BNY Mellon Sustainable Real Return and FP WHEB Sustainability are two funds that investors hoping to improve the world could consider, according to investment platform Hargreaves Lansdown. 
Recent events such as flooding in Pakistan, a ‘megadrought’ in the western US thought to be the driest period in 1,200 years and a heatwave in China that some say is the most severe ever recorded highlight that the world is facing a climate emergency.
Tara Clee, ESG analyst at Hargreaves Lansdown, said: “Increasingly investors are concerned with whether their portfolio is on the right side of the green transition. Considering environmental, social and governance (ESG) factors, alongside the usual financial considerations, can be a great way to ensure your investments are aligned to the net zero transition, and able to capitalise on the opportunities that may arise.
“But many fund managers go further and implement exclusions, ramp up engagement and, for those who want to be at the forefront of solving the climate crisis, invest with impact – investing in companies that have a quantifiable positive effect on the environment or society, such as those developing low carbon electricity.”
Below, Clee highlights two funds that she thinks can help investors have a greater positive impact on the future.
BNY Mellon Sustainable Real Return
Her first pick is the BNY Mellon Sustainable Real Return fund, which resides in the IA Targeted Absolute Return sector and is managed by Philip Shucksmith and Matthew Brown.
The £491m fund has a similar approach to the respected BNY Mellon Real Return fund, investing in a combination of stocks, corporate bonds, government bonds, commodities and cash with the aim of making positive returns in a variety of market conditions.
The portfolio is built around a ‘return-seeking core’ of assets that the managers think can provide long-term growth, while a ‘stabilising layer’ of investments offer additional protection. At heart, the fund emphasises not losing money over making it in order to bolster long-term performance.
Performance of fund vs sector since launch
Source: FE Analytics
However, the managers apply an extra layer of ESG considerations when building the portfolio.
“The fund’s sustainable ‘red lines’ mean companies that violate the UN Global Compact Principles and those incompatible with the aim of limiting global warming to 2°C are not considered for the fund,” Clee explained.
“It also won't invest in companies that make more than 10% of their revenues from tobacco, alcohol, gambling and several other contentious industries. The team also engages with the companies they invest in on a range of ESG issues.”
MSCI’s analysts say that 17% of BNY Mellon Sustainable Real Return’s holdings are classed as ‘ESG Leaders’ while just 2% are ‘ESG Laggards’.
FP WHEB Sustainability
Clee’s second pick is FP WHEB Sustainability. Headed up by Ted Franks, this £838m global equity fund combines a responsible investment approach based on a number of long-term themes with more traditional financial analysis.
The portfolio tends to hold high-quality growth companies that are leaders in their sector and trade at attractive valuations, while providing solutions to critical environmental and social challenges facing society.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
“WHEB believe that investing in and supporting businesses that have a positive impact on people and planet can help bring about a zero carbon and more sustainable economy. They invest in companies making a positive impact within nine investment themes [and] companies that have a negative impact on the environment and society are not considered,” Clee said.
These nine themes are made up of four social (education, health, safety and wellbeing) and five environmental themes (cleaner energy, environmental services, resource efficiency, water management and sustainable transport).
According to MSCI, 59% of FP WHEB Sustainability’s holdings are ‘ESG Leaders’ and none are ‘ESG Laggards’.