Top five pioneering positive Investment funds
This Good Money Week, Barchester Green analysed the £11.2 billion ethical funds market to find out just how divested the UK's most sustainable funds are, picking out some "winners" and "sinners" in the space. With attention around the recent New York climate summit and global climate march, the second half of 2014 has already seen an unprecedented shift values in the investment space away from fossil fuels and towards a clean energy future. Barchester Green, the UK's leading ethical and financial advisory firm, has identified five pioneering positive investment funds for Good Money Week. These are the funds that have a transparent positive investment strategy, avoid exposure to fossil fuels, and actively seek out opportunities for long-term growth in successful companies that are tackling major social and environmental issues.
Top five positive investment funds
1. WHEB Sustainability Fund'The WHEB Sustainability Fund is an excellent example of the new style of focused 'sustainability' funds,' says John Ditchfield of Barchester Green. 'Rather than seeking to screen out or avoid negative industries they are positively investing in sectors which offer strong prospects for both financial returns and social and environmental benefits.' What you need to know:
- Transparency: WHEB publish all individual stock positions and make public the minutes from their investment group meetings, this gives investors insight into how the fund selects investments.
- Position on Fossil Fuels: The WHEB Sustainability Fund is a fossil fuel free fund and has no direct investments in coal, oil or gas.
- Positive Investment Strategy: WHEB is a positive 'thematic' investment fund which puts investor capital into sectors which are addressing major social and environmental issues; the fund's main themes are: resource efficiency; water management; sustainable transport; education; wellbeing; health; safety; cleaner energy; environmental services.
- Performance: Over one year the fund is in the top 25% in its sector or group so has beaten the vast majority of Global investment funds.
2. The Alliance Trust Sustainable Futures UK Growth fund'The Sustainable Futures fund range offers investors a range of approaches to risk, all within a process which emphasises contribution to sustainability. In fact the entire investment process within these funds considers how a business contributes to sustainability,' says John. What you need to know:
- Transparency: Alliance Trust publish all of their individual fund holdings and are open and transparent with regard to decisions taken in relation to portfolio holdings - providing detailed commentary and explanation to advisers and their clients.
- Position on Fossil Fuels: This year, Alliance Trust announced that the carbon dioxide emissions of companies held in their Sustainable Future Equity funds. On average they emitted 59% less than the market in the 2009-2012 period, and they are committed to reduce that still further.
- Positive Investment Strategy: We estimate 17.5% of the SF UK Growth fund's total assets (£194 million) is invested in climate change and energy efficiency themes - representing approximately £34 million of investments. Of this approximately 3% (£5.8 million) is invested in pure renewables (mostly operators). The rest of this theme is invested in energy efficiency. themes
- Performance: The Alliance Trust - Sustainable Future UK Growth has a consistent record of high performance. Over the 5-year period the fund is in the top range of the best performing ethical and environmental funds; the fund is actually the top UK fund over five years in the ethical and sustainable sector.
3. Quilter Cheviot Climate Assets Fund'This is the UK's leading multi-asset sustainability fund with solid performance and a flexible approach to investing, allowing the manager to hold a mix of assets in order to protect investor capital,' says John. What you need to know:
- Transparency: The full list of holdings is available for investors and for advisers.
- Position on Fossil Fuels: Quilter Cheviot invests in companies that provide alternatives to fossil fuels, although it does hold some gas companies. Fossil fuels will be part of our economy for the foreseeable future and gas is the cleanest by far. When coupled with significant investments in clean energy this is consistent with a sustainable and ethical strategy. The fund also avoids nuclear power and genetic modification.
- Positive Investment Strategy: The fund invests in companies providing the clean and more efficient products and technologies to deliver the 'New Economy'. It focuses on positive inclusion, driven by sustainability themes like energy, food, health, energy efficiency, clean transport, resource management and water management.
- Performance: Since its launch the fund has had a low volatility and has outperformed its benchmark (IMA Mixed Investment 40%-85% Shares) by 23.2%.
4. Premier ConBrio B.E.S.T Income Fund'With bank base rates at such an historic low (1% interest) and many investors actively looking for income we welcome the innovative ConBrio Income Fund with its positive and stable returns,' explains John. 'This highly innovative fund offers investors a high level of income (3.99%) with no exposure to fossil fuels, a unique combination in the UK investment market. The fund also publishes details of all holdings and has a clear and transparent investment process.' What you need to know:
- Transparency: Full list of holdings in Annual Report, along with exposure in different sectors.
- Position on Fossil Fuels: It is innovative, being the only income fund to exclude the oil and gas and mining sectors. It sold its positions in oil and gas companies (Petrofac, BP and Shell) and now excludes all mining companies and oil and gas producers.
- Positive Investment Strategy: One of the key focuses is to avoid companies likely to have the most malign impacts on the environment and on climate change. The fund actively supports direct investment into alternative energy sources. It looks for positive themes and seeks to invest in companies that address issues such as climate change, social issues, water and renewable energy.
- Performance: Responsible investors have few conventional income investment options and so this fund is excellent news for the sector as a whole. Over a three year period the fund has returned 38.30%.
5. Jupiter Ecology FundWhat you need to know:
- Transparency: The fund invests in around 80 companies and declares all of its holdings to investors.
- Position on Fossil Fuels: The fund does not invest in fossil fuel exploration or production companies. Around 12% of the Ecology Fund is currently invested in renewables, around 9.5% in clean transport, while energy efficiency makes up just over 18%.
- Positive Investment Strategy: Energy efficiency offers a broad set of opportunities for the fund, such as lighting space and vehicles. For example, we have witnessed far greater acceptance of technologies such as LED (light emitting diode) lights as the technology has matured, and the environmental benefits are compelling.
- Performance: The Jupiter Ecology fund has been particularly strong over the long term with excellent growth of 143% over ten years returns compared with 121% for the FTSE All Share Index and 123% for the MSCI World Index.