Ethical investing has become hugely popular in the last five years, with people such as Greta Thunberg, Extinction Rebellion and David Attenborough all challenging consumers, companies and the government to do more to fight climate change.
And despite popular misconceptions, investing to benefit the environment and society does not mean having to accept lower returns. Over three years the MSCI ACWI ESG Universal index has delivered 38% compared to 36.9% for the MSCI World.*
Most fund providers have signed up to the Principles for Responsible Investment, which align their investment practices with the broader objectives of the United National Sustainable Development Goals. These aim to tackle ‘societal, environmental and economic development issues’ and include affordable clean energy and responsible consumption and production.
ESG risks also bring opportunities for innovation. Electric vehicles look set to disrupt transportation as falling battery costs make them more affordable. Meanwhile, power generation is becoming cleaner as the falling costs of solar panels and wind turbines make them more competitive.
To play these themes, Adrian recommends the ASI UK Ethical Equity, Royal London Sustainable Leaders and Stewart Investors Worldwide Sustainable funds.
ASI UK Ethical Equity – Long-standing manager Lesley Duncan follows a strict ethical approach. This involves applying both negative and positive criteria, with a number of companies and industries screened in or out of the universe depending on their impact on the environment or society. 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 – Manager Mike Fox has been running this strategy since 2003. He 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 shares in companies involved wholly or in part in the manufacture of products, industrial processes or the provision of services associated with improving the environment and the enhancement of human health and safety. The fund manager also invests in companies whose management are making above-average efforts in corporate responsibility.
Stewart Investors Worldwide Sustainable – This global equity fund, co-managed by Nick Edgerton and David Gait, draws on the market-leading research and stable investment team at Stewart Investors. Although the strategy is reasonably new, launched in 2012, 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 also preference for high-calibre management and healthy balance sheets leading to a bias to defensive growth shares. The extensive, independent and insightful research has delivered decent performance for investors since inception and we think it should continue to deliver sustainable returns.
* Source: FE Analytics. Total Return in pounds sterling. 8th February 2017 to 9th February 2020.
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.