Damien Lardoux is a portfolio manager for EQ Investors, which offers Positive Impact Portfolios and has been rated by Good With Money as a Good Egg. Here, he explains how he tries to do his bit with his own personal finances.
How would you rate your own personal finances for goodness, on a scale of 1 to 10? Why?
I am going to say 9 out of 10. I invest my SIPP (pension) and ISA money into the EQ Positive Impact Portfolios, which select funds supporting companies and organisations having a positive impact on the society and/or the environment. These portfolios seek to align their objectives with the UN Sustainable Development Goals which highlights the 17 most pressing issues for the planet and humanity.
What bit of your finances would you most like to change for the better?
A number of big issues like world hunger or access to education still lack investment opportunities particularly among listed securities. Whilst a number of projects tend to be very small in scale, I would like to see more fund providers allocating 5 to 10 per cent of their assets to small, even unlisted, companies or organisations in order to improve the overall impact of my investments.
The French pension system with the creation of the ‘Fonds Solidaires’ is a great example to follow where they allow sustainable portfolio managers to invest up to 10 per cent in high impact but unquoted investments.
At EQ, we are in continuous dialogue with our preferred fund managers to get this message across and further increase the overall impact our investments.
Which provider are you most impressed by? Why?
I am probably most impressed by Impax Asset Management, one of the oldest investment firms dedicated to environmental investing. It was founded in 1998 and remaining dedicated since then to sustainable investment that impacts the environment and society positively.
They have been at the forefront of impact reporting, disclosing carbon, water, waste and energy footprints for their funds. They also directly support the framework provided by the UN Sustainable Development Goals mainly focusing on the environmental issues that need financing.
Finally, they have been able to marry high impact with strong performance confirming that one does not have to be at the expense of another.
Which provider would you like to see hoisted by their own petard? Why?
I have been less than impressed with BlackRock’s approach to impact investing in the UK.
The BlackRock Impact World Equity Fund seeks to achieve exposure to equity securities with a measurable positive societal impact, however amongst the holdings are British American Tobacco and ExxonMobil. It’s great to have a huge asset manager like BlackRock promoting impact investing, but this risks confusing investors.
For me, underweighting sectors having a negative impact on society like tobacco manufacturers or oil producers is closer to what we call SRI or Socially Responsible.
Investing where funds managers will favour the best rated companies across each sector as far as their Environmental, Social and Governance (ESG) practises are concerned. The concept of impact investing goes much further than that as the investments must be in companies having a net positive impact on the society and the environment.
Do you think you have lost out financially by making sustainable choices?
I am absolutely convinced of the opposite as the companies I invest in are involved in fast growing sectors like energy efficiency or healthcare offering innovative products and services being in high demand. Since their launch in 2012, our EQ Positive Impact Portfolios have actually outperformed their benchmarks and most of their peers.
Going forward, I am personally a lot more comfortable being invested in companies evolving in sectors which are seen as key to solve the challenges discussed instead of being allocated to past winner like oil majors or tobacco manufacturers which are going to face many headwinds.
What personal finance headline would you most like to read in the next year, and why?
I would love to read that the big oil majors are now diverting new investments towards solutions in line with the Paris Agreement on climate change to limit the rise in temperature well below 2 degrees Celsius.
Unfortunately, until now, nearly all the oil companies have been denying the need for them to adapt to a low carbon economy. However, according to Nature Magazine, a third of oil reserves and half of gas reserves will remain unused from 2010 to 2050 in order to meet the target of 2°C.
For me, it’s urgent that they start developing new products or activities in line with this target if they want to remain as a going concern in the future.