Features

Global Sustainability : a new ESG investment trust

Global Sustainability offers a rare opportunity to invest in ESG alongside big pension funds.

923_MW_P22_Funds

There has been an explosion of funds within the fast-growing ESG investing space in recent years. The acronym stands for environmental, social and governance, and refers to an investment approach that takes account of these factors.

In my experience, active investors want a direct approach to ESG. They want to invest in a wide range of businesses where the specific purpose of the investment and business case is to make the world a better place. People want to see their pounds make a difference. This has inspired a trend known as impact investing, where investors attempt to measure the ESG effect of a business.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

Invest with the big guys

Most of the interesting funds in this space tend to be closed to mainstream investors: big pension funds and sovereign-wealth funds are keen on this approach and prefer private-market vehicles. There are a few impact-based unit trusts and investment trusts, but they are few and far between.

However, that could be about to change with the imminent launch of the Global Sustainability Trust on the London Stock Exchange. I tend to avoid writing too much about proposed launches, but this novel fund has been quietly building a head of steam for at least six months now.

Advertisement
Advertisement - Article continues below

Unlike many of its peers in the ESG space, this fund is planning to invest exclusively in private-market investments: deals traditionally only available to private-equity funds and large institutions. The aim is to build a portfolio across different asset classes with a target return of 6% to 8% per year. The managers will only include businesses that can advance the UN's sustainable development goals, which include developing clean energy and tackling world poverty.

The fund has a strong independent board of City grandees, and the portfolio itself is managed by Aberdeen Standard Investments. This huge UK investment manager has long been strong in both sustainable investing and private markets, and was chosen after an exhaustive "beauty parade". Fees will be relatively reasonable at 0.7%, falling to 0.65% on assets of more than £200m.

The key consideration is how your money will be invested. If the fund is just another private-equity vehicle which nods in the direction of sustainability, then it will represent a lost opportunity. The managers have indicated they'll focus on private-equity structures, as well as infrastructure assets and sustainable real estate. The biggest chunk of money will be put to work in businesses in the circular economy sector (where the idea is to keep resources in use for as long as possible, extracting the maximum value from them) and financial-inclusion strategies (extending access to financial services).

In practical terms, typical businesses could include everything from Nordic hydro-electric ventures to timber projects in the US aiming to improve tree diversity.

Along the way you might even find sustainable business parks in the Netherlands and fintech providers focused on providing micro-finance loans to poorer customers around the world.

Only time will tell

As always, the devil here will be in the detail. Will the portfolio businesses be intentionally set up to help with a wider social good? Will they make money, and how will investors measure the returns, both financial and social?

Advertisement
Advertisement - Article continues below

My guess is that most of the interesting ideas are still relatively early stage, and probably sitting in the private sector, which will help this fund provide real focus. The challenge will be to achieve scale quickly, and not invest in worthy projects that fail to provide a decent return.

The prospectus is out now, with an 11 December deadline to apply. The fund goes live on 17 December.

Advertisement

Recommended

Visit/520115/investment-trusts-the-cinderella-of-investment-arrives-at-the-ball
Funds

Investment trusts: the Cinderella of investment arrives at the ball

Investors should look beyond the market noise of a single year and examine the bigger picture. Max King explains what we can learn from 25 years of in…
8 Jan 2020
Visit/511175/seven-investment-trusts-to-make-your-investments-go-global
Stock markets

Seven investment trusts to make your investments go global

The outlook for equities remains encouraging. An investment trust with an international remit will help you profit.
23 Jul 2019
Visit/509793/give-these-investment-trusts-a-chance
Share tips

Give these 19 investment trusts a chance

Investors should spare a thought for these 19 out-of-favour investment trusts, says David Stevenson.
2 Jul 2019
Visit/509043/what-makes-investment-trusts-so-special
Investments trusts

What makes investment trusts so special

MoneyWeek likes investment trusts. We write about them every week. However, now might be a good time to remember what it is that makes them special.
13 Jun 2019

Most Popular

Visit/investments/investment-strategy/600709/the-coronavirus-is-scary-but-its-irrelevant-to-your
Investment strategy

The coronavirus is scary – but it's irrelevant to your investments

The spread of the coronavirus is causing alarm around the world. And, while it could be a serious short-term threat to human health, it’s not somethin…
24 Jan 2020
Visit/investments/commodities/gold/600686/gold-and-silver-bull-market-2020
Gold

Want to make money in 2020? Gold and silver are looking like a good bet

If you want to make money from investing, says Dominic Frisby, it’s simple: find a bull market and go long. And in 2020 gold and silver are in a bull …
22 Jan 2020
Visit/investments/stocks-and-shares/share-tips/600672/share-tips-of-the-week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
24 Jan 2020
Visit/economy/global-economy/600711/the-charts-that-matter-coronavirus-or-a-liquidity-air-pocket
Global Economy

The charts that matter: coronavirus – or a liquidity air pocket?

With the yield curve showing worrying signs of flatlining again. John Stepek wonders what's to blame and turns to the charts that matter most to the g…
25 Jan 2020