As a consumer Anna Vaughan has started to adopt a greener lifestyle in recent years, from eating a mainly plant-based diet to reducing plastic waste. So she wanted an investment plan that reflected these values.
Anna, who works as fundraiser in the arts sector, says: “We already buy our energy from Ecotricity, and I have also recently committed to no air travel. I am now planning my first rail trip to Europe this summer with my husband.
“My husband is also involved with a local environmental group, as a trustee, so we are very environmentally aware. I was convinced by Naomi Klein’s book ‘This Changes Everything’ that as consumers we need to change our behaviour, and as investors we need to divest our savings from fossil fuels and support the green economy.”
With this in mind Anna has opened a stocks and share ISA with ethical bank Triodos, through which she invests in a number of their ethical funds.
Anna hopes this ISA will help her become more financially resilient. She says: “I’ve set it up as a rainy day fund, alongside other less risky savings, to help cover any gaps in my income as I’m self-employed. The pandemic was a good example of why I might need this — as a theatre fundraiser I lost all of my work for around six months.”
Three Impact Funds
Within this ISA Anna is invested in three Triodos funds: the Pioneer Impact Fund, their Global Equities investment fund, and the Sterling Bond Impact fund.
Anna is investing on a monthly basis, putting the minimum amount into each fund. She says: “I liked Triodos’s ethos behind their investments. When I set these up in 2020 there didn’t seem to be a huge choice of other ethical funds out there.
“I respect the way these funds support small companies with social purpose. This matches my ethics as a fundraising professional working in the charity sector.”
Anna says that these are long-term investments and she is hoping that over time they will benefit from the transition towards a greener economy.
Both the Triodos Pioneer Impact fund and Global Equities Impact fund have good track records to date, with strong gains made during 2020 and the early part of 2021. In the early part of the Covid pandemic many funds with strong ESG mandates did well relative to other funds. Many had very little exposure to heavily polluting sectors - such as oil, airlines and mining - where shares prices fell sharply during this period.
However, the performance of these funds has dropped off in recent months during market volatility.
Long-Term Returns
The Triodos Pioneer Impact fund has a 4-star rating from Morningstar, and a Morningstar Quantitative Rating (MQR) of Neutral. The fund invests almost 70% of its asset in small and mid-cap companies across the globe, which comply with its sustainable investment strategy.
This does not appear to have dented its long-term returns. The fund has delivered total annualised returns of 10.64% over the past three years (and 7.74% over five years).
The Triodos Global Equities Impact fund also has a MQR of Neutral, alongside a 3-star rating from Morningstar. While the Pioneer Impact fund invests in smaller companies, this fund concentrates on larger cap companies from across the globe. Again these have to meet the asset manager’s strict sustainable investment criteria. The fund has delivered total returns of 6.23% a year over the past three years.
The Sterling Bond Impact fund is a newer product launched towards the end of 2020. It again imposes similar sustainability criteria, but rather than investing in equities it holds UK corporate bonds, impact bonds and sovereign bonds.
Anna, who is 43, hasn’t really had surplus funds to invest before. She does have a pension through her work, but these are her only investments. She has also been put off previously by confusing industry communications around investing and jargon, which she has found to be a barrier in the past.
However she is now looking to the longer term and is prepared to be patient with her investments. She hopes this will lead to a better future, for both her family and the planet.
