Barely a fund manager meeting goes by without a mention of environmental, social and governance factors.
It has reached the point where you actually want to tell the managers there is no need to mention ESG as, along with all their peers, I know it is part of your investment process.
This week’s launch in this space is Investec Asset Management’s UK Sustainable Equity fund – one of a number of sustainable funds launched recently.
So, how will Investec differentiate itself from this burgeoning mass?
Matt Evans, portfolio manager, sits in Investec’s ‘quality team’ headed by Simon Brazier – this is not my view on how good they are, it is the style of investing.
The fund has launched with an unsurprising underweight to mega-caps, but with a good spread of companies from £500m in size and up.Mr Evans joined in 2017 from Columbia Threadneedle and also manages the Investec UK Smaller Companies fund.
It has always been easy to categorise ethical/green/environmental/sustainable into one large bucket, but the lines are much more blurred now.
Investec has positioned its fund across a broad spectrum, from impact investing to more traditional investing – albeit with an ESG overlay. As the fund sits within the ‘quality team’, companies have to have a good business model (sustainable growing returns) and typically turn profit into cash.
Valuation and capital allocation are also important characteristics. The team are looking to combine internal and external sustainability with financial sustainability (essentially the ‘quality’ investment process).
There are many themes (and companies) that sit in the universe for this fund, including accessible healthcare, sustainable infrastructure, climate change and clean energy, and efficient use of resources, to name a few. Investec also has a proprietary tool to assess impact, which covers areas such as waste reduction, training and health and safety.
The fund has launched with an unsurprising underweight to mega-caps, but with a good spread of companies from £500m in size and up. Sectors avoided include alcohol, gambling, and tobacco, among others.
It is clearly on trend to launch sustainable funds and I do question in the long term the need, as many mainstream funds now incorporate ESG.
Having said that, this new fund looks like a decent offering, with a well thought through investment process. The ongoing charges figure of 0.89 per cent is not the cheapest though.
Ben Yearsley is director of Shore Financial Planning
