One of the UK’s biggest robo-advisers, Nutmeg, is today launching a brand new range of ten fully managed ‘socially responsible’ investment portfolios that invest according to ethical principles.
Using an environmental, social and governance (ESG) screen devised by global market aggregator MSCI, each portfolio will carry a score indicating how ethical or ‘socially responsible’ it is, ranging from 1 for the least to 10 for the most responsible.
Unlike sustainable or impact investment funds that target specific outcomes – for example a reduction in Co2 emissions via a clean energy investment – Nutmeg’s portfolios will invest in main markets using the MSCI screen to filter out companies that do not meet its criteria.
The portfolios will have two baseline exclusions: tobacco and controversial weapons, including nuclear and chemical. Other areas including mainstream arms, fossil fuels, mining and alcohol will be included, with the screen focusing on ‘best in class’ examples from each category.
Transparency for ethical investing
In its literature for the new funds says Nutmeg says it hopes its approach will provide a new level of transparency to the label ‘ethical’, which is not always helpful for investment as interpretation of the term varies widely.
Nutmeg says: “The industry is awash with different labels for this kind of investing, which can be very confusing for investors. At Nutmeg, we’re using the term socially responsible investing.
“We believe this term fairly reflects our customers’ interests in limiting exposure to companies that engage in controversial activities, while increasing exposure to those that lead their peers in social responsibility.”
The firm stresses its approach is different to sustainable or impact investing – which might, for example invest in a small-scale community energy or microfinance project. However Nutmeg argues its portfolios are lower risk than the latter and so better suited to the broader market.
Shaun Port, Nutmeg’s chief investment officer says: “Hard as we may try, no investment portfolio can be designed to dodge every controversy, but we’re committed to improving choice in the investment world, being transparent about how sustainable our portfolios are and empowering investors to decide what’s right for them.”
He adds that Nutmeg is also one of only handful of wealth managers in the UK that is signed up to the UN supported Principles for Responsible Investment network, which it joined last week, on 13 November.
ESG boom
Nutmeg’s launch follows news from financial ratings agency Morningstar that assets under management in ESG strategies have grown by 60 per cent in just six years, up from $655 billion (£510 billion) in 2012 to top $1 trillion (£779 billion) in October.
The data from Morningstar also showed that the number of new funds launched using ESG principles has risen from 140 in 2012 to 372 last year, as asset managers have rushed to meet investor demand for more socially responsible investing.
On where he sees ESG going from here, Port says: “We see we are at a tipping point in terms of embedding ESG into all investment strategies – not just socially responsible investment portfolios. The industry standard should be that everyone reports clear and transparent data on how sustainable their portfolios are. Hopefully this will be a wake-up call to the industry.”
The Nutmeg Socially Responsible portfolios are available through www.nutmeg.com and have a minimum investment of £500. They have an ongoing annual charge of around 1.16 per cent for portfolios up to £100,000 and 0.71 per cent for portfolios of more than £100,000.
