Sustainable investors “shielded from the worst” of stock market falls

Written by Good Money Girl on 13th Mar 2020

Global stock markets have suffered their worst falls since 1987, with more than 10 per cent wiped off global markets on Thursday, instantly slashing thousands of pounds from the pension and ISA pots of millions of people in the UK who depend on the stock market for their life savings.

This has been a particularly scary week if you are a new investor and this is your first experience of loss in the value of your investment pot. While most commentators agree it is a “temporary phenomenon” – even that there are now buying opportunities – it can still be hard to see the positives.

However green investors can take heart. For those who are as likely to have been as motivated by environmental concern as the promise of returns, there is reason to believe the picture may not be so bleak.

Have sustainable funds weathered falls better?

The environmental concerns of many first-time investors means many are likely to have chosen sustainable funds for their first foray into the market. We know that millennial money has been plumping for green returns for some time.

Firstly, almost no company or fund has done well out of this week’s market turmoil – it’s hard to pick one approach that works when the whole world is facing a relatively unpredictable existential threat.

But on the bright side, there is evidence that those who have chosen sustainable over non-sustainable funds have suffered less.

John Fleetwood, of 3D Investing, which monitors a ‘universe’ of self-proclaimed ethical and sustainable funds, said: “Like the rest of the market, ethical and sustainable funds have been hit hard by the uncertainty caused by the coronavirus, and its impact on world trade.

“However, these funds have not suffered to the same extent as mainstream investment funds with their exposure to oil and resources. The vast majority of 3D funds have very little exposure to fossil fuels, and as a result, have been shielded from the worst of the impact of the dramatic fall in the oil price.”

Besides the limited or non-existent exposure to fossil fuel-related market gyrations within these funds, there are other reasons they might do well. Some funds, often those labelled as ‘positive impact’, are actively interested in solutions to global problems, such as healthcare.

Fleetwood says: “Many of the more thematically driven funds also have a significant exposure to healthcare, which may be a long-term beneficiary of the increased focus on healthcare systems and the need for investment.”

Good With Money analysed the performance in the past week (March 5 to March 12) of the top 14, five-star rated funds from the 3D Universe against the FTSE 100 to gauge to what extent they had been sheltered from the coronavirus storm.

Sustainable fund versus FTSE 100 one-week performance

Fund nameOne-week performance, %FTSE-100 one-week performance, %
Baillie Gifford Positive Change -12%-22%
Civitas Social Housing-10%-22%
Foresight Solar-5%-22%
FC WHEB Sustainability-12%-22%
Hermes Impact Opportunity Equity-15%-22%
Impax Environmental Markets Fund-17%-22%
Investec Global Environment-18%-22%
John Laing Environmental Assets-5%-22%
Lombard Odier Climate Bondn/a-22%
M&G Positive Impact-13%-22%
Montanaro Better World-15%-22%
Triodos Pioneer Impact-19%-22%
UBAM Positive Impact Fund-12%-22%
Wellington Global Impact-26%-22%

It’s important to say this is a one-week snapshot of performance in extraordinary times in global markets. But it’s also interesting that the majority of these top-rated sustainable funds have suffered less dramatic falls in value than the FTSE 100 this week.


Five investment mistakes first-timers should avoid


I’m a new investor and stock market falls have scared me. Should I do anything?

Many commentators believe a global recession has now been ‘priced in’ to market movements (meaning the value of shares now assumes this will happen), with some saying the low values now represent a buying opportunity.

Of course, with the coronavirus representing an unprecedented and unfamiliar threat, what happens to public health, the economy and markets is still anyone’s guess.

But there is strength in the traditional wisdom that if you are invested for the long term and have no need for your money now, hold tight. It’s only a loss if you sell your holdings now.


Read the Good Guide to Impact Investing


Should I actually be buying into the market now then?

Some people believe that fortune favours the brave. There is some logic to this. The argument goes that if you buy low, particularly at a time when stocks and shares sell-offs have been fear-based and *may* have become under-valued, then your investment has more chance of making bigger gains in future.

But it is very difficult to time the bottom of a market, particularly when faced with a threat of a global pandemic of a new illness.

It really is up to you to decide – if you’ve got some money held in cash, and the low interest rate on it is chafing, and you think that the market has probably gone as low as it can on the back of coronavirus, then you should know at least that you aren’t totally mad for considering it.


Read the Good Guide to Stocks and Shares ISAs