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Style Name: Environmentally Themed/ Focused funds

Investment funds which focus on environmental standards and practices when making investment decisions

Brief description of Style

Environmentally themed funds significantly integrate environmental issues into their investment strategies, sometimes alongside ethical avoidance criteria.

Some funds invest significantly in environmental solutions companies and cleaner technologies, some focus on a single issues (e.g. climate risk) or a named resource (e.g. water) – others invest across most sectors, selecting companies that meet their stated criteria.

SRI approach applied

Investment decisions are arrived at by considering companies’ environmental credentials alongside regular financial analysis. Fund managers typically take into account the extent to which companies are likely to benefit from the regulatory and legislative changes and improving environmental standards – particularly regarding climate change.

Fund managers often use positive selection criteria (and themes) to identify companies with strong environmental credentials. Some funds focus on ‘best of sector’ or ‘leader’ companies across almost all business sectors, whereas others focus on a smaller cohort of perhaps more specialist companies.

Some Environmentally themed funds apply ethical screening criteria in addition to their environmental themes (which helps to make it clear where they will not invest). Responsible Ownership (stewardship) strategies apply to some of these funds and can be used to encourage progress towards more sustainable and environmentally aware business practices and lifestyles.

Measuring positive impacts is increasingly a feature of this style.

See ‘Policy’ and ‘Approaches’ filters for further fund specific information.

SRI issues covered

Environmental funds typically focus on companies that manage environmental issues well – although the way they approach this varies.  Funds often group environmental issues into themes – such as waste, transport, clean energy and climate change.

Most funds cover a wide range of these company types and issues although some are ‘single issue’ funds – focusing on a narrower investment field such as water, forestry, clean technology or renewables.  Others consider broader themes such as infrastructure, transport, demographics or carbon/climate.

Some funds consider these issues alongside ethical screening criteria such as avoidance of tobacco companies and armaments manufacturers.

Variation across Style segment

All environmentally themed funds focus on environmental issues but their aims and strategies can be very different.

Some focus on a broad spectrum of issues and require companies to meet certain standards in order to be acceptable for investment, whilst others focus on ‘change agents’ where their environmental message is clear.

Some Environmentally themed funds have responsible ownership policies – as part of a strategy that aims to encourage and support better business practices.  Some publish explicit areas of exclusion whereas others do not.

Impact on investment strategy

Environmental funds look for investment opportunities amongst companies that meet their stated criteria. Investment strategies vary significantly as approaches are very diverse. Across this Style there a number of funds that can invest in most sectors (by selecting ‘leaders’) whereas others are very restricted.

Who is this Style most likely to appeal to?

This group of funds offers options for investors with an interest in environmental issues – either across a wide or a narrow range of issues. Environmental investors are often looking to benefit from the opportunities presented by increasing worldwide emphasis on environmental risks and opportunities (particularly climate related). They will typically aim to find funds that hold companies that are ahead of their peers or leading change – and/or want to invest in companies with strong environmental practices ‘across the board’.

Associated Styles

The closest match to many funds in this Style is ‘Sustainability Themed’ options however others are more akin to ‘ESG Plus’ and ‘Sustainability Tilted’ funds where there is a less clear focus on using financial markets to effect positive change.

Associated jargon

Funds in this Style tend to use terms such as Green, Environmental, Ecology and Climate – although other more specific terms such as clean technology and individual resource areas also relate to this area.

 

 

 

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