Theonlywayisethics! Ourtipscanhelpyou investwithaconscience
YOU don’t have to donate money to worthy causes to help make the world a better place — where you invest it can make a real difference, too.
Many savers feel passionate about protecting the environment. Last week, we showed how making a few eco-friendly changes, such as switching shower gel for soap, could save you £2,500 a year.
But why not also consider using your private pension or Isa savings to invest in companies that have a strong track record on environmental, social and governance issues? This is known as ESG investing.
There are many companies working to develop cleaner energy and sustainable transport as well as reduce plastic waste.
Under the social banner of ESG, the focus is on a firm’s treatment of staff and suppliers, and to what extent it upholds labour and human rights.
Governance issues include avoiding child labour, ensuring fair leadership of the business, matters of executive pay and the stance on shareholder rights.
These issues form part of the 17 Sustainable Development Goals created by the United Nations.
The UK market for socially responsible investing is expected to grow by 173 pc, to reach £48 billion by 2027, according to a study by Triodos Bank. Many fund management companies offer specific ‘green’ funds, where a manager picks stocks with sustainability at their core. Fund managers can also use their influence to encourage corporations with poor ESG records to improve.
Ryan Hughes, head of active portfolios at AJ Bell, says: ‘ESG has become the new buzzword for fund managers. I would focus on funds that have had ESG at the heart of their investment process for many years, rather than those who just jumped on the bandwagon more recently.’
Mr Hughes tips the Liontrust Sustainable range, which has a track record of more than 15 years. He says: ‘ Liontrust Sustainable Future UK Growth is one for investors looking for UK equity exposure and focuses on companies that look to improve people’s quality of life.
‘While the largest holdings in its portfolio are mainly household names such as Prudential, it is a reminder that large companies can still have a positive impact.’
The fund invests £4.47 for every £ 100 of savers’ money in Prudential, which has global responsibility programmes. Its measures include investing £25 million in building stronger communities and charitable fundraising through its Prudential RideLondon cycle race. The sustainable fund also invests £2.36 for every £100 of savers’ money in events and publishing firm Informa. What it produces informs debate, aids decision makers and also encourages research and development. The Lions trust fund has turned £10,000 into £16,597 over five years. John Monaghan, of investment research group Square Mile, recommends Stewart Investors Worldwide Sustainability. The fund invests £7.80 for every £100 in Unilever, which aims to double its business by 2020 while halving its environmental impact and increasing its positive social influence. Unilever has cut packaging waste per consumer by 28 pc since 2010 and is aiming to have at least 25 pc recycled plastic content in its packaging by 2025.
For every £100 of savers’ money, the fund also invests £ 5 in consumer goods firm Henkel, which pledged to ensure its products contain at least 35 pc recycled plastic in Europe by 2025, and make all packaging recyclable, reusable or compostable.
The fund has turned £10,000 into £11,230 over five years to April 26.
Also tipped by Mr Hughes is Impax Environmental Markets investment trust. He says: ‘Impax specialises in environmental investing and now runs nearly £8 billion in this way, while the trust is over £500 million.
‘It has exposure to themes such as energy efficiency and pollution control.’ One of its largest holdings is in Australian company Brambles, which specialises in reusable pallets, crates and containers. The fund invests £2.60 for every £100 in Brambles, and has turned £10,000 into £20,200 over five years.
Closer to home, the fund also invests £2 for every £100 of savers’ money in UK-based DS Smith, which specialises in recycling and waste processing.
The company strives to achieve zero waste, and analysts noted its good record of growth.
Laith Khalaf, of Hargreaves Lansdown, likes Kames Ethical Equity. The fund invests £1.50 of every £100 of savers’ money in Victrex, a polymer manufacturer which hopes to save more CO2 than it produces by 2023.
The fund also invests £3.60 of every £100 into Aveva, the software company which is helping industries use technology to become safer and more efficient. The fund has turned £10,000 into £12,830 over five years.