BLOG: Making good money choices
When it comes to our daily lives many of us are already making good choices: recycling more, using cars less (or going electric), consuming less plastic, eating less meat… the list goes on.
But when it comes to our investments it seems that, while bad practices might put us off an investment, good practices alone are still not enough of an incentive – confusing terminology and a perceived lack of choice is holding us back.
So, for those teetering on the edge of making a good investment choice, here are three of my favourite ‘no-brainer’, easy to understand and passionate-about-their-cause funds.
Ninety One Global Environment
Launched in December 2019, this global equity fund has a unique approach: it only invests in companies that are contributing to the decarbonisation of the world economy.
It’s estimated that some $2.4trn per year will need to be spent or reallocated, in order to reach global temperature goals of a maximum 2°C rise. This fund looks to tap into the companies that are providing environmental solutions to decrease CO2 and will therefore benefit from that spending.
The managers not only analyse the levels of carbon dioxide that will be avoided by using one firm over another, but they go right through a company’s products and services, supply chain and areas of activity looking at the breadth of CO2 reduction.
For example, they will look at the emissions created onsite, or by company vehicles, emissions generated from the energy the company uses, and indirect costs such as employee commuting, the use of their products and downstream transportation. If a company’s total activities generate less carbon emissions than the average company in their sector, it is included in the investable universe.
As well as avoiding creating carbon emissions, companies will also have to have at least 50% of their revenues from three sectors: renewable energy; efficient use of resources, and electrification. The managers are highly knowledgeable about this specialist area and passionate to their core.
Edentree Responsible and Sustainable UK Equity
Edentree is the ‘OG’ of ethical investing and this fund dates back to 1988 – before most ESG funds were even a twinkle in the asset management industry’s eye.
As a pioneer of responsible investing, the company’s enthusiasm, knowledge and expertise in the field is second to none. A quick look at its website demonstrates this immediately, with in-depth reports on a huge range of issues from breast milk substitutes to modern slavery, ‘golden hellos’ paid to directors and plastic pollution. Just this week I spoke to co-manager Ketan Patel about fast fashion – a subject close to his heart as his mother was a seamstress. I can’t express just how interesting the whole conversation was.
And it’s not just the investment process that is all-encompassing of responsible and sustainable practices – it’s the company itself and its employees too. Even the most discernible investor couldn’t go wrong here.
The company has a huge range of products, but this particular fund invests in UK companies which make a positive contribution to society and the environment through sustainable and socially responsible practices. It has a bias towards smaller and medium-sized companies but was designed for regular savers – originally clergymen and family – and therefore conservation of capital is one of its primary objectives.
BMO Responsible Global Equity
The aim of this global equity fund is twofold: to avoid unsustainable business practices; but also to invest in companies where there are problems to be resolved. And it’s this engagement with companies that really sets this fund apart from many of its peers.
For example, from April to July the team engaged with 18 companies in seven different countries on matters ranging from business conduct through to climate change and human rights. This engagement is reported publicly each month.
Sometimes the team is so successful in encouraging change that companies ask them to consult on other areas of improvement. Sometimes engagement doesn’t work, and the team simply divests. One example of this is US stock market darling, Microsoft.
Earlier this year, Microsoft disclosed that it had won a contract with the US Army to build custom HoloLens augmented reality headsets (effectively weaponising VR headsets). While the deal shows that Microsoft can now generate meaningful revenue beyond its core areas, it goes against the fund’s principles.
The constraints on this fund are simple and include no alcohol, gambling, pornography, weapons or tobacco, and the fund is fossil fuel free. There are also restrictions on environmental impact (with particular consideration to the Arctic and ecologically-sensitive operations), animal welfare, human rights and labour standards.
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Juliet’s views are her own and do not constitute financial advice.
Juliet Schooling Latter is research director at FundCalibre