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Investor Views: Back ESG for a Sustainable Retirement

Private investor Sean Bridge is hoping a mix of ethical shares and funds will deliver sustainable returns in his retirement

Emma Simon 25 October, 2017 | 2:01PM

Investing in environmental assets could produce sustainable returns

After five years working as a gas engineer, Sean Bridge has recently changed career and now works as a consultant ecologist.

Bridge, who is lives in Perthshire, Scotland, says this career shift has made him think more carefully about how he invests his money.

“I’m interested in long-term sustainability and want my money to be invested in funds and companies that support this,” he says.

“Ethical standards are important, but I’m also interested in long-term investment potential. I think companies that can develop clean energy solutions have the potential to deliver sustainable returns into the future.”

Thirty-two year old Bridge he splits his investments between his SIPP and his ISA, both of which are held with AJ Bell.

“I think of my ISA as my rainy day fund, which I might use for a number of things in the future: be it buying property, land, or a new car, or simply providing a bit of financial security, should I lose my job,” he explains.

Bridge has only been investing in this ISA since January. Prior to that his main investment was his company pension with his previous employer. But his career change prompted him to better save for the future.

He invests in a mix of direct shareholdings and funds across both tax-efficient wrappers. As he tries to keep investment costs to a minimum, he likes low-charging options like ETFs, but he also invests in some actively managed funds too.

Ethical Funds to Match an Ecological Outlook

Not surprisingly, Bridge has a holding in Kames Ethical Equity, one of the leading ethical investors in the UK.

This fund has a Bronze Rating from Morningstar. Analyst Simon Dorricott says: “Kames Ethical Equity remains a good way for ethical investors to gain exposure to UK equities, but our conviction level has reduced slightly.”

The fund has been managed by Audrey Ryan since January 2000, although the initial ethical screening process is conducted by her colleague Ryan Smith, head of corporate governance and ethical research. Analysts say they like this twin-track approach.

Dorricott points out in performance terms, Ryan’s track record “remains good against both the UK Flex-Cap Equity Morningstar category and the FTSE All-Share Index.” However, the ethical nature of the mandate leads to the fund taking significant active sector positions, as well as a bias towards mid- and small-cap stocks, compared to the FTSE All-Share Index.

“Over time there have been some tailwinds for the ethical style, but the performance of this fund generally compares well to other ethically managed products,” Dorricott adds.

Technology and Energy Investments

Bridge also invests in iShares Global Clean Energy (INRG). This ETF tracks the performance of the S&P Global Clean Energy Index, which is made up of 30 companies operating in this sector. The ETF has just a two-star performance rating from Morningstar. Figures show that over three years it has delivered a 3.15% annualised return, and a 11.34% annualised return over the past five years.

When it comes to individual shareholdings, Bridge holds Solid State (SOLI). This technology company supplies specialist electronics equipment, which includes high tolerance and tailor-made battery packs, specialist electronic components, specialist antennas and industrial computers.

The company enjoyed strong share price growth during 2014 and 2015, with prices peaking at 910p per share in 2015, before slipping back significantly in 2016. Today they are trading at 425p per share.

Multi-Asset Fund Sits at Core of Portfolio

Away from the technology and clean energy sectors, Bridge also invests in AJ Bell’s Passive Adventurous fund. This is a risk rated multi-asset fund, which launched in January this year, investing in passive funds.

As its adventurous name suggests this particular fund invests primarily in higher risk assets, such as equities, and has relatively low exposure to cash or fixed income investments. It is global fund: currently its biggest holdings are iShares Core S&P 500 UCTIS ETF (CSPX), BlackRock UK Equity Tracker and BlackRock Emerging Markets Equity Tracker.

Bridge says he hopes this broader based fund will provide a useful bedrock to his investment portfolio, while offering cost-effective exposure to a range of markets.

Bridge makes monthly investment into his SIPP, and makes lump sum payments into his ISA, usually on a monthly, or bi-monthly basis. He adds: “I’m still relatively young, and relatively new to investing so this is early days. But so far I’ve been pleased with the returns on my investments. I know there will be periods of market volatility, but I’m happy to ride out most things by keeping my eyes focused on my longer-term goals.” 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
BlackRock ACS UK Eqty Trk X1 GBP Acc101.50 GBP0.40-
iShares Core S&P 500 ETF USD Acc USD248.00 USD-0.04
iShares Global Clean Energy ETF GBP388.90 GBX-1.59
Kames Ethical Equity B Acc228.55 GBP0.45
Solid State PLC397.50 GBX0.00-
About Author Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for Morningstar.co.uk