- Wednesday 18 November 2020
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As a portfolio analyst, one of the most common narratives of sustainable/green investing that we hear from fund managers and clients alike is that you have to sacrifice profit for ethics, which is to say that you can only have one or the other. This assumption has been around for decades but, thankfully, challenged in more recent years. Indeed, many of the developments in ESG Markets & Funds over the last 12 – 18 months have been around closing the gap to large-cap global equities in terms of performance and volatility and we’re delighted to see that start to happen.
However, and we can’t emphasise this enough, much of this improvement has been due to the over-weight exposure they have in many of the largest technology firms in recent years. With the likes of Facebook and Google being welcomed into the ESG Family, despite real questions over their green credentials, there are concerns that future growth in green investing will be tied to the performance of a completely different fund category or asset class.
As a result, the limitations of the present industry-standard approach to building portfolios in this space (i.e. omission led) may lead to unintended consequences and, most importantly, lack of meaningful real-world benefit through the fund strategies themselves.
INNOVATE GREEN: PROACTIVE VS OMISSION STRATEGIES
As we have explained before, our approach to Green Investing is proactive, meaning we choose funds where the underlying companies have an actual product or service that seeks to have a positive effect on the planet.
Clearly there are less companies in this space than under the Omission category, which, after all, has access to the total share universe as a starting point!
With less companies available, the funds are going to be more restricted in terms of diversification and one would therefore expect much more significant cost, risk and/or volatility.
However we have been reassured since launch that our funds have not displayed any of this, either in terms of ongoing volatility or back-tested risk/return.
For comparison sake, we can now show performance data for both our UCIT (Pension) and CGT (Personal) Innovate Green Portfolios.
INNOVATE GREEN(UCIT) VS IRISH INDUSTRY BENCHMARK (SUSTAINABILITY/GREEN) FUNDS
It’s safe to say that while the Irish fund industry didn’t embrace Green investing until recently, things have progressed significantly in a short space of time, with most providers now offering various types of ESG strategies. Most have done well, with the benchmark FTSE All World (full global equity holding) beaten by all funds over a one year period. For the 3 year term there is a much wider spread, as Irish Life and Standard Life underperform Global Equities. Over 5 years, only our Innovate Green Portfolio and the Friends First Stewardship fund outperformed this benchmark.
- TAKEAWAY: Over 5 years, our Innovate Green outperformed the next best ESG fund by c.20%
YEAR TO DATE
INNOVATE GREEN(CGT): GLOBAL BENCHMARKING
At Curran Futures we set our goals in terms of global best-in-class solutions and therefore it is really important for us to benchmark against the largest fund managers in the world. To that effect we are delighted to be showing so positively in terms of performance against our peers across the full range of time period.
- TAKEAWAY: Our Innovate Green Portfolio generates excess returns of 30%+ over all time periods against global benchmarks.
YEAR TO DATE