Sustainable futures

The Covid pandemic has accelerated the growth of some industries, while hastening the decline of others with the associated environmental and social consequences. The recent invasion of Ukraine has focused investor attention on the role of food and energy in society, and how these critical areas must evolve to meet the needs of the future.

We believe this background and the strong long-term returns, both financial and societal, that sustainable strategies can point to, mean that sustainable funds are worthy of consideration by all investors. It is something which has been moving in this direction for many years – we launched our sustainable range over 30 years ago, and our investment philosophy has evolved and developed ever since. However, it has always been based on the fact that we think markets often undervalue companies that can have a positive influence on society and the environment. Our sustainable funds aim to exploit this inefficiency, ensuring that every company we buy meets both a sustainable and financial hurdle.

But our range is more than an investment philosophy. We’ve also looked to work with advisers – both to talk through why a sustainable approach does not mean compromising on return potential, but also to make sure that it can meet the varied needs of their clients. Client demand meant that we launched global equivalents of our UK equity and credit strategies in the past two years. As we neared the end of 2021, we worked with a number of clients and risk rating agencies to fill a gap in this range.

Risk ratings such as Defaqto and Dynamic Planner are integral tools in the adviser toolkit. As a company that is fully committed to the adviser market, we are keen to ensure this range covers a range of risk appetites. As a result, in May 2022 we launched the RL Sustainable Growth Fund. While this is a new fund, it is based entirely on existing proven capabilities. The fund uses the same underlying global equity and credit exposure as our existing RL Sustainable World Fund, but with a lower equity exposure to meet the needs of investors with a lower risk appetite. With the fund rated as a 6 by both ratings agencies, it complements our existing multi asset Sustainable funds – so that advisers have a comprehensive suite of funds for an investor to find the risk profile that suits them, but still access the same underlying investment philosophy and team.

This brings us back to sustainable investing at the core of fund management – identifying financially and socially attractive companies, valuing them and timing our investment to maximise the returns to clients. Sustainability is booming and the pandemic and its aftermath have accelerated its agenda across governments, businesses, and consumers. This will help us find successful investments in the future.

While there may be periods of volatility, uncertainty could be the friend, not foe, of investors: long-term returns are potentially improved by buying at times of uncertainty. Should higher interest rates tip economies into recession as some believe, the companies we invest in should be relatively resilient as we favour high return on equity, unlevered established companies with good pricing power and strong earnings growth potential. History has taught us that whatever the challenges we face today, society can and will adapt, aiming to reach new highs never seen before. We believe sustainable investing will play a full and active role in achieving this.

The value of investments and any income from them may go down as well as up and is not guaranteed. Investors may not get back the amount invested. The RL Sustainable Growth Fund can only invest in holdings that demonstrate compliance with certain sustainable indicators or environmental, social and governance (ESG) characteristics. This reduces the number securities in which the Fund can invest and there may as a result be occasions where it forgoes more strongly performing investment opportunities, potentially underperforming non-sustainable funds.

For further information on RLAM products and services, please contact us

Find out more

• For further information, please visit rlam.co.uk/intermediaries 
• Find out more about our range of sustainable funds at rlam.co.uk/sustainable
• Browse our latest thought leadership articles here
• View contact information

For professional clients only, not suitable for retail clients

This is a financial promotion and is not investment advice. The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and are not investment advice.

For more information on the funds or the risks of investing, please refer to the Prospectus or Key Investor Information Document (KIID), available via the relevant Fund Information page on www.rlam.co.uk.

Issued in June 2022 by Royal London Asset Management Limited, 55 Gracechurch Street, London, EC3V 0RL. Authorised and regulated by the Financial Conduct Authority, firm reference number 141665. A subsidiary of The Royal London Mutual Insurance Society Limited.