However, anyone who is concerned about the long-term impact of their investments on the environment and society may want to consider a lesser-known alternative to the European heavy-hitters.
Neil Brown, manager of the Alliance Trust Sustainable Future European Growth fund, says looking ahead at the future is the key differentiator between his funds and its peers.
"Because we’re always trying to benchmark ourselves against mainstream funds, the core difference with other funds is that sustainability angle," he said.
The manager says there is a strict set of criteria companies have to meet in order to make it into the fund range. For an in-depth explanation of how Alliance Trust Investments’ SRI funds work and their investment criteria, see this previous FE Trustnet article.
"The real interest for us is what we call integration," Brown said. "This means bringing these issues into the actual view of the stock. Rather than going through a list of things that we don’t like, we’re looking for things that we do like."
"We’re looking at the forecasted future returns for a company and saying ‘look, where does this change? Where does the product that they're making stand to benefit from the changes that we’re seeing?’ We then bring that back into the value of the stock and then take a view on that basis."
The manager adds that focusing on a sustainable and ethical angle has driven rather than detracted from performance.
The Alliance Trust Sustainable Future European Growth fund has fared well under Brown’s tenure. Since he took over the portfolio in April 2011, it has made 13.63 per cent while the MSCI Europe ex UK index has gained 10.9 per cent.
Performance of fund vs sector and index since 2011
Source: FE Analytics
The fund performed broadly in line with its peers over the period, but has been more stable.
Over the last two years, it has an annualised volatility score of 14.82 per cent, while the sector and index are both close to 16 per cent.
Brown is backing long-term global healthcare trends, with major pharmaceutical firms such as Switzerland-based Roche and Danish pharma giant Novo-Nordisk featuring in the top-10 holdings.
However, Brown says the team takes more of a bottom-up approach to picking individual stocks, aiming to find individual companies that can benefit from the sustainable themes in the wider economy.
"The focus for each sector is trying to identify a company that’s really looking to exploit a change that we see," he said.
"We see really interesting changes at the moment in insulation, for example, in building products that are allowing people to waste less energy and therefore a company that’s exposed to that and that’s really exploiting that change and doing well because of it."
"There are sectors we favour, but really it’s looking at those sustainable companies within each sector. Within autos it’s those companies that are exposed to emissions regulation, or focused on increasing safety. As the world hopefully becomes safer and as emissions regulations tighten, as we’re seeing around the world, they’ll materially benefit, rather than particular sectors."
The Alliance Trust Sustainable Future European Growth fund requires a minimum investment of £500 and has ongoing charges of 1.65 per cent.
Discrete performance of fund
| 30/09/2012 to 30/09/2013 (%) |
30/09/2011 to 30/09/2012 (%) | 30/09/2010 to 30/09/2011 (%) | 30/09/2009 to 30/09/2010 (%) | 30/09/2008 to 30/09/2009 (%) | |
|---|---|---|---|---|---|
| Fund return | 23.9 | 13.5 | -10.4 | -0.8 | 12.3 |
Source: FE Analytics
This article was written in collaboration with and is sponsored by Alliance Trust Investments.
