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Investors in £1bn trust reject ESG switch

Investors in £1bn trust reject ESG switch

Shareholders in the £1bn Temple Bar investment trust have rejected a proposal from its board to have an increased focus on ethical investments.

In his notes as part of the annual report published on February 19, the trust’s chairman Arthur Copple said: "The board consulted with shareholders as to whether they would support the trust declining to invest in companies whose very business model was arguably unethical.

"Feedback suggested there was little support for this measure among shareholders, so the board is not proposing to change policy in this regard.”

A company spokesman told FTAdviser the board had undertaken a “shareholder consultation” in 2019. 

He said the aim was to "canvas shareholder opinion on Temple Bar’s ability to invest in companies some other investors have divested from on ethical grounds, including tobacco.

"Feedback from the consultation suggested limited support among shareholders for an amendment to the trust’s investment policy, therefore the board will not propose changing the trust’s investment policy at the present time."

He urged investors in the trust to understand however, that the fund manager has chosen not to invest in certain areas of the market for ethical reasons, most notably, cluster bombs and this policy won’t change. 

The trust is managed by Alastair Mundy, a fund manager at Investec, and invests in UK listed companies. 

In the 2019 calendar year, when the value style of investing, which the trust deploys, enjoyed a period of being in favour Temple Bar returned 32 per cent, compared with 19 per cent for the average trust in the sector in the same time period.

But in 2020 so far, as value investing has underperformed, the trust has followed suit, losing 8 per cent since the start of January, according to data from FE Analytics, as at February 19.

Among the top 10 holdings in the trust are holdings in BP and Shell, which as producers of fossil fuels would be unlikely to make the cut in an ethical fund.

A wave of money has come from investors into ESG funds in recent years, with data from the Investment Association, which covers open-ended funds rather than investment trusts, showing that clients placed £1.3bn into open-ended ESG funds in the final three months of 2019. 

The pace of increase can be seen in the context of a total of £170m going into the sector in the first three months of the same year. 

The waves of new products coming to market risks creating a bubble, according to James Sym, equity fund manager at Schroders. 

He previously told FTAdviser: “It is definitely the case that clients want asset managers to do more with their money than just invest it for a return and that will continue.

"There is no doubt that in future we will use fewer fossil fuels than we do now. But the issue at the moment is with the valuations of many of the companies in the ESG space.