- Ethical funds outperformed in 2020 and are well poised for this year
- Funds from Royal London and ASI among standout picks
The rise of sustainable and ESG-focussed funds has been something of a phenomenon in recent years, culminating in some standout performances for such funds in 2021.
While historically investing in these types of funds was thought to provide lower returns, the evidence in recent years shows sustainable stocks are leading markets more and more. Over the last three years, for example, the MSCI ACWI ESG Universal index has delivered 30.3%, compared to 28.9% for the MSCI World.
The issue when approaching ethical, sustainable or ESG investing is where to put your money. The world is now awash with strategies purporting to offer some degree of ethical or sustainable criteria when it comes to selecting its holdings, while others have it plastered in the name of the fund.
Adrian Lowcock, head of personal investing at investment platform Willis Owen, says there are ways for investor to pick through the funds available, however.
“Investing in ethical funds in your ISA offers a good opportunity to gain exposure to this growing trend, becoming something that is no longer a ‘nice to have’, but rather a necessity,” he says.
“Covid has accelerated the trend for sustainable investing as people have realised the impact human activity has on the world. Recent events such as the new US president signing back up to The Paris Agreement, has solidified the fact that climate awareness is high on the agenda, but the issue is the wealth of different choices out there.”
“There is a lack of clarity on what people are really investing in via the range of funds available, and without thorough research into underlying positions it is very hard for investors to know much beyond the labels on the funds.”
Nonetheless, there are a range of strategies out there with significant experience and understanding of sustainable and ethical investing, which have built up robust processes and solid track records.
Below, Lowcock delves deep into the sector to reveal his top choices for sustainably-minded investors.
ASI UK Ethical Equity – Manager Lesley Duncan follows a strict ethical approach which involves applying both negative and positive criteria; avoiding companies that harm the environment or are involved in alcohol, gambling, tobacco and weapons amongst other items. The team look to invest in environmental technology and pollution control companies, companies that promote equal opportunities and those that are strongly involved in the community. We believe the fund is a good choice for anyone who wants to embrace a socially responsible approach to investing in the UK.
Royal London Sustainable Leaders – Mike Fox and the team at Royal London have been evolving their sustainability strategy since 2003, and the fund looks to provide above-average capital growth by investing in companies that have a positive effect on the environment, human welfare and quality of life. The fund invests predominantly in the UK but with some exposure to the US and Europe. The portfolio consists of companies involved in improving the environment and the enhancement of human health and safety. The fund also invests in companies whose management are making above-average efforts in corporate responsibility.
Stewart Investors Worldwide Sustainability – This fund is co-managed by Nick Edgerton and David Gait and draws on the market-leading global equity research and stable investment team at Stewart Investors. The process behind this fund has been in place since the 1990s. Fundamental analysis of companies with a heavy focus on the sustainability of their earnings and business models is core to stock selection. There is preference for high-calibre management and healthy balance sheets leading to a bias towards defensive growth shares.
Adrian Lowcock, Chris Tuite
Head of personal investing Director & Head of Consumer Finance
Willis Owen MRM London
07849 846387 020 3326 9925
Notes to Editors
Willis Owen is one of the UK’s leading online investment service providers. Founded more than 20 years ago Willis Owen now has around £1bn of funds under management and has acted as an intermediary for over 150,000 customers and hundreds of millions of pounds worth of investments,
Willis Owen Limited is authorised and regulated by the Financial Conduct Authority.