By GRAHAM FROST 10/10/2007
Global Ethical funds invest worldwide in companies which demonstrate a positive commitment to the long-term protection of the environment. The fund managers of Global Ethical funds have a restricted universe to invest in, consisting of companies that pass certain ‘green’ criteria, according to the fund’s objective. As such there tends to be a bias towards small and medium sized companies. Often large sectors such as banks, oil companies and miners are excluded from investable companies, leading to markedly different performance relative the benchmark (when these sectors are leading/lagging the market). This is often seen as a disadvantage for ethical funds in terms of performance potential with restricted options available to the manager. However, good stockpicking fund managers are able to exploit the areas of the stockmarket that are in demand by investors.
Ethical fund have performed well in recent times (particularly over the last couple of years) with the increasing focus on green issues driving companies share prices. It is also true that ethical funds have become even more popular due to good performance.
There are three long-term drivers of growth within the environmental investment universe. Firstly, the impact of government policy and regulation. This is proving vital in forcing the pace of change and therefore the adoption of new technologies and services. Secondly, adoption of environmentally-friendly practices in the corporate sector is generating opportunities for service and product providers. Finally, the consumer sector is beginning to become increasingly important. Consumer choice could be a key determinant in the drive for further adoption of environmental products and services.
Our favoured fund investing globally is Jupiter Ecology.
Jupiter Ecology
The Fund’s investment policy is to invest worldwide in companies which demonstrate a positive commitment to the long-term protection of the environment.
This is a stock-picking fund first and foremost, with the portfolio strongly biased towards identifying emerging growth trends on a global basis. Ethical and environmental screening for the Jupiter Ecology Fund is undertaken by the Jupiter SRI & Governance Team, a team of environmental and social scientists. The team assesses companies against a set of environmental and ethical criteria and the manager Charlie Thomas is then able to choose stocks that pass this ethical screen. Jupiter’s research effort is focused on companies operating within their six green investment themes: clean energy, water management, green transport, waste management, sustainable living and environmental services.
Charlie Thomas has turned performance round since taking on this remit in September 2003. It has a ‘dark green’ approach to ethical investments across global markets with a bias to the UK. This fund takes a sensible approach to Socially Responsible Investing (SRI). Its aim is to invest in companies that are either making a difference, or taking positive strides to do so. While the portfolio is predominantly biased towards the smaller end of the market cap spectrum, a portion of the fund is in larger caps, typically blue chip ‘good governance’ companies which have a strong track record of managing their social and environmental impact. However, given the smaller company focus, stock specific risk within the portfolio tends to be fairly high. The SRI team is experienced, the process is strong and Charlie Thomas comes across as passionate green manager.
