Chase de Vere, the independent financial advisers, manages discretionary ethical portfolios valued at more than £45 million. However, Ben Willis, Head of Portfolio Management, says there’s more to it than just avoiding the bad stuff.
“There is a fallacy that ethical investing is simply about avoiding investments in certain sectors, such as tobacco, alcohol and gambling, and as a result ethical investors are left with more concentrated, volatile and underperforming portfolios.
“However, while this view takes account of where ethical funds don’t invest, it doesn’t consider where they do invest. Ethical portfolios will often have exposure to stocks and bonds which wouldn’t typically be found in mainstream portfolios. This can provide additional diversification and growth or income prospects within a portfolio.”
Some of the holdings Chase de Vere have in their ethical client portfolios include:
Everbridge provides software which can send out millions of messages per minute to help combat critical events. For example, the platform was used to send 20 million messages to support evacuation and recovery efforts during Hurricane Irma in 2016.
Insulet produces an innovative tubeless ‘pump patch’ for diabetics. It is small, robust and water-proof and replaces multiple daily injections, providing 24-hour delivery of insulin.
Aquafil’s technology recovers waste nylon from used fishing nets, fabric scraps and carpets and feeds it back into the textiles production process as a raw material.
This is a retail charity bond providing housing for key government workers who need to live in London but cannot afford the housing costs. So for example, this could be available to nurses and junior doctors. This is achieved by targeting households earning between £30,000 and £50,000 per annum with rent capped at 80% of the market rate.
This is a community interest company where ex-offenders from Barlinnie Prison receive specialist training in construction and are employed to build and refurbish homes. This project focuses on the rehabilitation of ex-offenders and also brings affordable new-build housing to deprived areas.
“There are many more examples of ‘ethical’ stocks or bonds which provide benefits for the environment or for society in general. Investors in mainstream funds may get limited, if any, exposure to these holdings. Meanwhile ethical investors can not only benefit from these opportunities, but can also be aware that they are doing that little bit more to help the ‘greater good’.”
Baillie Gifford Responsible Global Equity Income
Baillie Gifford is an excellent investment company which often goes under the radar. This new fund is the first ethical fund to be launched in the IA Global Equity Income sector. We rarely invest in new fund launches. However, there aren’t many ethical funds which pay a sustainable dividend and so, with the investment credentials of Baillie Gifford and the emphasis they’re putting on sustainable criteria, it is a fund that we’ve already added to the ethical client portfolios that we run.
BMO Responsible UK Equity
This is a long-established fund which was renamed from the Stewardship range of products. It boasts an experienced investment team and also utilises an external advisory council which is headed up by the Archbishop of Canterbury. The fund employs negative screening but also looks to invest in companies which make a positive contribution to society and the environment and uses its influence as an investor to encourage best practice through engagement and voting.
Rathbone Ethical Bond
This is a good quality corporate bond fund. It has a robust investment process which has helped it to produce a strong risk-adjusted track record, a good quality manager, pays a yield of 4.1% and invests in many underlying holdings not found in other funds, meaning it provides strong diversification benefits. These holdings include a UK disability charity supporting disabled people and their families, a not-for-profit company focusing on social housing and a mentoring programme for ex-offenders working with social housing associations.