The recent reports of COP26, NetZero strategies and the climate crisis may have you wondering how sustainable your investments are, if you can invest ethically or even if such options exists.
Environmental, Social and Governance funds, often called ESG funds are a way of taking a more hands-on approach to investing sustainably. They’re funds that tend to focus on areas such as renewable energy; resource efficiency; waste management; human rights; gender equality; diversity; labour standards; and anti-bribery and corruption, although this is not an exhaustive list.
Investing in ESG funds can be a more direct approach than just avoidance, whereby explicitly harmful industries are avoided, such as tobacco, but doesn’t necessarily mean investments will go towards sustainable initiatives.
Steps to selecting greener funds
If sustainable investments are of interest to you, Brunsdon Financial may be able to help. Our investment funds are known as the TM Brunsdon OEIC and consists of two sub-funds: the TM Brunsdon Cautious Growth Fund and the TM Brunsdon Adventurous Growth Fund. While our OEIC doesn’t have a specific ESG rating, both sub-funds have exposure to sustainable investments.
Our funds are actively managed by our carefully selected fund manager, Brooks Macdonald Group plc, which has a rigorous process when it comes to choosing funds deemed to be in line with ESG standards. This involves taking additional steps, as well as utilising an internal system to ascertain if a particular fund has any conflicts with ESG.
The process
Brooks Macdonald may produce a traffic light report when looking at funds for environmentally-aware clients and if any areas are flagged as ‘amber’ then this can be taken to the fund manager in question to discuss the reason for this before any investment is made.
An example of this may be where a fund has exposure to an energy company. It may not be excluded immediately if the energy company in question invests heavily into renewable sources, therefore a conversation may need to be had around this with the fund manager and the results of this are then reported on to the client.
There is strong global focus on decarbonisation currently, and opportunities to invest in it may increase following the pledge from 40 countries at COP26 to phase out coal-fired power in the 2030s and 40s[1].
Sustainable options
While the TM Brunsdon OEIC is not an ESG-dedicated fund, its broad spectrum, along with its active management, does mean that it’s often possible to find an investment strategy to suit most clients’ needs and wants. We can provide an ethical questionnaire to all our clients to ascertain where their interests lie.
For those looking for a dedicated ESG offering, we are able to make use of Brooks Macdonald’s Responsible Investment Service (RIS) portfolio or alternatively use a discretionary fund manager (DFM) for a more tailored approach if required.
We know that our fund manager is staying updated with regards to companies that may be affected by changing ESG rules, in order to mitigate problems that could arise from future regulations.
