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The Article 9 funds topping their sectors over 5 years

17 June 2024

Trustnet seeks out funds with the highest ESG standards and best returns.

By Gary Jackson,

Head of editorial, FE fundinfo

Guinness Sustainable Energy, Pictet Global Environmental Opportunities and Wellington Global Stewards are among the ‘dark green’ funds that have made their sectors’ highest returns over the past five years, Trustnet research shows.

Under the EU's Sustainable Finance Disclosure Regulation (SFDR), Article 9 funds have sustainable investment as their core objective, targeting positive environmental, social and governance (ESG) outcomes.

These funds – often know as ‘dark green’ funds – are required to meet stringent disclosure requirements to ensure transparency and accountability in their sustainability claims.

There are 87 funds in FE fundinfo’s database flagged as holding Article 9 status and 12 of these are currently in the first quartile of their respective Investment Association sector.

Performance of Guinness Sustainable Energy vs sector and index over 5yrs

Source: FE Analytics. Total return in sterling as at 12 June 2024

At the top of the list is Guinness Sustainable Energy, where a 105.5% total return over the five years to 12 June puts it in the top quartile of the IA Commodity/Natural Resources sector. Managed by Jonathan Waghorn and Will Riley, the $914m fund invests in companies that are part of the global transition away from energy derived from hydrocarbons.

Analysts at Square Mile Investment Consulting & Research give the fund an ‘A’ rating and said: “We believe this is a promising long-term offering which aims to reduce the reliance on hydrocarbons within energy production and therefore contribute to global decarbonisation efforts.

“We believe this strategy is well set to continue to benefit from that transition. We therefore believe this is a strategy that may appeal to investors who wish to accumulate capital over the long term whilst also playing a role in global decarbonisation.”

That said, they also noted that Guinness Sustainable Energy focuses on “a relatively nascent and high growth area of the market”, which means it can be subject to significant volatility.

Source: FE Analytics. Total return in sterling as at 12 June 2024

It’s a similar story with the fund in second place: Pictet Clean Energy Transition is another first-quartile IA Commodity/Natural Resources fund thanks to a 97% total return over the past five years.

The $4.7bn fund, managed by Xavier Chollet, Christian Roessing and Manuel Losa, is backed by the FE Investments team, which likes Pictet Clean Energy Transition for long-term investors. It is part of a range of thematic funds by Pictet, each of which focuses on a specific ‘megatrend’.

Analysts at FE Investments  said: “Pictet is a pioneer in sustainable thematic investment and it likes to invest across all aspects of each megatrend. Its focus on specific, often under-researched sectors provides investors with a unique opportunity to diversify through largely untouched investment areas.

“For every stock added it adjusts its positioning based on the ‘purity’ of the stock – that is, how much of the company’s business is exposed to the themes: the less related to a clean energy theme the smaller the position.”

Responsible investors who want a wider environment approach can see that Pictet Global Environmental Opportunities is also among the Article 9 funds to have made first-quartile returns over the past five years.

This is another of Pictet’s megatrend funds and invests in companies with a low environmental footprint that contribute to solving global environmental challenges such as the transition towards a lower carbon economy, sustainable resources management, the monitoring and prevention of pollution, or the protection of scarce resources such as water

FundCalibre analysts, which have the fund on their Elite list, said: “Unlike many of its peers this fund goes well beyond climate change and addresses a full range of global environmental challenges. The fund has a well designed process and we like the focus on less obvious, but no less important, environmental themes such as resource efficiency, less intensive agriculture and sustainable packaging.”

Pictet Global Environmental Opportunities is one of seven IA Global funds to make onto the 12-strong list above.

Another three of these global equity funds focus on environmental issues (Wellington Climate Strategy, Active Niche Luxembourg Selection Fund Active Solar, Nordea 1 Global Climate and Environment) while Wellington Global Stewards, Carmignac Portfolio Grandchildren and Candriam Sustainable Equity World have a wider ESG remit.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.