Big Issue’s ‘sustainable’ investing arm criticised for offering oil, coal and weapons

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A sustainable investment website launched last year and co-founded by The Big Issue has been criticised for recommending funds which invest in coal, oil and Grenfell-style cladding.

The Big Exchange said it wanted to “create positive solutions to combat the world’s biggest challenges”.

But funds were found to include investments in fossil fuel firms, and others failed to rule out investing in companies that fund weapons and commit human rights abuses, according to independent research commissioned by the website itself.

The research was intended to help illustrate the difficulty of finding investments which are completely free of harm. It also showed two competing methods of sustainable investment: investing in companies promising to change and making use of shareholder votes to make sure they do, or excluding them entirely.

Jill Jackson, of the Big Exchange, said its aim was to be transparent and let consumers choose. In contrast to most fund shops, which offer a top-10 list of holdings, its participating funds must be clear on all their investments.

Unlike self-described ethical funds, which avoid certain companies or industries, the Big Exchange said it looked for funds which invest in companies which had made positive contributions to the UN’s Sustainable Development Goals “and then flags the potential issues that may occur around that”, Ms Jackson said. “That’s a different starting point.”

It could mean investing in a company that uses some coal or oil today, but will move to greener fuels. Most energy companies selling electricity from the grid have struggled to avoid small sales of coal and oil-generated power, for instance.

The company asked a research firm to examine the funds and create warnings so users would know what the risks were.

Big Exchange-commissioned research included warnings over societal damage Credit: Big Exchange

One such summary, for the Liontrust Sustainable Future Cautious Managed fund reads: “The fund invests in companies whose corporate practices are widely considered to have damaging impacts on wider society” and that it holds companies “providing services or products used in military aircraft, attack vehicles or missile systems.”

Asked whether such warnings were too vague or off-putting to help a would-be investor, Ms Jackson said: “I do believe that we can improve on that. We’re a young business; it’s a starting point for us and I think that what you’ll find is that we’re one of the few investment firms that are highlighting anything like that to consumers.”

Liontrust said it does not invest in any company that makes more than 5pc of sales from weapons, thus avoiding large defence firms. It did not agree with the research’s assessment about harms to society.

“We go to considerable lengths to ensure we have exceptionally low exposure to companies which have damaging impacts on wider society,” it said, adding it planned to work with Big Exchange to provide more detail on its funds.

Another fund, Pictet Global Thematic Opportunities, listed a holding in Kingspan, which made 5pc of the insulation on Grenfell Tower. At the end of last year, the inquiry into the 2017 fire heard Kingspan had rigged fire safety tests, an allegation it contests. Pictet said it had sold the holding since the report was released in September. 

The Big Exchange website said: “The fund has no formal screens which would stop it investing in companies which raise ethical issues such as animal testing, human rights abuses, fossil fuels and gambling.”

Pictet said it had asked the Big Exchange to amend this wording and that it had a “rigorous responsible investment policy”. 

And while Pictet Clean Energy had “excluded companies that have significant exposure to fossil fuel use,” it does invest “in power producers whose sources of power include coal, oil or gas; or in distributors or wholesalers of fossil fuels; or in companies providing services for the production of oil and gas,” according to Big Exchange research.

Pictet said: “Our Clean Energy strategy invests in the energy transition to a low carbon economy by focusing on: renewable energy, energy efficiency, critical enabling technologies and infrastructure.”

Dean Buckner, a volunteer for the Savers Take Control project at the UK Shareholders Association and who spotted the investments, said there was no substitute for savers doing their own due diligence.