December’s top performing sustainable funds

Written by Rebecca Jones on 3rd Jan 2019

In a new series produced in collaboration with 3d Investing, we’ll be taking a regular monthly look at the top performing funds in the sustainable investment universe, tracking trends and trendsetters in one of the fastest growing areas of global finance today.

Our universe consists of funds rated three stars and above by 3d Investing, which has rigorously screened thousands of funds available to UK investors to come up with just 210 that meet this standard. We sort this list by the top performers of the month and then again by three years, giving a comprehensive overview.

 

As global markets tumbled, it was a strong month for bonds and renewables as funds holding the debt of companies investing in climate friendly infrastructure soared. Of our top ten performers, four plough money into this asset class – one of the fastest growing in the sustainable investment space today.

Our top performer by a country mile, however, is NextEnergy Solar – which invests directly into solar projects across the UK. With close to £700 million of assets under management the investment portfolio includes photovoltaic solar sites in Dorset, Boxted Woods and Northamptonshire.

 

Bright side of the sun

NextEnergy Solar returned 4.1 per cent in December; however this is likely due to some share price bumps around its dividend payment date – 28 December. Over the longer term it has still delivered a decent return, though: 31.4 per cent over three years.

The Civitas Social Housing investment trust, which helps to fund the UK’s ever dwindling stock of social housing, was our second best performer as it delivered 2.4 per cent for investors last month. However its one year return is still in negative territory (-1.6 per cent) and, launched a little over two years ago, it still has some way to go to prove itself over the longer term.

Of our green bond cohort the Mirova Euro Green and Sustainable Bond fund was the top performer, returning 2 per cent over the month. At less than £300 million in size the fund is fairly small, however it is nimble and has outperformed its sector in all but one of the past five years. It is also the longest established of our selection, with none of the others yet notching up three-year stats.

 

Top ten performing 3d three star rated funds in December 2018

Fund Total % return 1m Rank in sector Total % return 1yr Rank in sector Total % return 3yr Rank in sector
1 NextEnergy Solar Fund Ltd 4.1 1 / 9 8.0 4 / 7 31.4 4 / 6
2 Civitas Social Housing PLC Trust 2.4 1 / 16 -1.6 9 / 15 n/a n/a
3 Mirova Euro Green & Sustainable Bond 2.0 7 / 45 -0.2 29 / 44 24.4 25 / 36
4 Allianz Green Bond 1.8 16 / 45 -0.3 32 / 44 n/a n/a
5 LO Global Climate Bond 1.7 102 / 348 3.4 146 / 330 n/a n/a
6 Greencoat Renewables PLC Trust 1.6 2 / 9 5.3 6 / 7 n/a n/a
7 Parvest Green Bond Classic 1.4 370 / 977 -0.4 520 / 902 n/a n/a
8 Primary Health Trust 0.7 n/a 4.6 n/a 24.7 n/a
9 Pacific Assets Trust 0.7 5 / 15 8.9 1 / 15 54.5 6 / 15
10 Alquity Indian Subcontinent 0.7 21 / 46 -14.6 40 / 45 61.1 1 / 39

Performance data sourced from FE Analytics and is to 31 December 2018.

 

Commenting on the top performers, John Fleetwood, managing director of 3d Investing, says: “Unsurprisingly, in a time of sharp falls in global markets, the best performing funds are infrastructure funds that benefit from reliable income streams, and from high quality green bonds.

“Over the longer term, specialist funds have outperformed more broadly based funds, specifically thematic funds and Asian funds. The coming year looks likely to highly uncertain for equity and bond investors, and this outperformance of thematic funds may come under pressure.”

 

Asia curries favour over long term

Over three years renewable and climate conscious infrastructure continue to do well, with 3i Infrastructure and Impax Environmental markets topping the table over the period, with returns of 63 per cent and 62.4 per cent respectively, while Bluefield Solar Income comes in at number ten.

Asia is the big story here, though, with three out of ten of our three year leaders invested in the region. Taking bronze overall is November’s top performer: India focussed Alquity Indian Subcontinent, which has returned 61.1 per cent since 2015, placing it first in its sector of 39 funds.

 

Top ten performing 3d 3star rated funds three years to 31 December 2018

Fund Total % return 1m Rank in sector Total % return 1yr Rank in sector Total % return 3yr Rank in sector
1 3I Infrastructure Plc Trust 0.6 4 / 6 22.2 1 / 6 63.1 1 / 6
2 Impax Environmental Markets Trust -7.5 3 / 3 -0.4 1 / 3 62.4 1 / 3
3 Alquity Indian Subcontinent 0.7 21 / 46 -14.6 40 / 45 61.1 1 / 39
4 Pictet Robotics -8.0 60 / 85 -6.2 61 / 76 58.0 31 / 62
5 Pacific Assets Trust Plc Trust 0.7 5 / 15 8.9 1 / 15 54.5 6 / 15
6 Stewart Investors Asia Pacific Sustainability -0.7 23 / 118 7.1 1 / 112 50.7 18 / 102
7 Stewart Investors Worldwide Sustainability -4.0 26 / 276 0.5 23 / 260 46.7 9 / 221
8 Schroder ISF Global Sustainable Growth -5.5 12 / 99 3.6 2 / 87 46.0 2 / 62
9 iShares S&P Global Timber & Forestry -8.5 117 / 172 -12.5 137 / 168 45.2 36 / 144
10 Bluefield Solar Income Limited Trust 0.4 3 / 9 11.4 1 / 7 43.5 1 / 6

Performance data sourced from FE Analytics and is to 31 December 2018.

 

It is joined by The Pacific Assets investment trust; one of the oldest and most consistently top performing funds invested in Asia. Over ten years the trust has delivered an astonishing 359 per cent for investors – making it the second best performer of our 3d rated universe behind 3i infrastructure (379 per cent).

Stewart Investors – experts in the region – have also bagged two places on our long-term leader board thanks to the ever popular Asia Pacific Sustainability fund and the newer Worldwide Sustainability fund, which also has good exposure to Asian markets (around 27 per cent of the portfolio).

Interested in investing in a sustainable fund? Find out how in the Good With Money Guide to sustainable stocks and shares ISAs.

 

The 3d Investing Methodology

The 3D Star Rating is a shorthand for identifying the ‘best’ sustainable investment funds registered for sale in the UK. It is derived from a combination of quantitative and qualitative data to objectively determine those funds that best meet the three core tenets of 3D Investing – doing good, avoiding harm and making money. It reflects the level of confidence we hold in the funds to meet these objectives and is based on our assessment of funds in five key areas:

  • Quality of sustainability management
  • Avoidance of ethical controversy
  • Social impact
  • Financial performance
  • Transparency

The overall rating is based on a weighted score combining all of these factors, and is ultimately derived from stock by stock analysis of all of the underlying holdings of the fund.

The 3D Star Rating is intended to facilitate quick and easy identification of those funds that best meet the 3D Investing objectives of making a positive social impact, avoiding ethically controversial companies and delivering a decent financial return. The 3D Star Rating is a demanding ranking that seeks to identify the very best funds. As such, a three star rating is far from average and in fact means the fund is likely to be amongst the best in its sector. A five star rating is reserved for the very best funds and is an aspirational standard.

 

To find out more see the latest Good With Money and 3d Investing Good Investment Review – your guide to the best sustainable funds on the market

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