Having worked as an environmental consultant, it is not surprising that Richard Venes likes to invest in funds and shares with strong ethical and environmental credentials.
Now retired, Richard is an active investor trying to generate extra income to complement his pension fund. But achieving this while maintaining a principled stance can be difficult, admits Richard, and there are lots of different views as to what actually constitutes an “ethical” fund.
“I’m not so keen on so-called ethical funds that invest in big US-internet related companies like Microsoft and Google,” he explains. “When it comes to choosing my own investments, I tend to favour companies that have a fair tax policy and I avoid certain sectors, such as big pharma, tobacco and armaments”.
One of the issues he is particularly concerned about is climate change, so this is factored into his investment decisions. He adds: “I also want to invest in companies that have appointed female directors or female executives to the board.”
But Richard’s investment decisions aren’t based solely on these environmental, social and governance (ESG) factors; there are also a number of key financial metrics he also looks out for. He says: “With shares I’m looking for companies that have a positive net asset value, a lack of debt and have a business model I understand.”
When it comes to funds, he prefers those with a strong track records but also likes funds which address ESG issues and likes those with a female manager at the helm. These are few and far between, of course; a Morningstar investigation recently revealed that more funds run by men named Dave than are run by women.
Richard, who lives in Manchester, has a pension and an Isa, which he manages himself. He tries to take a long-term approach, aiming to hold any shares for at least five years. “My usual share purchase is about £2,000 and I aim to sell a portion of these shares once the price has doubled,” he explains.
Pasties and Packaging
Some of his best holdings have included high street bakers Greggs (GRG), which he has held since 2010, and paper and packaging company Mondi (MNDI) and engineering group VP (VP.), both of which he has owned since 2011.
Shareholders in Greggs have enjoyed tasty returns, particularly since the start of 2014. At that point shares were priced at 439p and have climbed steadily since as the baker has successfully managed to tap into key trends, most notably with the launch of its vegan sausage roll. Greggs shares hit £24.66 earlier this year.
According to Morningstar data, shareholders has seen an annual return of 19.18% over the past 10 years, more than twice the 7.24% return delivered by the FTSE 100 over the same period.
Mondi has delivered similarly buoyant returns over the past decade. According to Morningstar, shareholders have seen annual returns of 20.64% over the past 10 years.
Meanwhile, VP has also enjoyed a decade of strong growth. While its share price has dipped since mid-2018, shareholders have still seen a yearly return of 20.3% over 10 years.
Richard has held Spirax-Sarco Engineering (SPX) since 1998, when shares in the engineering stocks were around 200p. Today they are trading at £85.90. He adds: “My investment strategy has not changed much over the years, but I find it harder to find shares which fit my criteria. This is probably a good thing as it limits the size of my portfolio.”
Ethical Funds Deliver
Richard believes his ethical outlook has also paid off in his fund holdings, with Jupiter Ecology the best performing fund in his portfolio, where he has held it since 2003. It has delivered annualised returns of 8.9% over 10 years.
Jupiter Ecology has a four-star rating from Morningstar, however it has recently been downgraded from a Bronze to Neutral Analyst Rating. Morningstar analyst Ronald van Genderen is concerned that the fund manager — Charlie Thomas, who has run this fund since 2003 — has accumulated additional responsibilities in recent years and that the additional workload could affect the performance of the fund.
While not all Richard’s holdings have produced such good returns, he says there haven’t been too many “out and out disasters”.
He says: “The only real disaster was PV Crystalox Solar. This company produces multi-crystalline silicone ingots and wafers used in solar panels. From an environmental point of view, it looked like an attractive option, but the company’s share price collapsed after cuts to government subsidies."
Shares in PVCS fell from a high of £69.26 towards the end of 2008, to 230p at the start of 2012. Today they are trading at around 65p. Richard says: “I now have stricter criteria on share selection as a result of this experience.”
