Once upon a time ethical and sustainable investment funds were as rare as an emotionally complex Disney Princess. Thankfully times have changed; as Elsa and Anna show us how today’s sisters do it for themselves, sales of ethical and sustainable funds are skyrocketing.
While the sector still represents a relatively tiny proportion of the UK fund market (less than 2 per cent at £14.4 billion), over the past few years retail sales of ethical and sustainable funds have exploded – shooting up 68 per cent from £371 million to £625 million between 2015 and 2016 alone.
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The strong and growing demand for funds that do good things with our money means more and more asset managers are waking up to the opportunity and launching new and exciting positive investment strategies. Over the past year to 31 October, a total of 27 sustainable funds have launched into the UK retail market – representing nearly 6 per cent of all comparable launches over the period.
This month heralded three new investment funds targeting sustainable and responsible companies, with the UK’s biggest asset manager – Aberdeen Standard Life – launching its first ever impact product.
Standard Life Investments Global Equity Impact
The Standard Life Investments Global Equity Impact fund will invest in companies whose products and activities specifically address the UN’s 17 Sustainable Investment Goals, from universal access to healthcare to tackling pollution to eradicating global poverty.
Managed by Sarah Norris and Dominic Byrne, the fund will have a ‘high-conviction’ portfolio of just 35 to 60 stocks and each company will need to prove that it is making a ‘genuine’ positive social or environmental impact to make the cut.
Ethical is no longer enough – investors want an impact
Commenting on the launch, Euan Stirling, Global Head of Stewardship and ESG Investment at Aberdeen Standard Investments, said: “Impact investing is about shifting the might of the capital market to change the world for the better. Through the Global Equity Impact Fund we aim to have a positive social and environmental impact, while still delivering an above-market financial return for our clients.”
KEY FUND FACTS:
Fund name: Standard Life Investments Global Equity Impact
Annual charge: 1.4% (of what you invest)
Minimum investment: €1,000 (£880)
iShares MSCI World SRI UCITS ETF
Adding to its growing stable of environmental, social and governance (ESG) focused passive products, this month US power (fund) house BlackRock launched the iShares MSCI World SRI UCITS ETF – its eleventh ESG fund in Europe.
Like all ETF’s (or ‘exchange traded funds,’ meaning they’re listed on the stock exchange), the fund passively tracks companies that match its investment criteria – in this case companies in the MSCI World SRI Index that have strong ESG credentials.
(See our guide, ‘Six of the Best Socially Responsible ETFs’)
It aims to avoid companies cutting governance corners as well as traditional sin stocks: arms, tobacco, alcohol, nuclear power, gambling, adult entertainment and GMO. Again like all ETF’s the lack of active management also means it’s super cheap, with an annual charge of just 0.3 per cent.
Manuela Sperandeo, Head of Specialist Sales at iShares EMEA, said: “This ETF allows investors to express their active investment decisions on a broad range of markets and geographies. Importantly, the SRI index it tracks has also outperformed its [non-SRI] parent index since inception.”
Fund name: iShares MSCI World SRI UCITS ETF
Annual charge: 0.3% (of what you invest)
Minimum investment: TBC
UBS Equity SICAV Global Impact
Following Standard Life’s lead, the asset management arm of Swiss bank UBS launched the UBS Equity SICAV Global Impact fund this month, which also looks to invest in companies making a measurable positive impact on society and the environment.
With the help of some academic boffins, UBS has developed a ‘bespoke methodology’ for the fund, which it says will demonstrate a ‘positive and tangible impact on human well-being and environmental quality’. Key themes for the fund include climate change, air pollution, water scarcity, treatment of disease and food security.
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It will be managed by Bruno Bertocci, head of the sustainable equity investors team at the asset manager, who will also run a ‘high-conviction’ portfolio of between 40 and 80 stocks, with nearly a quarter of the fund invested in its top ten holdings.
“This fund is the result of a project that I think will be influential and interesting in the years ahead; a project that actually develops a quantitative framework to measure the external impact of public companies on society,” said Bertocci.
KEY FUND FACTS
Fund name: UBS Equity SICAV – Global Impact
Annual charge: 1.2% (of what you invest)
Minimum investment: TBC
Note: These funds are not yet widely available. If you’re interested, speak to your friendly local financial adviser (but don’t let her bung you in something else instead).
To see a full list of the 200+ UK impact funds that are really making a difference AND a profit for investors, download the Good Investment Review
 Source: The Investment Association, August 2017 AUM and Sales, page 16 https://www.theinvestmentassociation.org/assets/components/ima_filesecurity/secure.php?f=press/2017/stats/stats0817-12.pdf
 Data compiled by author using FE Analytics