This article is sponsored by Liontrust Sustainable Investing, as part of a series celebrating 20 years of the Sustainable Future funds.
Two decades ago, most investors were certain that incorporating ‘goodness’ or positive impact into their portfolios would mean taking a financial hit. Fast forward to 2021 and this assumption has been turned on its head.
New figures show that those who were early adopters of sustainable investing 20 years ago, who wanted strong returns without compromising on their principles to achieve them, now stand to have made a good profit on their investments – as well as the knowledge they’ve contributed to a cleaner, healthier planet.
Data from the top performing sustainable funds from March 2001 to March 2021 reveals impressive growth of up to 1,126 per cent.
John Fleetwood, of Square Mile Research which produced the figures for Good With Money, said sustainable investing is picking up pace as the financial industry and investors increasingly see its potential value both for the health of the planet, and their own returns.
He said: “Responsible investment funds have flourished over the past 20 years, markedly increasing in both number and sophistication. However, it is only over the last two years that they have really come of age, seeing a step-change in take-up and acceptance by investors and the financial community. The stage is set for transformational growth over the next 20 years when I expect to see sustainability become a central part of investment management.”
Top performing sustainable funds over 20 years to March 31, 2021:
| Fund name | Total return (net dividends) in the last 20 years, end of March 2021 (GBP) |
| Primary Healthcare Properties | 1126.87% |
| Pacific Assets Trust | 665.65% |
| Pictet Water | 444.05% |
| NN (L) Emerging Markets Enhanced Index Sustainable Equity | 405.46% |
| EdenTree Amity International | 397.95% |
| AB Sustainable Global Thematic | 365.35% |
| Carnegie Worldwide Global Equities Ethical | 356.97% |
| Liontrust SF European Growth | 353.97% |
| BMO Responsible Global Equity | 349.81% |
| Janus Henderson Global Sustainable Equity Fund | 345.83% |
| Premier Ethical | 343.00% |
| EdenTree Amity European | 330.70% |
| Liontrust SF Managed Growth | 318.28% |
| Royal London Sustainable Leaders | 317.61% |
| Aegon Ethical Equity | 308.90% |
| Liontrust UK Ethical | 301.47% |
| Liontrust SF UK Growth | 289.81% |
| Liontrust SF Managed | 287.10% |
| ASI UK Ethical Equity | 280.75% |
| Liontrust SF Global Growth | 276.77% |
| ASI Global Ethical Equity | 269.90% |
| Liontrust Pan European Growth | 268.77% |
| Jupiter Ecology | 258.51% |
| EdenTree Amity UK | 250.84% |
| Janus Henderson UK Responsible Income Fund | 235.41% |
| Keystone Positive Change Investment Trust | 216.35% |
| BMO Sustainable Opportunities Growth | 186.66% |
| Legal & General Ethical | 170.52% |
| British Land | 151.68% |
| Jupiter Responsible Income | 150.13% |
| Liontrust SF Corporate Bond | 145.87% |
| Aegon Ethical Corporate Bond | 140.79% |
| JSS Sustainable Equity – Global | 129.49% |
| JSS Sustainable Portfolio Balanced | 121.59% |
| JSS Sustainable Equity – Europe | 93.57% |
| BNP Paribas Sustainable Equity High Dividend Europe | 75.58% |
| Family Charities Ethical | 66.72% |
| Source: FE Analytics |
*includes only funds which have sufficient history over 20 years
John said the best performing funds over a prolonged timeframe are those that successfully look ahead to problems the world will face in the the years to come, and find companies and projects that are working to address them.
He said: “Liontrust had the foresight to invest in a substantive team of sustainable investment specialists long before it became fashionable. This early adoption has paid dividends in spades, with the Sustainable Future funds becoming a mainstay of the company’s products and having rewarded investors handsomely.
“Pictet were one of the original thematic investors and their identification of water as an investment theme has not only attracted large investment flows for Pictet, but it has lived up to the marketing rationale for water as an investment theme.
“Similarly, the Janus Henderson Global Sustainable Equity Fund was one of the first to adopt a thematic approach based on investing in solutions to social and environmental challenges. It too has rewarded investors with attractive returns over a prolonged period.”
Climate change in the spotlight
The success of sustainable investing has also been driven by a growing public and political awareness of pressing issues such as climate change.
The way we view our world, and our connection to it, has transformed in the last 20 years. Until recently, concern over climate change – much like interest in sustainable investing – was limited to the dedicated few. But thanks in large part to Greta Thunberg and David Attenborough, the climate crisis has been pushed into the global spotlight.
In 2015, the United Nations set its 17 Sustainable Development Goals, or “Global Goals”, which aim to create a better, more sustainable future by 2030.
A year later the landmark Paris Agreement was signed by 196 nations with the goal of limiting global warming to well below 2 (and preferably to 1.5) degrees Celsius, compared to pre-industrial levels. The UK is now preparing to gather global leaders for crunch climate talks, known as COP26, in Glasgow in November.
Alongside this, awareness of the power of our finances to help achieve these ambitious goals for the planet and society has grown significantly.
And crucially, far from sustainability being an obstacle to good returns, it is increasingly being found to improve them. Companies that are providing solutions to the world’s biggest problems, rather than contributing to them, are proving best placed to succeed.
Success of sustainable investing
This opportunity, and rising demand from investors to ensure their money is being used for good, has led to a rapid increase in sustainable funds.
Peter Michaelis, head of the Sustainable Investing Team at Liontrust, said: “If anyone had asked us in 2001, we would not have dreamt of the success that sustainable investment has achieved over the subsequent 20 years.
“According to the Forum for Sustainable and Responsible Investment’s 2020 trends report, sustainable investment now represents 33 per cent of the $51.4 trillion (£37.3 trillion) in total US assets under management, and the figure in Europe doubled over 2020 to hit €1.1 trillion (£0.94 trillion). The pace at which these funds have launched over recent years is also striking, with more than 500 European launches in 2020 alone.”
Data from European Morningstar shows that 505 ESG funds launched and 253 more shifted to an ESG focus in 2020, and there are now more than 3,000 sustainable products available in Europe.
The next 20 years
The world may have been transformed over the past 20 years, but the pace of change is accelerating. From the development of personalised medicine to the transition to renewable energy, genuinely sustainable funds are looking at trends that are changing the world for the better and the opportunities they create.
They focus on the biggest issues of our time, hunt for companies that can make money from solving them and invest in the opportunities of maximum impact for maximum returns. Who knows, it might not be that long before sustainable is the norm rather than ‘niche’.
Lessons from 20 years of sustainable investment
Do remember that the value of an investment and the income generated from it can fall as well as rise and is not guaranteed. Therefore, you may not get back the amount originally invested and potentially risk total loss of capital. Past performance is not a guide to future performance.
