Ecclesiastical’s Hepworth, who heads up both ethical and unconstrained funds, believes that investing in environmentally sustainable companies is a benefit to performance, even though many assume ethical mandates are at a severe disadvantage.
“I think that companies that take this sort of thing seriously are more likely to grow in the long term and can guarantee sustainable returns,” Hepworth said.
“Take Johnson & Johnson, a company we added to the portfolio recently, which implemented a carbon reduction programme a few years ago. It took steps like reducing their water usage and moved to using solar panels for energy.”
“This change in company policy saved Johnson & Johnson $39m last year and this all drops down to the bottom line of company returns.”
“So my view is that companies that focus on good policies towards the environment, society and corporate governance are more likely to be a good long term investment,” he explained.
Hepworth, who manages three retail funds at Ecclesiastical, including the Amity International and Higher Income portfolios, says a focus on ethical investing is too easily knocked by members of the industry, who have done little research into the area.
“I think we need to turn this “is ethical investment limiting?” question on its head, because it is fairly straightforward to see negatives,” he said.
The manager says his focus on environmentally sustainable companies extends into his unconstrained portfolios, including the five-crown rated Higher Income fund. It holds both GlaxoSmithKline and Vodafone in its top-10 – companies which Jupiter’s Chris Watt recently identified as ethical equity income stocks.
Performance of manager versus peer group over 10yrs
Source: FE Analytics
Hepworth’s sustainable focus has held him in good stead over the long-term; over 10 years, the manager has delivered 174.05 per cent compared to 124.22 per cent from his peer group composite. He’s also been less volatile, and has performed better in down markets.
A recent FE Trustnet article highlighted his Ecclesiastical Amity International fund as the most consistent ethical portfolio in the IMA universe, in that it’s the only one that has outperformed its sector in consecutive five year periods.
He also heads up the Ecclesiastical Amity Sterling Bond, with co-manager Chris Hiorns. It’s outperformed its sector with less volatility since its launch in 2008.
All of his retail funds have a minimum investment of £200, with total expense ratios (TERs) between 1.33 and 1.58 per cent.
This article was written in collaboration with and is sponsored by Ecclesiastical Investment Management.