Earth Day, the annual environmental day of action, takes place on Wednesday 22nd April – and the theme is cherishing our planet. This means recognising that sustainability depends more on the daily actions of everyone than on a single administration or election outcome.
To mark the occasion, we have picked six funds investing in companies that either boast strong green credentials or are committed to making a difference.
Please remember that the value of investments will fluctuate and returns may be less than the amount originally invested. Tax treatment depends on your individual circumstances and tax rules can change. Chelsea does not offer advice and so if you are unsure of anything please contact an expert adviser.
FTF ClearBridge Global Infrastructure Income
Billions of pounds are being spent every year on global projects to improve our lives and help safeguard the planet. The sectors at the heart of these schemes include everything from utilities and renewable energy to airports and toll roads.
This fund invests in around 30 stocks in those areas, including Entergy*, a US energy company that is trying to reduce greenhouse gas emissions. It’s designed to provide a good income, stable growth, and some inflation protection. It targets a yield of greater than 5%. You’d be hard-pressed to find a more experienced team of infrastructure specialists, and we particularly like the fund’s track record of dividend growth alongside a generous yield.
BlackRock Continental European Income
While not an obvious environmental fund, this portfolio invests in undervalued companies, many of which are helping the planet. They include renewable energy player Engie, as well as Schneider Electric SE**, whose systems make buildings and data centres more energy efficient.
The fund’s managers favour businesses that offer reliable, sustainable dividends, potential dividend growth, and protection against inflation – and all with a lower level of risk. It’s also worth noting that BlackRock’s European team has a consistent, sophisticated ESG analysis system embedded in the overall investment process.
Janus Henderson UK Responsible Income
This UK equity income fund avoids companies that the investment manager considers involved in activities that may be environmentally or socially harmful. These industries include those involved in fossil fuel extraction, animal testing, fur, chemicals of concern, alcohol, armaments, gambling and tobacco.
On a positive note, it’s also currently invested in businesses that are having a more positive impact on the world around us. These include SSE***, a renewable energy company committed to achieving operational net-zero by 2050. We think the Janus Henderson UK Responsible Income fund is a great option for investors seeking a sustainable yield, and we regard the management team as pragmatic and experienced.
Our next suggestion is in the fixed-income world. This portfolio focuses on quality investment grade bonds and looks for a competitive return and attractive total returns. Greenbank, an ethical and sustainable research division of Rathbones, has a veto over holdings, and its exclusions include mining, arms, gambling, animal testing, and nuclear power.
However, this fund also makes positive investments, with renewable energy and social housing among its most prominent sectors. Key factors in potential holdings are whether a company has managers with integrity and competence, has cash to pay its debts, and assets backing the loan. We like that this fund has consistently outperformed, despite its ethical constraints, and has benefited from stability under lead manager Bryn Jones, who has been at the helm for more than two decades.
Regnan Sustainable Water and Waste
This is a thematic, global, high-conviction fund that focuses on identifying companies that provide solutions to global water and waste challenges. Its largest holdings include Sabesp***, a Brazilian company that collects, treats and distributes water, and constructs distribution infrastructure.
The fund’s managers incorporate an ESG-integrated process and tend to favour medium-sized companies with good earnings visibility. Just under a third of holdings have market capitalisations of £10 billion to £20 billion, with industrials, utilities and materials the most prominent sectors represented***. We believe the water theme is under-researched, and this portfolio can provide investors with a differentiated product that has minimal overlap with global equity funds.
Ninety One Global Environment
Our final contender is a portfolio that invests only in companies contributing to the decarbonisation of the world economy. Ninety One Global Environment also takes a high-conviction approach, with just 20-40 holdings, and is designed to benefit from the trillions of dollars being spent to meet global temperature goals. It aims to achieve total returns comprising both capital growth and income over at least five-year periods, while making investments with a positive environmental impact.
One of its largest holdings is Iberdrola***, a Spanish leader in renewable energy and electricity utilities. It’s focused on wind, solar and hydroelectric power. In the latest quarterly update, its managers noted how the energy transition was creating new opportunities for high-quality decarbonisation solution providers.
