Michele Sisto started investing in the 90s when various state-owned companies were being privatised, snapping up shares in these as well as a number of dotcom companies.
Michele says: “At the time, “I found it amazing to see share prices move so quickly, and for reasons that I couldn’t really understand.” Of course, the tech bubble burst in 2000, but the experience did not put him off investing. However, it did teach him to take a longer-term view with his investments.
Investing with an ESG Edge
Michele, who is in his 40s and works as an IT consultant, is predominantly saving for retirement, and hopes to retire earlier than State Pension age. He puts any excess income into his portfolio rather than spending it, utilising tax-free accounts including an Isa, pensions, Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs). The latter two offer generous tax-breaks for investing in unquoted and start-up companies.
When choosing his investments, Michele’s main criteria is to look at the ethical purpose of the company: “I like to see some link between my investment and a positive economic or social result; although the link is sometimes difficult to visualise.”
He uses this strategy when choosing individual shares to buy too, and is particularly interested in companies in the renewable energy sector as well as unquoted companies with a clear ESG purpose. “I like the idea of holding these companies for a long time and seeing them realise their objectives,” says Michele. “These could be start-ups or community-led co-ops that set up renewable energy projects. I have also invested in charity-issued bonds or companies with an ethical purpose.”
In order to keep his portfolio diversified, Michele holds a number of funds, the best performer of which has been Quilter Investors Ethical Equity. “I am particularly happy that an ESG focus in a fund can also mean good performance,” he says.
This global fund has a four-star rating from Morningstar, and a four globe sustainability rating. The fund seeks to deliver long-term capital growth and income through a portfolio of international holdings and can invest across both large and small cap sectors. According to Morningstar data, it has delivered annualised returns of 9.3% over the past decade, and 14.2% over the past five years.
Renewable Energy Investment Trusts
Elsewhere, he also invests in the investment trusts Impax Environmental Markets (IEM) and Renewables Infrastructure Group (TRIG). The former has a five-star rating from Morningstar and has again delivered strong gains for investors over the longer term, with annualised returns of 20.58% over the past five years.
Michele says: “I think there is also potential with some of the new funds in the battery storage sectors, like Gore Street Energy Storage Fund (GSF). I don’t necessarily think these investments will make me rich, but they will provide stable income and I know how my money is being used.”
Of course, the steady income such funds deliver is nothing compared to the gains he was making in the height of the tech bubble, when he sometimes saw returns of 60% in a matter of days. “However, something similar did happen when the market was volatile recently,” he says. “My holding in Active Energy Group (AEG) ended up gaining 50% in just a few days.”
Shares prices in this company rose steeply at the end of last year, although its share price is still significantly below prices seen in 2015.
Michele prefers investing in equities to bonds after getting his fingers burnt with Co-op Bank bonds. He says: “To start with I thought bonds were much safer than shares and I also trusted the Co-op Bank as an ethical institution, so the near-collapse of the bank was a real shock.”
In 2013 shares in the bank plummeted after a significant black hole in its accounts was uncovered. The bank was forced to restructure, closing branches and shedding jobs, and the value of its bonds also fell in value.
Michele says: “Since then, I don’t really like to invest in bonds. They may be less risky than shares, but it seems that when things go wrong on a corporate level, bonds are not spared and I’m not sure of the rationale of accepting lower returns from investing in bonds if you’re still at risk.”
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