'My Ethical Funds Have Delivered Big Returns'

Investor Views: Private investor Luke Evens wants his investments to help support ethical and sustainable businesses

Emma Simon 6 October, 2021 | 10:49AM
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For most 18 year olds, financial decisions tend to be around student debt, getting their first credit card, or ensuring they have enough cash for a good night out. But at this age Luke Evens received an inheritance and started to look at his investment options. 

Luke, who is now 28, wanted to get a return on this money without putting in the bank. “ I wanted to save and invest this money to hoped it would help me get on the housing ladder at some point.

“But I was worried that by just blindly putting my inheritance into the bank that happened to offer the highest return, my investments could be used for something I don’t agree with ethically.”

Instead Luke opened a savings account and Stocks and Shares Isa with Triodos Bank.

Luke, who is currently taking a career break from his job as a civil servant to do a postgraduate degree, says: “During my research into different options, I was impressed by Triodos Bank. I felt they were transparent about where they were investing their money, and have been investing ethically for a long time.”

Governments are Waking Up

Sustainability has become more of an investment trend in recent years, but when he first invested there were far fewer options for his money.

Luke, who is originally from Scotland but now studies in Finland says: “I’ve recently noticed how government, institutions and businesses generally are waking up to things like the climate crisis and are now planning to do something about it – which is fantastic. But I recognise that Triodos has been around for a long time and were supporting these issues long before it was the conventional thing to do.”

Luke uses this Isa to invest in a couple of funds. However, he also takes into account a number of other factors alongside a fund’s environmental, social and governance (ESG) rating.

“Whether you are investing sustainably or not, fees and performance will still be important. To me though I tend to look more at the long-term performance rather than solely opting for the cheapest option.

“But ultimately I want my money to be used for good. I picked the Stocks and Shares Isa because its tax-efficient. It also allows me to invest in a mixed investment portfolio.”

He accepts this is obviously higher risk than simply keeping the money in a cash Isa, but felt it was an appropriate investment vehicle at the time, given the length of time he was likely to keep this money invested. “It just fitted into what I was looking for in terms of risk and return.”

Two Key Funds

Luke currently invests in two funds: Triodos Pioneer Impact Fund, and Baillie Gifford Positive Change Fund.

The Triodos Pioneer Impact fund has a 4 star rating from Morningstar, reflecting its strong performance against peers in recent years. It also has a Neutral Morningstar Quantitative Rating (MQR).

The fund invests around two-thirds of its assets in small and mid-cap companies around the globe that comply with the fund’s sustainable investment objectives. Around a third of the funds assets are in larger companies.

The fund launched in 2013 and according to Morningstar data it has delivered total trailing returns of 10.82% over the past five years, and 14.54% over the past three years. It has, perhaps not surprisingly, a higher than average sustainability rating from Morningstar, with 4 globes.

Growth Focus

Meanwhile the Baillie Gifford Positive Change fund is another strong performer, delivering annualised trailing returns of 31.9% over the past three years. This has helped it achieve the highest a 5-star rating from Morningstar and it has an Analyst Rating of Neutral.

Morningstar says this fund aims to build on the Baillie Gifford’s long-standing experience in growth investing. “The strategy is a natural extension of Baillie Gifford’s growth approach, though with a focus on companies that are perceived to contribute to solving a social or environmental challenge. It relies to a large extent on the research done by the other equity teams of the firm. However, compared with other Baillie Gifford funds, its portfolio is very concentrated, leaving little room for errors.”

Both of these funds are align to Luke’s values. For example, he wants to ensure that his money isn’t being used to fund fossil fuels and arms companies.

He adds: “I’ve been investing for quite a while and I’ve come to realise that this is a  long-term game.” But he adds that he believes investing in this way should deliver better and more sustainable returns over the longer term. “I am aware there are now a lot more ESG funds available, hopefully this will help deliver real change in future.”

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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About Author

Emma Simon

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