With COP26 dominating the investment agenda this month, and the Financial Conduct Authority stressing green will be in everything it does from now on, here are five asset allocators' top ESG picks for November.
Louis Tambe, a senior investment analyst at City Asset Management, picked Brown Advisory’s US Sustainable Growth Fund, run by Karina Funk and David Powell.
“Within the UK fund market there’s a paucity of sustainable funds just focussed on the US,” he said.
“Generally we prefer investing with regional managers, as it enables them to run more concentrated portfolios and be more specialist in certain areas.
“Despite the shorter track record of the vehicle [it was launched in Q1 2017] it is quite popular amongst wealth managers.”
Tambe added the fund managers actively avoid parts of the market based on social criteria but also incorporate sustainability into their investment process in a positive way.
“They want fundamental business model strength as well as a good valuation but the other pillar of their investment process is what they call sustainable business advantage, so they want to see a company that actually benefits from a sustainability theme that gives them a competitive advantage versus competitors.”
Richard Warne, fund manager at YOU Asset Management, recommended the Schroders Global Cities Fund, run by Tom Walker and Hugo Machin.
He said: “The fund invests in a portfolio of Reits which covers many different property sectors – residential, industrial, office and healthcare, to name a few.
“We know that the construction of physical property is one of the biggest carbon-producing sectors, so any means to reduce the energy consumption/output, improve water efficiency and improve recycling of products will contribute positively.”
Lynn Hutchinson, senior analyst at Charles Stanley, recommended the Rize Sustainable Future of Food Ucits ETF, which aims to capture consumer food buying changes.
"[This product] includes companies involved in the sustainable food industry and which potentially stand to benefit from the accelerating transition to more sustainable food production systems and consumption patterns," she said.
"Inclusion into the fund is to capture companies that are predominately plant based, including companies producing reusable, recycling and compostable packing are included."
The ETF is currently tracking 45 firms that are screened for "thematic purity". Hutchinson added there were a number of exclusions including companies involved in GMO seeds and products, land-reared meat, eggs and dairy and tobacco and weapons.
"Companies also need to demonstrate sustainable procurement of major forest risk commodities within their supply chains – palm oil, soybean, cattle and timber through the CDP Worldwide Group.
"The AUM has grown to just under $300m (£222m) since launch in August 2020. This is early days for this investment sector and the theme is likely to take some years to play out, but sustainability of our food supply is an issue that will not go away."
Thomas Hibbert, investment analyst at Psigma Investment Management, picked Ninety One’s Global Environment Fund, run by Deidre Cooper and Graeme Baker.
“Since we invested in May 2020 it has performed extremely well delivering a return of 72 per cent (to the end of October).”
“Having said this, decarbonisation is a multi-decade theme and our conviction in the Global Environment fund is built around the long-term.”
He added the investment philosophy was high conviction, which results in a highly concentrated portfolio targeting three key areas of decarbonisation: renewable energy, resource efficiency and electrification.
“Through investing in companies that are solving the world’s environmental challenges the fund aims to have a measurable positive impact.”
Anna Haugaard, fund analyst at wealth manager Brewin Dolphin, recommended The Schroder Global Energy Transition Fund.
“This provides exposure to companies actively engaged in energy transition, for example renewable energy production, storage and distribution,” she said.
“The lead portfolio manager, Mark Lacey, and his team are dedicated to the sector and have extensive experience spanning environmental technology and conventional energy.”
sally.hickey@ft.com
