BMO Global Asset Management has become the latest fund to rebadge an existing fund as a sustainable product with its European Equity fund rebranding as the Sustainable Opportunities European Equity fund.
BMO Gam said in a press release that the fund had incorporated multiple aspects of sustainability in its process to date and that minor changes would be made to the investment policy to align with its “renewed” sustainable focus.
Morningstar has awarded the fund four sustainability globes out of a total five possible. It is rated seven out of 10 under MSCI’s ESG ratings.
Surge in funds repurposing as responsible investments
Funds repurposing into responsible investment products surged in 2018 with more than 40 European-domiciled products changing into fully-fledged offerings in the space, according to Morningstar. That compares to 17 the previous year.
Repurposing funds allows asset managers to leverage existing assets rather than building new products from scratch, potentially reducing the time it takes to reach scale, the 2019 sustainable funds report from Morningstar said.
“This may also be a way for fund companies to reinvigorate ailing funds that are struggling to attract new flows,” the report said.
The BMO Sustainable Opportunities European Equity fund holds just €28.9m, according to Trustnet.
Other funds that have been repurposed this year, include the East Capital Emerging Asia fund becoming the Global EM Sustainable fund and the RLAM Emerging Markets Equity Tracker being rebranded as an ESG leaders product.
Fund seeks companies with defensible moats
The BMO Sustainable Opportunities European Equity fund will use the UN Sustainable Development Goals to seek out companies that make a positive contribution to society and the environment. It uses voting and engagement to encourage best ESG practice.
The benchmark will change from FTSE AW Developed Europe to MSCI Europe as European investors in the Sicav are more likely to use to the latter index provider.
BMO Sustainable Opportunities European Equity performance
| 6m | 1yr | 3yr | 5yr | 10yr | |
| BMO Sustainable Opportunities European Equity A Inc EUR TR in GB | 5.40 | 14.31 | 23.93 | 41.20 | 122.46 |
| FTSE Developed Europe GTR in GB | 5.89 | 14.57 | 31.73 | 48.81 | 113.30 |
| MSCI AC Europe GTR in GB | 6.10 | 14.90 | 32.13 | 48.26 | 109.66 |
Source: FE Fundinfo
Fund manager Sacha El Khoury said businesses addressing sustainability head on were among some of the best quality opportunities in Europe.
“These companies with wide defensible moats are the ones that tend to be more resilient through cycles, and these are the companies we want to hold in our portfolios for the long term as we are confident that they will drive shareholder value for our clients.”
El Khoury added that European businesses were leading the way in the space.
