Sustainability – Sorting the wheat from the chaff
On April 22nd 2019 “Earth Day” was celebrated by millions of people around the world with thousands driven to protest over the unprecedented global destruction of habitats, plants and wildlife populations as the world faces the greatest rate of extinction in 60 million years.
Yet it need not be so. With coordinated action across consumers, voters, leaders, scientists and investors, we can build on a rapidly growing, global movement to change behaviours, policies and spending, and affect rapid change to help us embrace nature in our day to day lives.
Enter sustainable investing
With public awareness increasing massively by the day however, ‘Sustainable Investing’ is rapidly becoming fashionable and trendy and with it comes the launch of a growing number of funds which are marketed as ‘ESG, Sustainable or thematic’ yet employ radically different policies in practice.
Many of these strategies demonstrate a clear desire to understand and integrate sustainability issues into fundamental analysis, but their differences can lead to criticisms around misunderstanding, credibility (doing what they say), being too loose in the application of criteria or conversely too extreme by effectively boxing themselves into an overly narrow investment universe.
Choosing a strategy to meet your needs
The answer lies in fund managers’ chosen strategies. To some managers sustainability can mean selecting ‘best of sector’ companies and placing significant emphasis on ESG integration. To other managers focusing on finding companies that provide products and services that help us to live more sustainably is essential – occasionally with a strict ‘pure play’ emphasis. Others focus on engaging with large caps, which can even include oil and gas, using their powers as asset owners to influence companies, through voting and engagement (stewardship) activity. These different strategies all have their place in supporting the shift towards more sustainable living but clearly suit different clients.
Building and managing a real sustainable strategy is difficult, requires years of practice and the right people, processes and documentation to ensure it’s employed effectively without incurring unnecessary risks or ultimately having no effect.
This is precisely why Parmenion employ external independent consultants with decades of experience in the industry, to conduct extensive due diligence on all fund providers and sit on our Ethical Oversight Committee, to ensure the funds selected really do what you would expect.
It’s this link and credibility, that gives financial advisers the confidence to update their client fact find to enable them to identify new and existing clients with a strong desire to invest in ESG, Sustainable or Ethical funds (and therefore companies) and have their money managed in way which aligns with their individual values.
Where do we fit in?
The PIM Strategic Ethical Active portfolios offer a convenient, carefully curated set of funds which cater for clients with a wide range of different attitudes to risk and ethical objectives. Whilst our Responsible Leaders (Ethical Profile A) strategy offers an integrated ESG approach, our Sustainability Leaders (Profile B) portfolio is often of particular interest for clients with a strong focus on the environment. Finally, for those clients who want to avoid areas of concern, Ethical Profiles C and D offer negatively screened portfolios which stringently apply the ethical criteria.
As individuals, we must ask ourselves whether we want to keep on as before, despite the damage we see around us, or whether it’s time to change course and set a new direction. Moreover, with an increasing risk of financial penalties and reputational damage from ESG issues and climate change in particular, focusing on funds that invest in companies offering real solutions could present interesting opportunities to like-minded investors.
PIM Strategic Ethical Active
Offering ESG, Sustainability and Ethical portfolios to align with the values of clients.
PIM ethical portfolios offer a range of flexible solutions for investors with ESG, Sustainable or Ethical preferences. They offer ten Risk Grades for each Ethical Profile, which vary from offering a more positively orientated ESG and Sustainability approach, to a more deeply screened traditional Ethical portfolio. The portfolios are reviewed by an experienced independent Ethical Oversight Committee to ensure ongoing credibility.
“The above article is intended to be a topical commentary and should not be construed as financial advice from either the author or Parmenion Capital Partners LLP. If a client wishes to obtain financial advice as to whether an investment is suitable for their needs, they should consult an authorised Financial Adviser. Past performance is not an indicator of future returns.”
Any news and/or views expressed within this document are intended as general information only and should not be viewed as a form of personal recommendation. All investment carries risk and it is important you understand this. If you are in any doubt about whether an investment is suitable for you, please contact your financial adviser.