Frequently Asked Questions

Q: Why has Zenith introduced these classifications?

A: While we researched and rated ‘Sustainable/Ethical’ funds as a subset within equities for many years, increased client demand for additional RI tools has led to the development of these classifications. The classifications form the foundation upon which further RI tools will be developed over time.

Q: Has Zenith’s rating process changed? Does a product’s RI classification affect its Zenith rating?

A: No, the ratings process is unchanged and the RI classifications do not have a direct link to product ratings. Our ratings encompass a range of factors, including RI issues, that are assessed as a component of our ratings process.

Q: Are the RI classifications a reflection of Zenith’s assessment of a product’s RI implementation approach?

A: The RI classifications are reflective of our views on how fund managers address and integrate RI issues into a product, rather than an assessment of the effectiveness of their RI implementation. While we may consider managers’ views on their RI approach, the determination of all RI classifications is ultimately at our discretion.

Q: Does the RI classification correspond to the fund manager or a specific product?

A: RI classifications apply to individual products, not fund managers. As such, there may be dispersion in classifications across products and asset classes for the same manager. Any material RI issues specifically related to the manager are considered in our ratings, independent of the RI classification.

Q: Is a product penalised if its objective is void of RI elements?

A: No. Our classifications are used as an identification tool rather than an assessment. We recognise that many investors seek outcomes with varying consideration of RI issues and practices.

Q: Are all funds subject to a Zenith RI classification?

A: Subject to limited exclusions at our discretion, all funds that hold a Zenith investment grade rating from 30 September 2020 onward will be assigned an RI classification. These classifications will be assigned as each sector report is released. Any ratings issued on an out-of-cycle basis will also have classifications assigned at the time a rating is released. RI classifications will be revisited annually at each sector review.

Q: Are classifications comparable across asset classes?

A: Yes. Classifications are designed to reflect a manager’s approach to RI issues. While recognising that some asset classes are more conducive to implementation of RI than others, we believe individual investment products should not be used in isolation. Therefore, when constructing portfolios, advisers seeking to incorporate RI awareness into portfolios need a consistent framework to identify each product’s approach.

Q: Are RI classifications peer-relative or absolute?

A: Classifications represent a view on each product’s approach, not as a measure of RI effectiveness on a peer-relative basis.

Q: How should advisers utilise the RI classifications?

A: Subject to any exclusions, all Zenith Product Assessment Reports will carry the RI classification. For subscribers using the Zenith Mosaic portal, products can be searched by RI classification and are visible on the main page of each product. The classifications allow users to identify which products utilise RI as a core component of its investment process.

Q: Does a product’s RI classification impact how Zenith uses products in portfolios?

A: A product’s RI classification will have no impact on its inclusion or exclusion from existing portfolios. However, should a client wish to stipulate a minimum RI classification level in their portfolio, the RI classifications will be referenced by our portfolio consulting team.

Q: Who is responsible for these classifications and how are they generated?

A: We have formed an internal Responsible Investment Committee (RIC) to govern the research, development and application of RI tools for our clients. Under the oversight of the RIC, our research team is responsible for assigning and monitoring RI classifications. We use information gathered during direct interactions with managers, their supporting documentation and external sources such as Principals for Responsible Investment (PRI).

Q: Zenith already has categories for ‘Sustainable/Ethical’ and ‘ESG’ funds in its database. How does the introduction of the RI classification impact these?

A: At present, we intend to retain these identifiers in our system. The fundamental premise of a ‘Sustainable/Ethical’ or ‘ESG’ labelled product is the demonstration of clear intentionality to pursue RI outcomes. By contrast, while the majority of funds classified as ‘Integrated’ are judged to be holistically integrating RI practices, they do not have overt RI objectives.