3 Funds for Environmental Investors

With climate change on many investors' radars, we look at three environmental funds aiming to make an impact

Annalisa Esposito 10 October, 2019 | 9:25AM
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With the Swedish environmentalist Greta Thunberg constantly making headlines and climate change protests taking place with increasingly regularity, environmental issues are firmly in the spotlight. 

With the future of the planet at the top of many investors' agendas, it is no surprise that a growing number of companies are developing new technologies to manage the impact of climate change.

For those investors who have environmental issues on their minds, there are number of funds which aim to tap into the theme. Here we look at three of the options:

Impax Environmental Markets

The Bronze-rated Impax Environmental Markets fund is a solid option for investors seeking exposure to environmental markets across the globe. The portfolio invests in quoted companies in four broad categories, which are: clean energy, water, waste, and sustainable food. Top holdings include the manufacturer of power generation products Generac Holdings and waste control company Clean Harbors.

Launched in 2004, this strategy benefits from the experience of veterans Bruce Jenkyn-Jones and Jon Forster. It has produced strong annualised returns of more than 12% over five years and is up 21.4% year to date.

However, investors should be aware of the fund’s penchant for small-cap investments, which adds some risk into the portfolio. “We believe this strategy remains a solid proposition in the environmental sector for investors who understand its risks” says Morningstar analyst Ronald van Genderen.

Nordea 1 Global Climate and Environment

The five-star rated Nordea 1 Global Climate and Environment fund invests in companies that are trying to change the world for the better through their climate solutions. The idea is that saving electricity is as important as generating clean electricity.

The £1.6 billion Copenhagen-based fund has been run by Thomas Sorensen and Henning Padberg since its launch in 2008. Over five years it has delivered annualised returns of 14%, comfortably beating its peers, and is up 26.7% year to date.

The duo take a methodical approach to their investing, using a process they have devised themselves: each potential investment is assigned an ESG rating, scored A, B or C (where A is the highest possible rating and C the lowest). The rating accounts for how well a company performs across five pillars: business model, business ethics, corporate governance, social aspects and environmental aspects.

The fund also employs negative screening, avoiding any businesses involved in the manufacture of biological and chemical weapons, nuclear weapons and other arms. Top holdings include chemical company US-listed Linde and Texas-based Waste Management.

RobecoSAM Smart Energy

The Bronze-rated RobecoSAM Energy strategy invests in companies that provide competitive and sustainable solutions to the growing need for reliable, clean and affordable energy supply across the world. 

Around half the portfolio is in US stocks and among its top holdings are two semiconductor manufacturing companies, Power Integrations and Cypress Semiconductor Corp. The fund has a growth style and, as a result, a relatively high exposure to smaller companies.

The fund has been run by Thiemo Lang since 2007 and has outpaced its peers in the Alternative Energy Morningstar fund category by almost 4.5% a year since. It has also outperformed the S&P Global Clean Energy Index by an even far more significant margin.

However, performance has been volatile, with hiccups along the way, admits Morningstar's van Genderen. “[But] Lang has done well in this highly volatile segment and we remain convinced by the lead portfolio manager's expertise," he adds.

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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Annalisa Esposito  is a data journalist for Morningstar.co.uk

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