In this new series for ESG Clarity EU, Hargreaves Lansdown dives into ESG funds available in the UK and EU, analysing their investments, performance and ESG credentials.
For this latest article, Dominic Rowles takes a look at the Ninety One UK Sustainable Equity fund.
The Ninety One UK Sustainable Equity fund invests in companies making a positive contribution to the environment, society or both. Those that result in significant negative impacts, such as tobacco, oil and gas, and coal producers, are excluded.
The fund is managed by Matt Evans, a seasoned investor with 25 years of investment experience. His investment process involves assessing companies across three pillars.
A financial sustainability assessment digs into balance sheet strength, tests the quality of earnings and allows him to form a view on the management team’s track record of allocating capital efficiently.
Next up is an internal sustainability assessment. Evans assesses the environmental and social impact of a company’s operations. The key areas of focus will differ depending on the type of business being analysed but can stretch from its carbon footprint and usage of resources like water, to employee working conditions.
Finally, he assesses any positive impact the company makes by mapping it to the UN Sustainable Development Goals. This helps him understand which companies are creating the most positive sustainability outcomes.
This process whittles down the universe to a portfolio, which currently includes 42 companies and looks very different to the broader UK stock market.
Top and bottom sector weightings vs benchmark
The fund includes several companies that support the transition to a low carbon economy via emission reduction technologies and clean energy products. Fuel-cell technology company Ceres Power is an example. The firm stands out from its peers because it sells intellectual property rather than making fuel cells themselves. It comes up with clever designs and then effectively sells the instructions for manufacturing them. This takes a lot of the raw material cost pressure off the table and allows Ceres to focus on improving the technology itself. The manager expects the firm to grow as governments step up decarbonisation plans and look to achieve greater energy security.
Evans has delivered strong performance over the long term. The fund has risen 37.53% since launch in December 2018, compared with a 27.73% rise for the FTSE All Share. The manager has added significant value through stock selection over the course of his career, according to our analysis.
Overall, Evans is a committed and passionate sustainable investor and has the experience and resources to do a good job for patient investors over the long term.
Fund performance since launch