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May 24, 2023

EdenTree Responsible & Sustainable Fund now available

We are delighted to announce a new fund is now available on The Big Exchange, our first fund from EdenTree.

EdenTree Responsible & Sustainable Short Dated Bond Fund available on The Big Exchange

A pioneer asset manager

We are delighted to introduce our first fund from EdenTree. The fund provider is the investment subsidiary of Ecclesiastical Insurance Group, which in turn is owned by a registered charity, the AllChurches Trust.

EdenTree is a pioneer in responsible and sustainable investing, having launched one of the first UK ethical funds in 1988. For over thirty years they have advocated the importance of ESG (Environmental, Social and Governance) integration as part of a holistic investment approach.

Following a philosophy of ‘delivering profits with principles’, the firm places a strong emphasis on supporting its people, customers, the environment, and local communities. The EdenTree Community Investment Fund provides support to community-based charitable programmes in London that work with disadvantaged people.

Whilst equities (shares in companies) have historically offered the most opportunities for responsible investing, we have seen ESG, green, social and sustainability bonds enjoy a surge in popularity. This looks set to continue, as companies and governments issue bonds to finance the green industrial revolution which is underway.

Below we highlight the key characteristic of the fund and provide an example of a company bond that the fund invests in to show you how your money can count for more.

EdenTree Responsible & Sustainable Short Dated Bond Fund- silver medal

The aim of this fund is to preserve your capital whilst generating a regular income (paid quarterly) above that available on cash. It may, therefore, be worthy of consideration by cautious investors who are prepared to take on some risk to potentially achieve a higher yield than is available on cash (though this is not guaranteed).

The fund predominantly invests in short-dated bonds issued by companies and governments which are considered to make a positive contribution to society and the environment through their sustainable and socially responsible practices. The focus is on high quality 'investment grade bonds' (single A rated and above). A 5% cap on allocations to a single issuer ensures credit risk (the risk of default) is lessened through diversification.

The shorter time to maturity (on average 2-3 years) means that the portfolio is less sensitive to changes in interest rates, compared to funds investing in longer-dated bonds. This is because, as they mature, holdings can be rolled over into higher yielding bonds if interest rates are increased to combat higher inflation.

A ‘profit with principles’ philosophy drives the investment approach and the responsible investing team has oversight of suitability from this perspective. Negative screening addresses ‘absence of harm’, whilst positive screening is conducted across nine pillars, including Environmental Management, Corporate Governance and Human Rights, to identify the most responsible and sustainable companies.

Although the sustainability attributes are more subjective, the team consider how bond issuers align with the relevant UN Sustainable Development Goals (SDGs). They take a positive view of social utility in relation to the themes of Education, Health & Wellbeing, Social Infrastructure and Sustainable Solutions.

Our assessment

EdenTree engages with companies to understand material ESG (Environmental, Social & Governance) risks, encourage best practice and promote positive change. Overall, they score 2 out of 3 for positive influence. There is, however, limited evidence of the results of engagement undertaken although the firm is active in promoting responsible investment and produces thought pieces on important issues. Until there is more detailed reporting of outcomes, the fund scores 1 out of 3 for impact evidence.

The fund is notably aligned with SDG 1 (No Poverty), at 28% of the portfolio, and SDGs 11 (Sustainable Cities and Communities) and 12 (Responsible Consumption & Production) both at 5%. 2

The fund is well diversified with over 160 holdings. The UK accounts for almost half of the portfolio with the Netherlands representing 11% and Canada 7%. At a sector level, bonds from the financial sector (such as Friends Life and Direct Line Insurance) dominate at 43% of the portfolio whilst government bonds account for 26%. 1

Bond impact example:

The fund invested in a bond issued by Places for People, a property developer specialising in social housing and regeneration. The company aims to build not just homes but also spaces and communities that work for everyone. Places for People Neighbourhoods focuses on key areas of economic development, green spaces, financial inclusion, and young people.

Places for People Living+ is a care and support specialist which provides housing and support to older people, those with a disability or mental health problem, women escaping domestic abuse and homeless people. Places for People Financial Services offers mortgages, affordable loans, home contents insurance and budget advice.


1 Source: Fund factsheet 31 March 2023

2 Source: TBE Impact Assessment October 2021, data refreshed December 2022

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