Investment Trusts  

Investment trusts urged to ‘catch up’ on ESG

Investment trusts urged to ‘catch up’ on ESG

Investment trusts have been told to “catch up” on the ethical investment trend gripping the asset management industry as research showed trusts lag behind funds on ethical options.

According to consumer platform Interactive Investor, just 17 of the investment vehicles included in its 140-strong list of the ethical investment universe were trusts.

This means a meagre 12 per cent of the environmental, social and governance options for investors come in the form of closed-ended vehicles.

On top of this, four of the 17 ESG trust options are venture capital trusts and are therefore riskier and more suited to those who have maxed out their pension and Isa contributions.

The investment trusts which fall into Interactive Investor’s ethical list also primarily feature in specialist sectors, the platform said.

ESG investing takes into account ESG factors alongside financial markers in the investment decision-making process.

It has become a more commonplace part of the global investment space in recent years and Morningstar data shows net flows into ESG products increased by nearly 2,500 per cent between 2014 and 2019.

Moira O’Neill, head of personal finance at Interactive Investor, said: “If more than 12 per cent of collective investments with an ethical tilt are investment trusts, we’ve been hard pressed to find them.

“Our customers are big fans of investment trusts and ethically minded customers may well like to have a balanced portfolio made up entirely of ethical investment trusts if more variety were available.”

Ms O’Neill said the investment trust sector had come up with some “strong environmentally  focused offerings” but they were not easy for investors to identify.

She added: “So for now at least, even the staunchest investment trust supporters who want to have a well-diversified ethical portfolio will have to look to the funds sector to fill the gaps.”

But the Association of Investment Companies has hit back at the claim trusts needed to ‘catch up’, explaining that investment trusts and VCTs made up only 8 per cent of the funds universe to begin with.

Annabel Brodie-Smith, communications director, said: “Looking at this another way, 5 per cent of investment companies are on the list of ethical options, compared to 3 per cent of the open-ended universe.

“It’s misleading to say investment companies are underrepresented. Of course we hope to see more investment company launches in this area, but as things stand we are punching above our weight.”

imogen.tew@ft.com

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