Name: Sustainability Themed funds

Investment funds which focus on sustainability related issues when making investment decisions

Brief description of Style

Sustainability Themed funds focus on sustainability related issues and opportunities, such as longer term social and environmental shifts, as part of their investment strategy, often alongside ethical criteria.

SRI approach applied

Fund managers select companies that fit within their published investment themes and typically favour well run, forward looking, longer term focused, sustainably managed businesses.

Fund managers in this Style generally select companies with sound environmental, social and governance strategies, often favouring those that are helping to enable the shift towards sustainable business practices and lifestyles.

SRI Issues

Fund managers generally look for companies that have a positive impact on society as well as the environment.

Relevant issues include the management of climate risk, responsible use of resources, good employee and stakeholder relations and addressing long term environmental challenges for example through the development of new technologies or ways of working.

Variation across Style segment

Fund aims, approaches, investment strategies and resources vary. Different fund managers have different views on what constitutes progress towards ‘sustainability’.  Some fund managers focus on ‘best in sector’ companies across most industries whereas others focus on specific themes such as climate change, resilience, health and wellbeing or sustainable transport.

Some funds invest mostly in larger companies whereas others will focus on smaller, newer companies, most however combine both (in varying degrees).

Some explicitly avoid certain areas (such as avoidance of armaments and tobacco companies), however this is often used as a way to clarify where they will not invest in order to reassure investors (as such sectors are unlikely to fulfil the positive selection criteria of a Sustainability themed fund).

Some of these funds, particularly those with in-house expertise, include Responsible Ownership strategies and actively use share ownership to encourage more sustainable business practices.

Impact on investment strategy

Fund managers invest in companies that are expected to succeed as a result of the way they deal with key environmental and social challenges, risks and opportunities.  They will, for example, aim to hold companies that are expected to benefit from the raising of standards across areas such as climate risk, resource constraints, employment practices and board structure.

Some of these funds aim to invest in most investment sectors (ie types of business), only avoiding those that are deemed to be inherently unsustainable.  This can help be helpful when market conditions change.  Others specialise in a more concentrated range of companies, in line with their published themes – which will be helpful when those areas prosper.

Who is this Style most likely to appeal to?

Ideal for investors who are looking to benefit from, support or encourage companies that understand sustainability related issues and reflect this through the way they operate.

Associated Styles

Some of these funds have much in common with Balanced Ethical and Environmental Themed funds.

Associated jargon

Sustainability, environmental – fund names often indicate taking a responsible view on the future.

Providers

Fund providers include established and newer market entrants.

 

 What is Sustainability?

Commonly used explanations of sustainability refer to, or are variations of, the following:

‘…meeting the needs of the present without compromising the ability of future generations to meet their own needs.’

Source: The Brundtland Report 1987