“Adults keep saying we owe it to the young people, to give them hope, but I don’t want your hope. I don’t want you to be hopeful. I want you to panic. I want you to feel the fear I feel every day. I want you to act. I want you to act as you would in a crisis. I want you to act as if the house is on fire, because it is.”Greta Thunberg, 17 year-old Swedish Activist
Aim of Portfolio
The portfolio looks to deliver above inflation returns (capital growth) through a combination of fixed interest, equity, and alternative investments with a responsible investment mandate.
Responsible investing is an umbrella term covering different routes to investing; we see it as doing good and believe there are three main ways to achieving this – ethical, sustainable / responsible and impact. More details can be found here
About the Portfolio
The name, Positive Impact Portfolio, reflects a desire to achieve positive outcomes for the environment and society without sacrificing returns.
This means that we build the investments first; whether they fall into the ethical, sustainable or impact bucket is almost irrelevant. This is because we take a blended approach to deliver the best outcomes. The chart below shows the current split between buckets in our Adventurous Positive Impact Portfolio.
Using data from yourSRI.com and MSCI, the chart below demonstrates how the portfolio stands against the MSCI ACWI Low Carbon Leaders, MSCI Carbon Target and MSCI ACWI Index.
Using data from yourSRI.com the Portfolio is compliant with the ten principles of the UN Global Compact.
This means operating in ways that, at a minimum, meet fundamental responsibilities in the areas of human rights, labour, environment and anti-corruption. More details can be found clicking here
The chart below shows the portfolio ESG Rating Distribution with an overall rating of A. 35.60% of the portfolio has exposure to ESG Leaders. This is an evolving market and not all investments are currently rated.
This tests the Portfolio against the Paris Agreement. The key points are:
- Circa 30% of the portfolio is aligned to the Paris Agreement
- Of this 30%, around 35% of equities is in power. This equates to 42 tonnes of CO2 emissions which is equivalent to 7.6 homes’ electricity for one year
- The potential financial risk to the portfolio is around -0.42% on equities based on the current holdings and if nothing changed
We can overlay this information with what we know. So, for example, we know that some of the holdings have exposure to coal which is being transitioned to renewables (NextEra Energy) so we would expect the coal exposure to reduce.
The other side is that 70% of the portfolio covers other areas (for example Civitas which in turn invests in social housing), and therefore the portfolio is more rounded not just covering the carbon environment but also other enviromental and social issues meaning there are different drivers which are good for the planet and society.
Where do we invest?
To bring this to life below are four example holdings.
ASI Europe ex UK Ethical Equity Fund (Ethical)
The principal outcome for the strategy is deliver investor-led sustainability. The strategy excludes those sectors that investors are concerned about and prioritises those with the right processes and solutions. Investors have a voice in the criterion the managers employ to create the investable universe.
They do invest in companies that are transitioning to positive change, but they must be within the guidelines set by the investors in the Ethical Approach Document. This document lays out the negative exclusions as well as the positive inclusions.
Carmignac Emerging Markets Fund (Sustainable)
The strategy aims to enable positive change in emerging market countries by contributing directly or indirectly to improve living standards in these countries with their investments. It involves delivering the best returns possible while having a positive impact on society and the environment. The strategy uses a combination of negative screening and exclusion policies as well as ESG integration and positive screening. They also favour companies with a low carbon approach.
Yes, they are looking at trajectory and efforts undertaken by companies rather than having a static approach that consists of looking at a company / its ESG scoring at a given time. Therefore, transitioning companies are key, as by making efforts and changing the way they operate, they have more potential impact in driving positive change.
Regnan Global Equity Impact Solutions Fund (Impact)
The strategy is a solutions-first strategy, focused on investing in mission-driven businesses that address underserved environmental and social challenges and deliver real, systematic change for the better.
Yes, the strategy will invest in transformational companies undergoing a significant shift in their business model or operations towards one that is focused on the delivery of a solution as identified using their proprietary systems.
Civitas Investment Trust (Thematic Impact)
The strategy is a leading Real Estate Investment Trust (REIT) dedicated to investing in the social housing and healthcare sectors in the UK. They have a dual objective of achieving both positive financial returns and large scale measurable social impact.
Split by funds within the Portfolio
Follow this link for the holdings as at 1 July 2021. This includes the aim of each strategy, the style, whether they invest in assets which transitioning to deliver positive outcomes and example underlying holdings.
Risk and benchmark performance of Portfolio
The Portfolio holds a higher content of equities compared to the Cautious and Balanced Portfolios. Currently the Portfolio holds approximately 95% in equity-based funds with the rest in target return strategies. We believe this is the best way to provide potential upside growth as well as providing equal weight between risk and reward.
For more information click here
What is the benchmark
We use the Royal London UK FTSE4Good Tracker Trust. The FTSE4Good Index is a series of ethical investment stock market indices launched in 2001 by the FTSE Group. The index excludes companies due to their involvement in tobacco production, nuclear weapons, conventional weapon systems, or coal power industry and rates companies for inclusion based environmental sustainability, relationships with stakeholders, attitudes to human rights, supply chain labour standards and the countering of bribery. Example holdings include Unilever, AstraZeneca, HSBC Holdings, Diageo and GlaxoSmithKline. This is an evolving area and we believe this to be the closest match.
The Portfolio was launched on the 1 July 2020 and the total return up to 30 June 2021 is 24.55% against a benchmark return of 18.78%. A detailed breakdown of the performance is shown below.
Performance from 1 July 2020 to 30 June 2021. Source: Morningstar,on a bid to bid basis with net income reinvested.
Source: Morningstar, on a bid to bid basis with net income reinvested. You should note that past performance is not a reliable indicator of future returns and the value of your investments can fall as well as rise. The total return reflects performance without sales charges or the effects of taxation, but is adjusted to reflect all on-going fund expenses and assumes reinvestment of dividends and capital gains. If adjusted for sales charges and the effects of taxation, the performance quoted would be reduced.
The performance for the portfolio is based on the previous holdings for the portfolio. Data for performance is sourced from Morningstar. These figures are provided to give an indication of the performance of the Portfolio. The performance figures take into account all fund / asset charges but do not reflect any additional charges, for example the cost of the investment plan and fees paid to LWM. These expenses may reduce the actual figures shown.
As an example of how this will impact on the performance, assuming the total gross cost of the Portfolio is 0.79% p.a. (this is reflected in the performance figures shown), then after rebates and reflecting any fees payable to LWM Consultants the actual cost of this portfolio could be 2.19% p.a. (on a fund of £100,000 this would be £2,190 p.a.). This means that the drag on performance is around 1.40% p.a. (on £100,000 this is around £1,400 p.a.). The cost of accessing the funds may be higher via other routes and will include additional fees, the estimate is based on the highest charge via a SIPP and for other investments the charge will be lower. Charges may also reduce depending on the size of the assets held.
You should note that past performance is not a reliable indicator of future returns and the value of your investments can fall as well as rise. LWM only invests in UK based investments although some funds / assets may have overseas holdings, the performance of funds / assets where some holdings are denominated in foreign currencies will also be subject to variations in currency rates.
These factsheets are provided by third parties for information. LWM is not responsible for these factsheets, has not reviewed them, and accepts no liability in connection with your use of them or any of their content. These factsheets display the fund manager’s standard retail charges and please note that product charges and fees may replace the charges displayed.