Scrooge might choose to build wealth for wealth’s sake. But more socially-minded individuals are putting their money where their morals are.
At its simplest this means being an ethical investor, where ‘sinful’ money generators such as tobacco or firearms manufacturers are not welcome in a portfolio of shares or funds. But screening out too many such offenders often means foregoing investment returns.
There is a more positive way to profit from your principles by backing companies seeking to solve the world’s key social and environmental issues. It is now commonly known as ‘impact’ investing.
Xylem is a firm that advises organisations on how to reduce their water consumption
Mark Dampier, of investment platform Hargreaves Lansdown, says impact investing has some way to go before it enters the mainstream. He says: ‘It is a small and immature market where available investments for investors are few and far between.
‘Aside from a few bond funds, such as Threadneedle Social Bond, investors are hard pressed to find appropriate funds they can slot into their portfolios.’
Ethical assets make up just 1 per cent of the total
Others are more upbeat. Rebecca Jones, at Good with Money, says: ‘There has never been more opportunity for investors to make a real impact with their money.’ She likes renewable energy funds Foresight Solar and Greencoat Wind. Another option is the Triple Point Social Housing Real Estate Investment Trust. This invests in building social housing for those with long- term learning disabilities.
Additional options include the Liontrust Sustainable Future range. Ethical bank Triodos has two socially responsible investment funds – Sustainable Equity and Sustainable Pioneer. The former invests in Japan National Railways which builds high-speed trains that compete on price and speed with more environmentally unfriendly planes.
Other funds include M&G Positive Impact, Edentree UK Amity and Rathbone Ethical Bond.
Barclays Multi-Impact Growth, launched less than a year ago, invests in other funds that meet its manager’s environmental and social impact criteria. The bank’s Smart Investor platform also highlights funds suitable for impact investors.
Fund aimed at young…and ‘groovy grandparents’
Investment house Aberdeen Standard hopes its new fund – The Global Sustainability Trust – will help feed the growing appetite for social and environmental impact investing.
Although recent research by Barclays suggests the trend is driven by younger investors, Aberdeen Standard expects ‘groovy grandparents’ – with money to spare – to wake up to the benefits. The trust has an initial target of £200million – money which it will use to invest in companies that align with the United Nations’ sustainable development goals.
These are firms that primarily assist in providing sustainable energy, food and agriculture. The trust will work with venture firm Bridges Ventures in finding suitable private equity opportunities.
In the past, Bridges has backed World of Books, a company that buys unwanted books from charity shops, identifies which ones are worth selling second-hand through Amazon, before sending the rest to be pulped.
Charity shops benefit and pulping volumes are reduced. Roger Pim, manager of the new trust, says: ‘At least 95 per cent of investment opportunities in the social and environmental impact area are private companies. We will be the only investor in many of these businesses and will seek ones aligned to our sustainable goals.
‘The investment trust structure offers private investors access to a diversified portfolio of opportunities not otherwise available to them.’
The initial offer for shares in The Global Sustainability Trust closes on December 11. You can apply via registrar Computershare or investment platforms such as Alliance Trust and Hargreaves Lansdown. Minimum investment is £500. For information, visit globalsustainabilitytrust.co.uk.