Aiming to do ‘more good and less harm’, the risk-ranked Aberdeen Standard Investments MyFolio Sustainable fund range launched in December for investors who want their portfolios to do more. 
The five multi-asset fund-of-funds are overseen by Joe Wiggins (pictured), head of portfolio management at Aberdeen Standard Investments, and senior investment analyst Matthew Wiles.
Wiggins said it uses ‘building blocks’ of the existing MyFolio ranges for portfolio construction and investment process and then imbedding sustainable features into it.
He said the sustainability objectives for the funds follow an ‘ABCD’ list.
‘A’ stands for ‘avoiding harm’ by screening out controversial companies, such as tobacco, thermal coal producers or controversial weapons, for example.
‘B’ is for ‘backing better companies’.
The third part, ‘C’ stands for ‘contribute’ with Wiggins explaining that it’s not enough for a fund in the portfolio to just have a good score on ESG – environmental, social & governance – issues, they must also invest in companies that have a positive environmental or social impact.
The final part, ‘D’, is for ‘develop and improve’, which involves managers engaging with companies and using their shareholder position to promote positive change within them.
Over the last couple of years, the management pair said that they’ve seen a notable, increasing demand for more explicitly sustainable strategies.
“Investors are now thinking about returns in a broader way than they have before,” said Wiggins. “So, it’s not just about the ‘performance of my fund relative to a benchmark’ or ‘my objective in financial terms’, it’s about ‘what else is my portfolio delivering’?”
Below, the pair highlight their three ‘go-to’ ESG funds from within the range.
Pictet Global Environmental Opportunities
First up is the €6.1bn Pictet Global Environmental Opportunities fund, overseen by Gabriel Micheli, Luciano Diana and Yi Du and investing in companies that provide solutions to global environmental challenges. 
Going beyond just tackling climate change, the fund invests across a range of issues, such as resource efficiency, agriculture or forestry.
Wiles (pictured) said that the Pictet fund was one the team has held for some time in the pre-existing multi-manager portfolios.
“[Pictet’s] approach is built around its planetary boundaries,” Wiles explained. “So, things like energy efficiency, dematerialised economy, water supply and technology. It’s really those sort of solutions to the changing world.”
These nine planetary boundaries underpin the Pictet Global Environmental Opportunities fund.
The nine boundaries are: climate change, freshwater use, land use, ocean acidification, nitrogen and phosphorous cycle, biodiversity, ozone depletion, aerosol loading and chemical pollution.
This fund is not a standalone ESG product for Pictet.
As well as having several explicit sustainable options, the asset management house has embedded sustainable thinking – to some degree – in all its active and fixed income funds. All of which must integrate ESG considerations when making investment decisions.
Wiles added: “Pictet are a really specialist group which has been working in thematic investing for a number of years and as we say it’s a fund that we’ve held for a long, long time anyway and been really pleased.
“So, that seemed to fit perfectly for what we were looking for.”
Over the past three years, Pictet Global Environmental Opportunities has outperformed both its sector and peer group, making a total return of 54.38 per cent, versus the IA Global sector’s 32.58 per cent and the MSCI ACWI benchmark’s 31.95 per cent.
Performance of fund vs sector & benchmark over 3yrs
Source: FE Analytics
The four FE fundinfo Crown-rated fund has an ongoing charges figure (OCF) of 1.11 per cent.
Ninety One Global Environment
Next up is the £451.9m Ninety One Global Environment fund, which has been run by co-managers Deirdre Cooper and Graeme Baker since launch in December 2019.
“This strategy is focused on companies which are focused on decarbonising the world, and so it’s particularly relevant [at the moment],” Wiles said, since many governments are currently pushing lower carbon polices in order to tackle the climate change issues.
“It’s in a lot of news stories recently – e.g. about China targeting being net neutral by 2060, and the initiatives that the UK government are launching with green bonds – so, this all plays into that.”
The Ninety One Global Environment fund invests at least two thirds of the portfolio in companies which are contributing to decarbonising the global economy and therefore making a positive environmental change.
It runs a concentrated portfolio of 20-40 holdings.
Performance of fund vs sector & benchmark since launch
Source: FE Analytics
Since launch it has made a total return of 51.27 per cent, an outperformance versus the IA Global sector (17.05 per cent) and the MSCI ACWI (14.46 per cent). It has an OCF of 0.90 per cent.
iShares Global Green Bond ETF
Alongside the higher risk, active equity impact strategies manager Wiggins said that passive ESG options were vital in the portfolio construction.
“ESG-enhanced passive funds are a crucial component because one of the crucial things that we wanted to do was to make sure that all the portfolios are appropriately diversified,” said Wiggins. “We didn’t want to be overly aggressive in exposures we were taking from a certain stock or from a factor perspective.
“So, they [the passive options] were the key building blocks which gives us good sustainability criteria at a low cost and allow us to take more risk in other areas around that.
“Those passive ESG elements were critical to how we structured the portfolio.”
The iShares Global Green Bond ETF is an example of a lower-risk building block in the portfolio.
Wiggins said: “Because most of the impact strategies in the fund are equities there’s a bias towards impact strategies at the higher risk level, so it’s important for us to think about where we could get impact strategies at a lower risk level and the green bond fund gives exposure – at the lower risk level – to high-quality bonds. But [they are] also [strategies] specifically targeting environmentally friendly projects.
“So, that gives us a nice balance of equity impact at the higher risk levels and fixed income-based impact strategies at the lower risk levels.”
Performance of fund since launch
Source: FE Analytics
The iShares Global Green Bond ETF aims to track the of the Bloomberg Barclays MSCI Green Bond index. Since it was launched in 2018, the ETF made a loss of 7.21 per cent, more than the sector’s loss of 4.70 per cent. It has an annual management charge of 0.17 per cent.