Liontrust Sustainable Future Global Growth, Stewart Worldwide Sustainability, and BMO Responsible Global Equity are among funds with an ESG (environmental, social & governance) focus that every investor should own.
With Good Money Week here once again, FE Trustnet decided to ask a number of advisers and other fund pickers which is the one ESG fund that they would recommend to investors.
Stewart Investors Worldwide Sustainability
The first fund on our list was the £410m Stewart Investors Worldwide Sustainability fund recommended by Adrian Lowcock, head of personal investing at Willis Owen, and Ryan Hughes, head of active portfolios at AJ Bell.
Overseen by FE Alpha Manager David Gait and colleague Nick Edgerton, the fund invests companies – located in both developed and emerging countries – that are positioned to benefit from, and contribute to, the sustainable development of the countries in which they operate.
“This is a good ‘one-stop’ fund for sustainability,” according to Lowcock. “Whilst there are different interpretations of ESG this fund is broad enough to suit a wide range of investors. The fund operates strongly as a global equity fund via some market-leading research and a stable investment team.”
Although the process is relatively new, according to Lowcock, the core process driving this fund has been around since the 1990s. Based on extensive company research with a major focus on a company’s “sustainability of earnings and business models is core to the fund.”
“Engagement is an important factor with strong interaction with management and crucially this is married with a long-term mind-set allowing them to influence and shape management behaviour over a long period,” added AJ Bell’s Hughes.
Performance of fund vs sector & benchmark over 5yrs
Source: FE Analytics
The fund has made returns of 86.31 per cent over the past five years, outperforming the MSCI AC World index which made 76.17 per cent and the average IA Global peer (up 66.55 per cent). The fund has an ongoing charge (OCF) of 0.89 per cent.
Liontrust Sustainable Future Global Growth
The next fund is Liontrust Sustainable Future Global Growth and recommended by Andy Parsons, head of investments and product proposition for The Share Centre, who said it “ticks all the boxes” for most types of investors looking for ESG exposure.
Parsons said that the five FE Crown-rated fund led by the “highly regarded” Peter Michealis and colleague Simon Clements and has delivered strong performance over three-, five-, and 10-year rolling periods.
“Taking into account that the manager’s investment universe is limited due to the nature of the fund this is strong evidence for the talent and skill involved in the process,” he said. “The fund has a concentrated and globally diversified portfolio of about 50 high-conviction quality names which were selected on a bottom-up basis and is suitable to complement a core portfolio.”
Liontrust Sustainable Future Global Growth has made returns of 93.75 per cent over the past five years compared with an 80.42 per cent gain for the MSCI World index. It has an OCF of 0.93 per cent.
BMO Responsible Global Equity
The third fund on the list was another global equity strategy – BMO Responsible Global Equity – chosen by Jason Hollands, managing director at Tilney Investment Management Services.
The four FE Crown-rated fund is managed by Jamie Jenkins and Nick Henderson and targets long-term capital growth.
“Interest in ESG strategies has grown significantly since the global financial crisis and a lot of new products are being launched in this space with unproven or track records,” said Hollands. “In contrast, BMO have a 30-year heritage of ESG investing and are well resourced in the three key areas: policy development and scrutiny, engagement and voting, portfolio construction.”
He added: “The fund invests across global equity markets with a mandate to back companies that are making a positive contribution to society and the environment, while avoiding those with damaging or unsustainable practices.”
“Importantly the ESG policies and the approval of the stock universe is the responsibility of an independent advisory council whose president is Justin Welby, the Archbishop of Canterbury.”
Performance of fund vs sector & benchmark over 5yrs
Source: FE Analytics
BMO Responsible Global Equity has made a 98.58 per cent total return over the past five years and has an OCF of 0.80 per cent.
RobecoSAM Smart Materials
Premier Asset Management’s Simon Evan-Cook has chosen a strategy that UK investors might not be overly familiar with, highlighting the offshore, four FE Crown-rated RobecoSAM Smart Materials fund.
The €638m fund targets long-term returns by investing in global companies that “provide technology, products or services relating to the extraction and efficient handling of raw materials, recycling of used resources and innovative alternative materials”.
Evan-Cook said: “Like any fund we pick, we like it because we think the manager is talented and well-disciplined, but we also think this is a theme that has a long-term tailwind behind it.
“But in addition, as contrarian investors, we think commodities and energy look like interesting areas, with their prices having been under pressure for the best part of a decade now.”
He added: “As substitutes for those commodities, any rises in price would be good news for these companies, as it would increase the demand for their products.”
RobecoSAM Smart Materials is managed by Pieter Busscher and has made a total return of 74.74 per cent over the past five years. It has an OCF of 1.19 per cent.
Liontrust Sustainable Future Corporate Bond
The final fund on the list is the £566.4m Liontrust Sustainable Future Corporate Bond, recommended by Victoria Hasler, director of research and consulting at Square Mile Investment Consulting and Research, a “corporate bond fund with a conscience”.
The £566.4m fund is managed by Stuart Steven, Kenny Watson and Aitken Ross and aims to provide a long-term return higher than that provided by UK government bonds.
“At the heart of the way that the managers run money is a strong belief that sustainability matters and that companies which produce goods or services that are of benefit to society or the environment, and who do so in a way which manages ESG risks and impacts will, in the long run, be the best investments,” she said.
“The team have been managing funds in this way for many years now and investors can rest assured that this fund does far more than bolt-on ESG considerations.
“Instead sustainability is one of the core pillars of the investment process, and just as much emphasis is placed on the sustainability work which the team undertake as credit analysis or valuation work.”
Performance of fund vs sector & benchmark over 5yrs
Source: FE Analytics
The fund made 30.49 per cent returns over the past five years compared with a return of 26.17 per cent for the average IA Sterling Corporate Bond peer. It has an OCF of 0.65 per cent and has a yield of 2.97 per cent.