Impact investment funds may be the right choice for investors determined to make sure their money is used for good. These funds may take a thematic approach, homing in on a specific area, or invest in a broader range of areas - regardless, the focus for these funds is on investments that will make a positive impact on the world.
BNP Paribas Climate Impact Privilege
As the name suggests, BNP Paribas Climate Impact Privilege looks to make a positive impact on the environment through its investments. The Bronze-rated fund is headed up by Bruce Jenkyn-Jones and Jon Forster, who have been investing in the environmental sector for more than two decades.
The fund focuses on growing companies doing at least 50% of their business in environmental markets. In 2017, the strategy was updated to ensure holdings also had a positive link to climate change and while this altered the portfolio slightly, it hasn’t had an impact on performance. Indeed, the fund has delivered annualised returns of 13.2% over five years.
The growth and small-cap focus of the fund make it a riskier choice but Morningstar analyst Ronald van Genderen thinks this is offset by the team’s expertise in the space. More than 40% of assets are in US firms including Generac, which make environmentally friendly power generators, and Nevada-based Ormat Technolgies, which develops alternative and renewable power plants.
One downside of the fund is its ongoing charge of 1.43% but van Genderen says: “The strategy remains a good proposition in the environmental sector for investors who understand its risks and are willing to pay the high fees.”
Allianz Green Bond
The Allianz Green Bond fund invests in bonds issued by companies and governments to make a positive impact rather than in company shares. Green bonds are debt issued by a organisation where the money raised is earmarked to be used for environmental projects.
Such investments can be a good option for investors who want to know exactly where their money is going, as this is something you can’t precisely determine when buying shares. An added bonus with bond investments, of course, is that they pay a coupon, meaning they can often be decent income investments too.
Launched in 2017, the Allianz fund doesn’t yet have a three year track record so isn’t rated by Morningstar analysts but it has a five globe sustainability rating. While it has delivered a return of 7.3% year to date, this comes at a high price tag, with an ongoing charge of 1.68%.
The fund invests predominantly in investment grade bonds – this is debt issued by institutions with a high credit rating, which are less likely to default on their loan and not repay investors. Among its largest holdings are bonds issued by energy provider E.ON, Danish energy firm Orsted and debt from the Netherlands and Belgium governments.
RobecoSAM Global Gender Equality Impact Equities
For an option with a more specific remit, the RobecoSAM Global Gender Equality Impact Equities fund invests from the view that investing in gender equality creates a positive impact.
The fund takes the stance that companies with strong gender diversity tend to have a greater competitive advantage and can therefore deliver better long-term returns. It draws on one of the United Nations’ Sustainable Development Goals of supporting companies that are good at equally remunerating men and women and which have a good rate of retention of their female staff.
Such a remit means the portfolio is varied with top holdings including payments giants Visa and Mastercard, consumer companies Estee Lauder and Unilever, and tech firms Microsoft and Alphabet.
Gender diversity is becoming increasingly important across various industries. In 2010 the 30% Club campaign was launched in the UK to encourage companies to ensure at least 30% of their senior management was made up of women. Morningstar is one of a number of companies which have signed up to the government’s Women in Finance Charter which also encourages firms to increase the number of women in their company at a senior management level and report transparently on their progress.
Certainly performance of the Robeco fund seems to prove the theory behind it, with annualised returns of 13.2% over three years.
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