How Sinful is Your UK Equity Fund?

How are some of the most popular UK-equity funds performing on ESG factors? Until recently, it would have been difficult to answer this question

Muna Abu-Habsa 25 November, 2016 | 11:21AM
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Sustainable investing is generally depicted as a concept that is implemented through specialist mandates: that is, those which explicitly express a commitment to sustainability objectives. As a result, investors have developed a polarised view of investment strategies–sustainable versus mainstream. This is not only because funds are often marketed that way, but the language cited in investment literature, where terms such as ethical, socially conscious/responsible, sustainable, mission-based, green, ESG, and so on are used interchangeably, has left those funds lumped into an undifferentiated mass.

Taking a bird’s-eye view, sustainable investing is a long-term approach that captures the environmental, social, and governance, or ESG, disciplines of companies. It has very little to do with ‘negative screens’, instead focusing on the behaviour of companies in areas such as product safety, climate change and carbon emissions, board composition, gender and diversity in the work place, executive compensation, energy efficiency; to name but a few. 

By and large, unless an investor has opted for a fund that is labelled as sustainable, it is safe to assume that the sustainability profile of their investments doesn’t keep them wide awake at night. We think sustainability warrants greater attention, though, as time and time again we are reminded about the significant, and long-lasting, impact that ESG-related mishaps have on companies’ financial performance. Therefore, this concept need not be confined to a specific group of funds that carry the sustainable label. It is relevant to all funds.

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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.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Barclays PLC182.72 GBP0.00Rating
BP PLC304.65 GBP0.00Rating
GlaxoSmithKline PLC1,388.20 GBP0.00Rating
Invesco UK Opports (UK) (Acc)732.88 GBP-0.48Rating
JOHCM UK Opportunities B GBP Acc3.11 GBP0.13Rating
Royal Dutch Shell PLC B1,445.80 GBP0.00Rating
Sage Group (The) PLC742.60 GBP0.00Rating

About Author

Muna Abu-Habsa  is a senior investment research analyst at Morningstar

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