Its Not Harry

Comment and opinion for retail investors in the UK

Sustainability/ESG

Midweek Musings – Vanguard’s sustainable offering vs. building an ethical portfolio using ETFs

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The Vanguard Sustainable Life offering

Not long back, I mentioned that Vanguard had announced that they would be offering multi-asset ESG (environment, social, governance) portfolios built using an actively managed approach, not something one would have expected, although I was aware that they were being criticised for the lack of ESG filtering of their main best sellers.

I initially and incorrecty assumed from the press release information that the products would be managed collections of ETFs (exchange traded index tracking shares), not direct holdings in individual businesses. That is the way the Vanguard Lifestrategy funds work.

I have now read a little more and the following may be of interest to readers who have ESG priorities when making investment calls. I have already written that there is indisputable evidence that more money is flowing into ESG filtered funds than the rest, and so all investors ought to take account of the obvious boost to the momentum factor.

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Watching Brief – December 2021

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Pottering About

I often cross check what I have written in the past about economics and markets, partly to see how my looking into the future has inevitably been exposed as frequently ‘off beam’ (this tends to keep my current writing away from the wildest of speculations!) but more to assess what surprises or new trends have emerged and the more common reality: over many periods how little changes in 12 months.

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Midweek musings – what about ETFs?

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When you need focus – should it be an ETF?

When undertaking some research into Agritech investing a few weeks back, I concluded that for the moment the only way a retail investor could make a highly focused investment in that theme was by purchasing an ETF (Exchange Traded Fund).

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ESG research tip and some ‘style’ discovery

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In the course of reviewing my own investments, I have just looked at the Jupiter Ecology fund which I rebought recently after a period when I had left it off my short list because of weak performance. A change of manager in early 2021 and a look at some of the holdings in the top 10 had prompted me to give it another run.

The new manager, Jon Wallace, is not known to me as a personality and so I thought I would see what I could find out about him, fitting in with my ongoing project on finding out about manager style. Jupiter has a long track record as an investor in environmentally positive businesses but their ‘old guard’ has now maybe retired and I wanted to get an idea of what the new manager was like.

Of course, he has a little biography published in the fund fact sheet and on the firm’s web site (and he has a very specifically suitable CV) but I wanted to hear him talk, so I looked for videos and found an interview he did with a TV channel I don’t know (ProActive -possibly internet only) about his investment trust – the Jupiter Green Trust.

He won’t necessary run an investmemt trust in the same way is his open ended (OEIC) fund but his answers over a few minutes to a couple of good open questions about how he and Jupiter work allowed me to get some idea of his competence and the way he looks at ESG issues, including what he has absorbed of Jupiter’s established culture as an ESG investor. Jupiter is known to run environmental investing as a major business theme and to have a whole long establised team dedicated to ecloogical issues.

I came away believing all is well and he is on top of his brief in detail (probably because his academic education is on topic), which together with an updated look at a few of the really interesting companies in the top 10 has left me more than comfortable owning this fund.

Of course, I am not recommending the fund to anyone (if that sort of investment interests you, please do your own research) because that is not my role, but I am reporting how I keep an eye on funds I already own, try to uprate my knowledge from time to time and gradually get a feel for what a manager is trying to deliver.

My conclusion to the Digging Deeeper article on manager style is still a work in progress and will be published soon!

Monday Mashup – being an activist investor

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I will next month post a longer piece in the Watching Brief summarising the very interesting data I picked up from a Morningstar webinar on sustainable investing a couple of weeks back, but one of the key takeaways was that ESG (Environment, Sustainability and Governance) is a theme that has not just become mainstream, but is now potentially the leading selection criterion for many investors in Europe.

When marketing people can see that money is flowing in a certain direction, they create and adapt products to capture some of it. That introduces a risk of ‘greenwashing’ – the labelling of investment funds as being ESG ‘approved’ when in fact there is only a token adjustment in the fund manager’s investment processes.

Article on fossil fuel disinvestment

This is not a rant week exactly, but a subject on which I do have strong opinions.

I know some of my readers are very seriously concerned about climate change risk. So am I. I recently wrote a piece for another blog on the subject of disinvestment from fossil fuel busineses – an approach that is being widely adopted by pension funds and other institutional investors.

I am not sure that disinvestment will actually help that much.

You can now read my thoughts in detail as I have added the article to this website – here.

ESG commitment level measuring

As the leaders in fund classification and filtering for ESG criteria, Morningstar are aware that their established Sustainability Globes system is a little limited and I would say that it does not use strict enough criteria to allow final fund selections for those of us that want to know in some detail what sort of companies our money will be invested in.

Morninstar have on their own web site various articles about how their assessments work, going back as far as 2016. These can be found with simple Google searches. But an article of particular interest published recently explains their more rigourous and newer ESG commitment level ratings, something I only recently became aware of. Here is a link to it. You may have to select the link twice to get past the audience filter landing page and you will need a Morningstar Basic (free) membership.

I also have available for anyone interested a long and detailed report (US based) that was the background to a webinar on Climate Aware funds that I tuned into last year. It will not give UK investors a fund picklist but it does offer some insights into how much analysis actualy goes into understanding the carbon footprint of investment funds.

All this I think is great news for those who want to personally do something to help improve the prospects of humanity still being alive on the globe in future centuries: we can direct our money away from negative business activities and in a small way play our part in mitigating climate change.