World Economic Forum 2020: five responsible investment funds
As recently as ten years ago, the environment didn’t even register in the top risks for discussion at the World Economic Forum. But at Davos last week, climate change and responsible investing dominated discussions. ‘How to save the planet’ was one of the topics and speakers included teenage environmental activist Greta Thunberg and outgoing Bank of England Governor Mark Carney - who is due to take up a new role as UN special envoy for climate action and finance.
Schroders’ portfolio manager Nicholette MacDonald-Brown, explained: “While environmental risks have long been a concern for many people, they were absent from the [World Economic Forum’s] list of top risks until 2011. It’s only from 2016 that it’s clear that the environment has definitively moved up the political and policy agenda. This doesn’t mean the other risks have gone away; policymakers, businesses and investors will still be grappling with them for years to come. However, it does show that the environment’s importance to global society and the economy has moved into the spotlight.”
This has important implications for investors.
As AXA Investment Managers’ Chris Iggo pointed out: “Recognition of the risks to life as a result of climate change is at record levels. Consumers are changing their spending habits to support more sustainable production, packaging and transportation. Companies are investing to shift towards more sustainable business models in terms of energy use, waste production and social impacts. Buildings are being erected that are more energy efficient and from materials that are more sustainable than concrete and glass.
“More and more, economists are factoring in climate change risks to long-term economic growth forecasts. This will become important for government policy as the impact of climate change on weather events, the physical infrastructure, health and agriculture become more evident and require public money to combat. Central banks and supervisors are starting to incorporate ESG into their systemic risk models.”
Five funds with responsible investing at their core:
1. ASI UK Ethical Equity
ASI UK Ethical Equity fund combines Aberdeen Standard’s excellent company analysis with a 'no compromises' investor-led ethical screening system. The company's proprietary ‘matrix’ system, is used to create a portfolio of between 50 and 100 UK companies. Although not a primary aim, the fund produces a small, natural yield.
2. BMO Responsible Global Equity
This fund invests in quality growth companies from around the world, with a focus on sustainability. Managers Jamie Jenkins and Nick Henderson are stock-pickers with a long-term approach, and they have the help of an independent sustainability team to ensure standards are maintained and backed-up by strong engagement with company management post-investment.
3. EdenTree Amity UK
As pioneers of responsible investing, EdenTree offers even the most discerning client a justifiable investment opportunity. In the EdenTree Amity UK fund, long-running manager Sue Round curates an actively-managed, diverse selection of UK businesses, designed to generate long-term returns for ethically-minded investors.
4. Pictet Global Environmental Opportunities
This fund identifies nine environmental challenges including but not limited to; climate change, ocean acidification, biodiversity and freshwater use. All companies within the portfolio must operate 'within a safe operating space' for each of these nine areas and actively contribute to solving environmental challenges.
5. Rathbone Ethical Bond
Rathbone Ethical Bond fund invests in quality investment grade bonds. Ethical exclusions are simple: no mining, arms, gambling, pornography, animal testing, nuclear power, alcohol or tobacco. This rules out about one third of the index. All positions must also have at least one positive environmental, social or corporate governance quality.
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the author and do not constitute financial advice.