Whilst recent geopolitical events (the energy crisis and Russian/middle eastern conflicts) have bolstered demand for fossil fuel/armament companies (two industries avoided by sustainable investors), the climate change crisis is going nowhere, creating a structural megatrend driving compelling opportunities for investors.
Global governments are pushing through supportive regulation which will benefit companies who are early innovators/adopters of environmental, social and governance (ESG) practices throughout their operations model, leading to greater resilience and potential for long-term capital growth when compared with companies who remain unprepared.
As the next COP event approaches, investors are also beginning to recognise the highly effective risk management insight offered by investing through a sustainability lens, protecting the future earnings potential of corporates and by extension your return on investment.
The sustainable investment opportunity for retail investors remains a compelling one for those seeking both financial and socioeconomical benefits over the long term – three of our top fund picks are below.
CCLA Better World Global Equity – global equity
Having traditionally managed funds for institutional managers, CCLA launched its first offering for retail clients back in 2022. The fund aims to provide a financial return whilst the managers also take their responsibility as good stewards of capital seriously, using ownership rights to improve the sustainability of assets.
CCLA seeks to be a catalyst for positive change for both the companies it owns but also for the wider investment universe and is well known for spearheading industry-wide initiatives to drive changes towards a better world.
Royal London Sustainable Leaders – UK equity
The fund seeks to achieve capital growth over the medium term by investing in large, liquid companies working towards social and environmental improvement. These companies pursue value creation for shareholders by encouraging good corporate behaviour and providing cleaner, healthier, safer and more inclusive products and services.
The fund is predominantly invested in UK companies that are leaders in their fields, with excellent management teams and strong franchises. Such companies tend to be involved in fields such as healthcare, cloud computing, artificial intelligence and urban regeneration.
CT UK Social Bond – fixed Income
Born out of a social partnership with the Big Issue Group, this fund aims to provide positive societal outcomes alongside financial returns. Having the opportunity to invest in primary bond issuances gives this fund the ability to tackle real social issues and affect direct benefits via targeted use of proceeds.
The managers combine both top down (social outcomes and UN Sustainable Development Goals (SDG) alignment) and bottom up (use of finance and social intensity) analysis to identify the investment universe they target.
The fund’s strategic impact objective is to support more inclusive and sustainable development in the UK and the portfolio targets eight social outcome areas aligned with the UN SDGs, including housing & property, financial inclusion, and employment & training.
Rosie Cook is an investment analyst at One Four Nine Portfolio Management. The views expressed above should not be taken as investment advice.