Fund Style Name: Environmentally themed funds

 

Style USP: Investing in companies with higher environmental standards

Brief description of Style

Funds which focus on bringing environmental issues into their investment decision making – sometimes alongside ethical screening criteria and/or with a focus on environmental solutions and cleaner technologies.

SRI approach applied

Investment decisions are arrived at by considering companies’ environmental credentials alongside regular financial analysis. Fund managers often take into account the extent to which companies are likely to benefit from the regulatory and legislative changes that are encouraging companies to adopt higher environmental standards.

Fund managers generally use a positive selection process to identify companies with strong environmental credentials. Some funds focus on ‘best of sector’ or ‘leader’ companies across almost all business sectors, whereas others invest more heavily in specialist companies that are facilitating change.

Some environmental funds apply ethical screens in addition to environmental themes. Engagement strategies also apply to a small number of these funds.

Some funds in this group have significant emphasis on cleaner, environmental technology investments.

SRI issues covered

Environmental funds focus on companies that manage environmental issues well. Funds may group environmental issues together into themes such as waste, transport, clean energy and climate change.

Most funds cover a wide range of these issues although some are ‘single issue’ funds – focusing on a single area only. There are funds available that select companies based on their response to the challenges presented by climate change and other funds that invest in a single sector – such as water or forestry.

Some funds consider these issues alongside ethical screening criteria such as avoidance of tobacco companies and armaments manufacturers.

Variation across Style segment

Environmental fund approaches vary significantly. All environmentally themed funds focus significantly on environmental issues but their aims and strategies can be very different.

Some focus on a broad spectrum of issues, others have a narrower or single issue focus. Some focus on companies that are enabling change (eg through developing solutions to environmental challenges) – others look for companies that meet certain minimum standards or ‘best in sector’ companies.  Some such funds specialise in or invest significantly in newer ‘clean technology’ companies – others do not.

Some Environmentally Themed funds have engagement policies -meaning that they aim to influence company behavior through dialogue or shareholder voting strategies. Many do not.

Impact on investment Strategy

Environmental funds look for investment opportunities amongst companies that meet their stated criteria. Investment strategies vary significantly as approaches are very diverse. Across this Style there a number of funds that can invest in most sectors whereas others are more restricted.

Who is this Style most likely to appeal to?

This group of funds offers options for investors with an interest in environmental issues – either across a wide or a narrow range of issues. Environmental investors are often looking to benefit from the opportunities presented by increasing worldwide emphasis on environmental issues and, or looking to support companies with strong environmental policies.

Associated Styles

Some of these funds are similar to Sustainability Themed funds and/or some Balanced Ethical funds.

Associated jargon

Funds in this Style tend to use terms such as Green, Environmental, Ecology and Climate Change.

Providers

Funds in this Style are offered by a wide range of fund and product providers.

 

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