Ethical investing isn’t as simple as it seems. But that doesn’t need to stop you from trying to do more good with your investment portfolio. Knowing your money could be working for good might be the nudge you need into investments if you’ve been to cautious to get started. (If that is you, you might find my beginners guide to investing helpful.)
I’m going to share with you the investments that I am making. However, I’m not a financial advisor, nor am I an environmental expert, so please please do your own research before making any investments.
Royal London Sustainable Leaders fund
I’ve already being investing in this fund over the last 6 years. This fund invests in companies “that have a positive effect on the environment, human welfare and quality of life”. It was a more expensive option and potentially subject to worse returns than a standard FTSE linked fund. However, when I started my investing journey, I wanted at least some of my money invested ethically.
To give you a summary of this fund: it gained 8.8% in 2016, 15.8% in 2017 and lost 2.2% in 2018. So far in 2019, it has seen growth. (For comparison, another UK FTSE linked fund I invest in grew 18.21% in 2016, 11.92% in 2017 and shrank 8.26% in 2018.)
BGF Sustainable Energy fund
When I think about ethical investing, the first thing that comes to mind is being able to invest in green energy, so I was thrilled to discover this in a fund. The fund is invested in companies involved in renewable energy. It doesn’t invest in companies involved in oil and gas exploration or coal. This is a simple summary, but you can read more about the BGF Sustainable Energy fund on Blackrock’s website.
In terms of performance, it shrank 2.66% in 2016, grew 7.68% in 2017 and grew 13.91% in 2018. At the time of writing, it has so far lost value in 2019 (which means I’m getting better value for my money!) but I really do believe this is the way that we need to be heading in sourcing our energy needs for the future.
RobecoSAM Sustainable Water Fund
Water is clearly a precious resource, but it is one that we can utilise better. There are opportunities for better distribution and treatment, or even more efficient irrigation. That’s what this fund invests in.
In terms of performance, it grew 9.75% in 2016, 11.89% in 2017, shrank 8.41% in 2018 and has grown in 2019 so far.
Unlike renewable energy, my thoughts around better water conservation were limited to switching the tap off when brushing my teeth and not spending too long in the shower. Want to learn a bit more about effectively using and managing water? Check out Sustainable Water. This is an American company, but they talk about various ways they help industry manage water. Understanding this a bit more gives me the confidence to 1) Invest in such a fund and 2) Believe it is an ethical investment to make.
As I said before, I’m not a financial advisor, nor am I an environmental expert. These are not recommendations so do be sure to do your own research before making any decisions.
As is always the case with investments (and as the performance of these funds indicate), the value can increase and decrease. While the aim is to grow your money, you could lose money. Historic performance isn’t an indicator of future performance.
Generic passive funds are cheaper, whereas specialised funds such as these have higher management charges. They may also have initial charges too. However, this post is about choosing funds that are ethical, not looking for funds that make the most money (although the plan is definitely to try to do this!)