDGs or SDGs) — you can read more about them here.

We back the UN SDGs and want to put all our effort behind them, but for some people they can make matters even more confusing, especially when combined with investing! So we split the relevant goals up into PEOPLE or PLANET to make it even simpler for people to grasp.

Translating the results of the methodology into useful information for customers was a challenge and one which we will work with customers to improve. At an overarching level, we use medals. Medals are a universal sign of positive achievement that goes from good to better to best; from Bronze to Silver and Gold. If a fund does not make the grade, it will not be allowed on The Big Exchange, but will instead receive feedback from us on where they need to improve and what they need to do to reach the level our customers would expect.

Gold Medals are for Impact Leaders: This is where a fund strives to invest in only positive outcomes and is able to impact report against this. An example of an impact report can be viewed here.

Silver Medals are for funds with a High Positive Impact: This is where the majority proportion of the fund is invested in companies that make a positive contribution to the SDGs and there are good reporting and engagement. Silver funds may not have reached a Gold medal for a number of varying reasons and we encourage focus on transparency, influence, and positive stock selection to reach the top award.

Bronze Medals are for funds that offer a Good Positive Impact: These funds have the strategic intention (that word again!) to invest in companies that make a positive contribution to the achievement of the SDGs and are working towards making the same type of contribution as the silver and gold funds, but not quite there yet.

The ratings are only based on the social and environmental impact of each investment. The financial return, the value for money, or the risk of each investment is not part of this assessment and it is important to take that into account separately when making your decision on what you want to invest in. We are not providing any form of advice to you, just giving you the information we think you want to help make decision making that little bit clearer.

What’s next?

We are not saying it is perfect, nor are we saying it is the only way it can be done. We understand that we are on a journey and as companies improve reporting, consumers change their behaviours and governments change policy, we will improve and adapt. We want to give people access, support, and choice to positive impact investments.

We built The Big Exchange for those who believe positive outcomes for people and planet weigh equal to financial returns. We are convinced that if every pound of UK investors’ money was invested not solely for financial gain but also for a social and environmental benefit too, the world could be a much better place.

Follow The Big Exchange on Instagram, LinkedIn, Twitter or Facebook. Please remember that when investing, making money is not guaranteed and your capital is at risk. The value of your fund can go down as well as up. Tax treatment depends on an individual’s circumstances and may be subject to change.

The Big Exchange (TBF) Limited is a wholly-owned subsidiary of The Big Exchange Limited. The Big Exchange (TBF) Limited is an Appointed Representative of Resolution Compliance Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 574048).