How to profit from a world of opportunity as green firms embrace The Attenborough Effect
Despite more than 60 years of reporting on our planet and its inhabitants, Sir David Attenborough still has the power to shock.
His latest film, A Life On Our Planet – extracts from an accompanying book were recently printed in The Mail on Sunday – provides a terrifying look at how quickly the planet has been stripped of resources and the devastating impact on the natural world.
Few who have watched it, or other Attenborough documentaries such as Blue Planet, will be unmoved by its message and many will want to do something to help, whether by being more ‘green’ in their daily lives or by making sure their money supports companies doing their best to help and sustain, rather than harm, the planet.
In our hands: Despite more than 60 years of reporting on our planet and its inhabitants, Sir David Attenborough still has the power to shock
Asset manager Liontrust says there is growing interest in sustainable investing because of the ‘Attenborough Effect’, which has prompted an increasing number of people to care about how they make their money as well as how much money they make.
Liontrust has seen the assets in its range of sustainable funds grow from £2.5billion in April 2017 to £7.5billion – and research it has recently conducted shows that 74 per cent of private investors say sustainability is important in their everyday life. With only 43 per cent of these people investing sustainably, demand is expected to continue to grow.
Peter Michaelis, head of sustainable investment at Liontrust, says: ‘We believe sustainable companies have better growth prospects and are more resilient than businesses not prioritising environmental, social and governance issues. These advantages remain underappreciated by the wider market.’
It is a view shared by Emma Wall, head of investment analysis at wealth manager Hargreaves Lansdown. She says: ‘The David Attenborough effect is real. When we surveyed consumers after the release of Blue Planet, we found the majority changed their lifestyle habits after watching it.
‘Putting your money where your morals are is easier than ever. There are a wide range of offerings; some investment funds work on an exclusionary basis – refusing to invest in companies involved in weapons, alcohol or oil – while others look to invest in businesses that are making a positive impact on society.’
High-profile campaigners from Royals to celebrities have been quick to take up Sir David’s message and encourage governments, companies and the population at large to consider how their everyday actions can help or harm the planet.
The message seems to be getting through: the European Union recently pledged to mobilise €1trillion in sustainable investment over the next decade while Boris Johnson has pledged £160million to quadruple the UK’s offshore wind capacity – with the aim of ensuring every home is powered by wind energy in the next decade.
This week marks Good Money Week, an initiative launched by the UK Sustainable Investment and Finance Association to raise awareness about sustainable, responsible and ethical finance since 2008.
All the current focus on the planet means there are some great opportunities for investors.
Darius McDermott, managing director of fund scrutineer FundCalibre, says: ‘Governments and businesses around the world are pledging to achieve carbon neutrality and at an accelerating pace. It’s increasingly likely that an important part of the global recovery from the pandemic will be green.’
One easy way to start as a ‘green’ investor is to invest in an environmental fund – and it seems more investors are already choosing this option.
According to investment manager Rathbones, in the second quarter of this year, money going into environmental, social and governance (ESG) funds accounted for a third of all European investment fund sales.
Mainstream investment funds are getting in on the act too. For example, M&G Global Dividend initiated a holding in Italian energy company Enel at the end of June to increase the fund’s exposure to the growth in renewables.
Manager Stuart Rhodes says: ‘The Italian utility has sustainability at the core of its growth strategy, combining higher investment in renewable energy with an acceleration in de-carbonisation by way of phasing out coal.’
The joy of ethical investing is that there are many different approaches you can take and different criteria that you can apply.
Eilidh Anderson is investment manager at Kingswood Wealth Management. She says clients are increasingly demanding an ESG investment approach.
She explains: ‘As an adviser, we need to find out from investors how strict an approach is needed to meet their values and expectations. If they wish to invest only in companies with a clear ethical mission, like Tesla for example, it is important to look for funds that exclude industries that cause harm to people or the planet, such as fossil fuels.
‘But some clients will be just as comfortable investing in companies that are determined to turn themselves into sustainable businesses.’
She points to the example of Orsted, formerly known as Danish Oil and Natural Gas, whose drive towards renewables has made it a leader in the offshore wind industry and whose shares have gone up 38 per cent in the year to date.
Other investment funds embrace both green issues and a wider ethical framework, such as BMO Responsible Global Equity.
Juliet Schooling Latter, research director at FundCalibre, says: ‘The aim of this fund is to avoid companies with unsustainable business practices, but also to invest in companies where there are problems to be resolved.
‘The constraints include; no alcohol, gambling, pornography, weapons or tobacco, and the fund is fossil fuel free. There are also restrictions on environmental impact, animal welfare, human rights and labour standards.’
Another fund she highlights is Montanaro Better World, a global equities fund which invests in businesses whose products or services aim to make a positive impact on the world.
To identify these companies, the Montanaro investment team looks at six impact ‘themes’: environmental protection, the green economy, healthcare, innovative technologies, nutrition and well-being. It excludes companies involved in tobacco, weapons and fossil fuels extraction.
Investment fund Ninety One Global Environment was launched last December and only invests in companies contributing to the de-carbonisation of the world economy.
Companies must generate at least 50 per cent of revenues from three sectors: renewable energy; efficient use of resources, and electrification.
There are also a number of more niche funds for those after a more focused ethical approach. One of wealth manager Tilney’s top picks is WHEB Sustainability, a fund run by WHEB Asset Management whose focus is on sustainable investing.
Says Tilney’s Jason Hollands: ‘The fund invests globally across the following themes: environmental services, resource efficiency, water management, sustainable transport, cleaner energy, safety, health, wellbeing and education.
The fund is fossil fuel free, avoids investments in alcohol, tobacco, gambling, pornography and weapons and reports annually on the positive impact that the portfolio has had.’
WHEB are actively engaged investors, adds Hollands, meaning they are prepared to hold companies to account and raise any contentious issues. He adds: ‘For example, the fund invests in Thermo Fisher Scientific, a leader in healthcare testing services who were one of the first companies to produce mass testing kits for Covid-19.
However, WHEB has been lobbying the company to increase the representation of women on the board and voted against remuneration policies.’
Hollands adds that it is also possible to invest in renewable energy infrastructure – such as wind turbines or solar panel farms – through listed investment companies. He says: ‘Our top pick is Octopus Renewables Infrastructure Trust which operates a portfolio of renewable energy assets in the UK, Europe and Australia.’
Hollands issues a final note of warning. ‘While sustainable funds are riding high at the moment in part due to their lack of exposure to oil companies whose shares plunged during the pandemic, it is unlikely to be the case for evermore.’
ONLINE PLATFORM GROWS LIST OF ETHICAL FUNDS BY A DOZEN
Fund platform Interactive Investor is to expand its list of recommended ethical investment funds from tomorrow, The Mail on Sunday can reveal.
The UK’s first ethical rated list will grow from 30 to 42 funds, and will be renamed the ACE 40 to reflect the change. Interactive Investor launched the ACE 30 list a year ago to offer investors a jargon-free way of wading through ethical options.
Funds are split into three categories. ‘Avoids’ covers funds that exclude certain companies or sectors for moral reasons; ‘Considers’ includes funds that look at companies’ ethical credentials, and ‘Embraces’ covers funds that focus on companies trying to make positive change in the world.
The newly added funds cover sectors including UK and global equities, global and sterling bonds and mixed asset.
They include three funds from the BMO Sustainable Universal MAP range of multiasset funds, which have an ongoing charge of just 0.39 per cent. The funds were launched in December last year, so have yet to prove their worth.
Dzmitry Lipski, head of fund research at Interactive Investor, says: ‘We are delighted to expand our range of rated ethical options to help investors navigate a still little-understood area with greater confidence.’
Two funds have been dropped from the list due to poor performance.
AXA Ethical Distribution Fund has been down 1.1 per cent this year so far, while its benchmark has produced a 1.4 per cent positive return. EdenTree Amity European Fund is down 0.4 per cent this year, while the benchmark is up 7.4 per cent.