This is part of a new series from Good With Money on ‘How to green your ISA’, showing you how to make your tax-free ISA allowance work for the planet and people as well as your pocket.
Interest in sustainable investment has risen dramatically in recent years. But how do everyday investors know if an asset manager is genuinely committed to making positive change with their money – or is simply cashing in on the hype?
Picked out by John Fleetwood of leading fund analysts Squaremile, here are the top 8 fund houses for your ISA that are leading the way in sustainable investment:
WHEB Asset Management
WHEB is a specialist fund manager wholly focussed on creating a positive impact through investing. Its team are true pioneers in the industry.
The firm’s flagship FP WHEB Sustainability Fund invests in five environmental themes (resource efficiency, cleaner energy, environmental services, sustainable transport, water management) and four social themes (health, safety, wellbeing and education), which it defines as providing a ‘solution to a sustainability challenge’.
WHEB believes that by focusing on the companies providing solutions to urgent social and environmental issues, the fund can deliver superior performance for investors.
BMO Global Asset Management
BMO Global Asset Management, part of the BMO Financial Group, launched its first responsible fund more than 35 years ago. It has since led improvements in ethical investing standards and actively driven companies to improve their environmental, social and governance (ESG) practices. Its goal is to mobilise $400 billion (£286 billion) for sustainable finance by 2025.
All of its active investment teams make ESG considerations an integral part of their decision making. It has 20 offices around the globe, has around £852 billion in total assets, and employs 45,000 people.
In 2019 it was named one of the ‘World’s Most Ethical Companies’ by the Ethisphere Institute for the 2nd year running. Ethisphere focuses on five key areas of evaluation in its selection process: governance, a culture of ethics, leadership and reputation, ethics and compliance programs, and corporate citizenship and responsibility. BMO was also included in the Bloomberg Gender-Equality index in 2019 for the 4th time.
Guided by a conviction that responsible investing is the best way to create wealth over the long term, Federated Hermes is a global leader when it comes to active, responsible investment.
Hermes Investment Management and its US owner Federated Investors combined names in February 2020 to become Federated Hermes.
M&G Investments is the global asset management arm of M&G plc. It set up the UK’s first ever mutual fund back in 1931 and has since been using its influence to drive positive change on a large scale.
The firm’s range of Planet+ funds are designed to deliver long-term financial returns for investors while also contributing to a better future for society and the planet. The range includes both sustainable and impact funds. The sustainable funds make investments in companies driven by sustainability-themed considerations such as the fight against climate change, or air pollution, while at the same time meeting high ESG standards.
The impact funds go a step further, investing in companies that aim to address some of the world’s major social and environmental challenges. You can find out more about the Planet+ funds here.
M&G has committed to reducing its own carbon emissions to net zero by 2030.
Aberdeen Standard Investments
Aberdeen Standard Investments (ASI) takes a two-pronged approach to responsible investing. At the investment stage, it uses ESG factors to help decide where best to invest. It integrates ESG issues into its research, analysis and decision-making process.
It also actively manages specialised funds that have stronger sustainability or ethical principles. As shareholders, it votes with sustainability principles in mind and works with companies to drive positive change. It also engages with policymakers on ESG and stewardship best practice.
Baillie Gifford has remained a privately-owned partnership, based in Edinburgh, for more than a century. This means it doesn’t face pressure from external shareholders interested in short-term profits. It has more than 1,100 employees and manages around £173 billion in assets.
Baillie Gifford’s Positive Change fund seeks out companies that can deliver positive change in one of four areas: social inclusion and education, environment and resource needs, healthcare and quality of life; and the so-called ‘base of the pyramid’ (addressing the needs of the world’s poorest populations).
Columbia Threadneedle is a global asset manager with a team of 2,000 people in 17 locations, looking after more than £400 million in assets.
Responsible investing is at the heart of its approach, it says, as “effective stewardship benefits companies, investors and the economy as a whole.” In keeping with these values, it takes three criteria into account for its investments:
- Sustainable themes – a company’s products and services must benefit from, and contribute to, a sustainable future. Sustainable themes must make up at least 75 per cent of the fund.
- Environmental, Social and Governance (ESG) factors – 25 per cent of the fund must be made up of companies selected for having good ESG practices. It avoids companies that have poor practices, but may invest where it believes there is scope for driving improvements.
- Sustainable and ethical exclusions – it will not invest in companies that are involved in harmful activities such as fossil fuels, tobacco and arms.
Columbia Threadneedle is a signatory to the United Nations-backed Principles of Responsible Investment (PRI).
Stewart Investors is a small team of investors who manage, on behalf of clients, portfolios that focus on high-quality companies that contribute to, and benefit from, sustainable development. It believes that “companies that deliver benefits to society and the environment face fewer risks and have access to more enduring opportunities over the long term.” It says these companies are therefore better placed to deliver positive returns to shareholders.
Top 5 green ISAs for your climate-friendly cash