While the coronavirus crisis remains everyone’s immediate concern, it may also be a catalyst for action on what remains the biggest threat to our world and society – climate change.
Here we round up three new sustainable investment funds, which aim to make a positive difference to people and the planet while also bringing good returns.
1. UBP – UBAM Positive Impact Emerging Equity Fund
This new fund from private wealth manager UBP invests in companies that provide solutions to help the world reach the Sustainable Development Goals (SDGs). They include education providers, companies expanding water and electricity access and renewable energy firms.
The fund scores companies on four elements: Intentionality (how explicit and committed is a company to having an impact), Materiality (how much of the business can be considered positive impact, net of negative aspects), Additionality (how much of a difference does it make) and Potential (how big and profitable is the market opportunity). Each score is out of five and a company needs to score at least 12 to be included in the portfolio.
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Mathieu Negre, co-portfolio manager for the fund, said: “The coronavirus, in a similar way to climate change, forces all of us to look at the economy in a different way. This is not any more simply about a cold financial calculation, but a balancing exercise that needs to consider how to protect people or the planet.”
John Fleetwood of 3D Investing describes the fund as “a welcome innovation.” He said: “It’s truly distinctive in that it focuses on positive impact unlike almost all other responsible emerging market funds that tend to look at Environmental and Social Governance factors (ESG). This fund does that as well, but also seeks to deliver a demonstrable positive impact by investing in companies that are providing solutions to social and environmental challenges.”
Julia Dreblow, who founded Fund EcoMarket to help financial advisers and other intermediaries to understand and compare sustainable, responsible and ethical investment fund options, said: “I recognise many of the very positive holdings in their top ten list and as such I welcome them as a new entrant to the hugely important, rapidly expanding impact investment market.”
2. Epworth Climate Stewardship Fund
The Climate Stewardship Fund from Epworth tackles the climate emergency head-on, letting UK charity trustees invest in a way that will help save the planet while targeting good long-term investment returns.
The fund, which invests mainly in UK companies, aims to have a carbon footprint substantially below that of the FTSE All Share Index. Epworth invests with ‘Christian ethics’, seeking out companies that contribute to the transition to a lower carbon economy.
Most notably, it excludes companies that extract or refine fossil fuels, or supply them with goods or services.
Epworth’s chief executive David Palmer said: “Covid-19 has shown everyone just how quickly the world can change – and the sudden damage and disruption that can be caused to day-to-day life. It is rightly everyone’s immediate concern, but climate change remains the biggest long-term threat to our planet. The pandemic response also shows that rapid radical action in response to an existential threat is possible. That gives us hope for action on climate change.”
Fleetwood said: “It’s good to see a charity fund take real action on climate change and to combine exclusion of fossil fuel companies with wider ethical exclusions and robust engagement. It also demonstrates how important the issue of climate change is becoming to charity investors.”
Dreblow added that Epworth has a strong reputation in the field of faith-based investment for charities, saying: “It is great to see them launching a climate change fund specifically designed for Christian investors. This has been a gap in the market.”
3. EQ Investors – Future Leaders Portfolios
The Future Leaders Portfolios from EQ Investors include eight different risk levels and are aimed at people who want to invest sustainably at low cost
They focus on the most responsible companies in each sector (primarily healthcare, clean energy and green bonds) by only including those with a strong environmental and social focus.
EQ’s head of impact investing Damien Lardoux said: “We’ve been a pioneer in the impact investing space over the last eight years. The launch of the Future Leaders Portfolios sees us building on that reputation whilst responding to the changing market we work in to deliver a very competitively priced multi-asset passive solution. Our ambition is to evolve the portfolios as the universe of passive strategies increases – this is just the start of the journey.”
He told Good With Money that they’re seeing a surge in demand from investors with a real emphasis on sustainable considerations but with a low cost, passive mindset. He said: “We have learnt a lot since we launched the EQ Positive Impact Portfolios in 2012 and want to leverage our experience in impact investing, to bring sustainability into passive investing without compromising on financial returns. In addition, we want to build on the ESG (Environmental, Social and Governance) focus we have built across all our fund research and increased understanding that it can benefit returns.
“Lastly, we see ESG investing as becoming mainstream in the asset management industry, and we also see regulation moving this way. Therefore, we wanted to take advantage of the opportunity while few peers offer this kind of portfolio.”
He said they are tackling any remaining exposure to fossil fuels using ESG measures. He said: “We are already in conversations with asset managers to produce new indices that would allow us to remove this exposure. We think this is essential to improve the climate change scenario alignment of the portfolios.”
Fleetwood said: “There are limitations in the level of impact of ETFs which follow ESG indices. There are inevitable compromises and the level of engagement is low. That having been said, the portfolios offer a low cost way of investing in funds with a better than average ESG performance.”
Dreblow added: “EQ has developed a strong and well deserved following as managers of impact investment portfolios managers and it is good to see them widen their range. Their challenge is likely to be explaining the differences between their various portfolios to clients – but as Damien Lardoux is managing both I would expect him to do so thoroughly and with great care.”