We’re evolving the Standard Life Ethical Fund

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We're making changes to the Standard Life Ethical Fund (an insured fund) to enhance diversification and support better long-term customer outcomes, while continuing to reflect customers' ethical and values-based preferences. We expect the changes to be implemented in mid-November.

We're sharing details of these changes ahead of writing to affected customers. Customer letters will be issued from 30/09/26, and a copy of the customer communication is available below for reference. Please note that own trust scheme members won't receive this letter - Trustees will receive a separate list of affected members and a letter they can send to those members.

Why we're making these changes

We regularly review our investment solutions to help ensure they continue to meet customer needs and expectations.

Research commissioned by Standard Life found that 70% of customers expect an ethical fund to perform as well as, or better than, a non-ethical equivalent.*

The Standard Life Ethical Pension Fund was launched in 1998. Since then, the ethical investment landscape, and the information available to assess companies and customers' expectations, have changed significantly. Following a review, we've identified an opportunity to modernise the equity approach, broaden diversification and support better long-term customer outcomes, while continuing to reflect customers' ethical and values-based preferences.

What's changing?

The Ethical Fund currently invests approximately:

• 75% in equities
• 25% in corporate bonds

The changes apply only to the equity component of the fund.

Equity component

The equity allocation is moving:

From

• An actively managed UK and Europe-focused equity approach
• A methodology primarily based on ethical exclusions
• A narrower regional investment universe

To

• Investing in line with the FTSE4Good Developed Index
• A broader global equity universe
• A methodology that combines exclusions with company-level ESG assessment
• A more diversified approach designed to support improved long-term outcomes.

This means the fund's equity investments will expand beyond the UK and Europe to include exposure to North America, Japan and developed Asia.

Corporate bond component

There are no changes to the corporate bond component of the fund.

The existing corporate bond investment approach and exclusions framework will remain unchanged.

Fund name, charges and fund description

The Standard Life Ethical Fund name will remain unchanged and there is no change to charges as a result of these updates.

There is also no change to the fund's risk profile or volatility rating.

Charges aren't guaranteed. They are regularly reviewed and may be changed in the future.

The fund description will be updated to reflect the revised investment approach and ensure it accurately describes the fund's investment strategy.

How does the new approach work?

The fund's equity component will invest in line with the FTSE4Good Developed Index, which combines exclusions with company-level environmental, social and governance (ESG) assessments. Companies must meet minimum standards before they can be included and are monitored on an ongoing basis to ensure those standards continue to be met.

The assessment considers factors such as:

• A company’s environmental impact
• The products and services the company is involved in.
• How the company manages environmental, social and governance risks and opportunities.
• Whether the company has been involved in significant ESG-related controversies or issues.

Companies that do not meet the required standards are not eligible for inclusion.

Why do we still consider this an ethical fund?

When the fund was launched, ethical investing was often shaped by a relatively small number of high-profile issues and sector-wide exclusions. Today, investors have access to much more detailed environmental, social and governance information, allowing companies to be assessed across a broader range of factors.

Traditional ethical concerns remain important, but customer attitudes now also include issues such as climate change, environmental impact, responsible business practices and corporate behaviour.

The new approach retains a number of explicit exclusions, such as:

• Tobacco production
• Thermal coal extraction (if greater than 50% of revenue)
• Controversial weapons (including nuclear weapons, chemical and biological weapons, cluster munitions and anti-personnel landmines)
• Conventional military weapons
• Firearms

The following activities which were previously excluded are now assessed against the FTSE4Good's Index standards and eligibility criteria:

• Adult entertainment
• Alcohol production
• Animal testing
• Animal husbandry
• Environmental protection
• Employment
• Fur
• Gambling
• Human rights
• Marketing breast milk substitutes
• Nuclear
• Poor business practices
• UN Global Compact

In addition, companies must meet defined ESG eligibility requirements before they can be included.

Companies continue to be monitored and may be removed if they no longer meet the required standards.

Some companies that would previously have been excluded may now be eligible for inclusion if they meet the required ESG standards. Equally, the approach can exclude companies that fail to meet those standards, even where they are not involved in traditionally excluded activities. Ethical considerations have not been removed: the new equity approach combines explicit exclusions with company-level ESG assessment and ongoing eligibility requirements.

The change also gives the fund access to a broader investment universe and greater diversification. Our objective is to strike an appropriate balance between reflecting customers' ethical preferences and supporting good long-term investment outcomes. In our view, this represents an evolution of the fund's ethical approach while continuing to invest in line with its overall ethical objectives.

What does this mean in practice?

For some activities, exclusion remains the primary control. For others, companies are assessed against environmental, social and governance standards before being considered for inclusion.

This means decisions are based not only on the sectors in which a company operates, but also on how effectively it manages the risks and responsibilities associated with those activities.

Funds affected

The changes apply to:

The Ethical Life Fund is not affected by these changes.

Customer communications

We're providing advisers and employers with advance notice of these changes before customer communications are issued.

Customer letters are scheduled to be sent from 30 September and will explain the changes and what they mean for those invested in the affected funds.

A copy of the customer letter is available below for reference.

Customer letter

Download a copy of the customer letter

Find out more

If you have any questions about the changes, please speak to your usual Standard Life contact.

*Source: 2024 Ethical Fund research by Gusto for Standard Life