The latest figures from independent ethical researchers EIRIS show a record £11.3bn has been invested by more than 750,000 investors in the UK’s green and ethical retail funds. Clocking in at £94.3bn in sales, ethical funds also saw a jump in assets under management of 23% to £7.1bn compared with Q2 2010.
GLG is one firm aiming to tap into this increase in demand with the launch in May this year of its Global Sustainable Equity Fund run by Jason Mitchell. Its concentration is on a number of sectors including healthcare, education services, waste and water management, alternative energy, resource and infrastructure-related efficiencies. Mitchell’s prime focus is on a range of mid and large cap companies using a top-down approach incorporating environmental, social and governance factors.
The newest hires in the market are those at Investec Asset Management with the recruitment of Therese Niklasson from Threadneedle as head of research in the firm’s environmental, social and corporate governance arm.
As with most things, a consultation paper from the European Union has thrown in the unintended consequence whereby SRI funds could hold more than 10% in a single stock and invest in areas like unsecuritised loans, thereby significantly raising their risk profiles. The consultation is ongoing.
Unfortunately, the performance figures don’t quite match up.
Looking at the FTSE4Good indices they, as with most equity indices, have struggled over the past few years. The FTSE4Good UK has fallen in line with the MSCI World and dropped -14.39% in the past three months (-14.52% for the MSCI World), -13.52% in the past six months (-14.9%), and -7.89% over a year (-5.29%).
There are individual funds that have a good track record and reputation – for example, Catherine Stanley’s F&C Stewardship Growth Fund was launched in 1984 and now has close to £500m in assets under management (F&C runs £3bn across the Stewardship range) – but its numbers are poor. It is down -8.67% year-to-date against its FTSE All Share index benchmark that is down -6.24%. Over three years it is down -0.37% compared to its benchmark that is up 8.87%.
To put this into context, for investors an SRI/ethical allocation is more than just about performance numbers as they go through a very different buying process. As Stanley says: “Many investors are unwilling to accept performance which comes at the expense of others, the planet or its wildlife.”
This coming week (16 to 22 October) is National Ethical Investment Week designed to promote all things ethical and investment-related to advisers and consumers. Last year it passed almost unnoticed by the investment community at large so here’s hoping for greater uptake in 2011 – in interest and performance.
