‘Ethics are trendy now – our stocks change the world’

Investors – particularly millennial ones – are beginning to think about the good they can do with their money. Environmental, social and governance (ESG) principles have gone from being relatively unknown to one of the first things investors discuss.

Funds such as the £729m Royal London Sustainable World Trust feed this demand by investing in, and lending to, companies that make a positive impact on the world we live in.

The manager, Mike Fox, tells Telegraph Money how he lost out by owning BT and why a company that makes trainers is a force for good.

It’s a sustainable fund, so it’s for people who want to embed environmental and social considerations into their investments. Ethical means excluding certain stocks you don’t like, while sustainable is positive and means including the ones you believe in.

Most people start with the ethical approach, but our method is to find companies that make a positive contribution to society, either through their products or services or through their ESG standards.

On products and services, we think things such as healthcare and technology intuitively fit into a fund such as ours.

When you look at ESG, it can be across many sectors. Take a company such as Unilever: it has very proactive views on things such as plastics. Our investors might be pragmatic individuals who use plastic, drive a car and have a drink on a Friday night, but in other decisions want to deal with companies that behave in a certain way.

We have exactly the same mentality in the way we invest. There are areas we won’t look at – armaments or tobacco – but generally it’s all about helping people who embed certain values in their lives to be able to do that when they invest as well. Our stocks won’t be as overtly positive as some may expect. We choose businesses that contribute to a better, more sustainable future or to a cleaner, healthier society. We also believe the investment return will be strong.

Adidas is going to sell 11 million pairs of trainers made of plastic recovered from the sea this year. Is Adidas at the forefront of energy transition like a renewables company? Of course it’s not. But it is serious about its environmental commitments and fits into what we do.

Diageo makes alcoholic drinks, but is one of the best companies we have come across in terms of ESG standards through the work it does on water management and promoting responsible drinking. The companies that have the biggest impact on society can make the biggest difference. Adidas is a fascinating nating company. It was s already a very strong brand nd but, through some strong environmental and socially conscious ous initiatives, the brand resonance is starting arting to grow.

It is doing

where investors who support firms that help make the transition to a better world also make a lot of profit.

The second part is a world that has acknowledged that resources are finite and has changed the way it acts, influenced by what we want the world to look like in 100 years’ time. Embedding that vision and responsibility into the way we invest is the right thing to do. £1,000 invested at launch would be worth £3,305 today

BT was very disappointing. We bought it when we thought people would buy broadband, mobile and content from one provider. BT was so dominant and had bought EE’s mobile network and rights for television sports. Broadband regulation ended up being tougher than we expected and the cost of showing sports rose. We got it wrong. We bought around 330p and sold at 220p. The price is about 175p now. I get a basic salary plus a performancerelated bonus, half of which is deferred over three years. Some 90pc of what I invest in stocks is via the three Royal London sustainable funds.