Sustainable investing has become popular in recent years as the world has become more environmentally aware. Often referred to as socially responsible investing (SRI), or green investing, sustainable investing seeks to generate a financial return while also considering environmental, social, and governance (ESG) factors.
In the past, investing on a sustainable basis often meant sacrificing returns as plenty of these funds underperformed the market. However, in recent years, many have delivered excellent returns for investors. Here’s a look at two sustainable funds that have smashed the FTSE 100 over the last five years.
Liontrust Sustainable Future Global Growth This Liontrust Sustainable Future Global Growth fund is a fund with a global focus, investing in a broad range of companies from around the world. However, it only invests in companies that meet the team’s rules for environmental and social responsibility. Liontrust’s investment process seeks to identify companies that not only have strong growth prospects, but also offer products or services that make a positive contribution to society.
In recent years, this fund’s performance has been excellent. Over one year, it’s returned 17.4%, while over three and five years, it’s returned 58.9% and 103.9%, respectively. By contrast, the FTSE 100 has returned just 2.3% over the last year, and 25.5% and 33.1% over three and five years.
One of the reasons this fund has performed so well recently is that it has considerable exposure to the technology sector. However, the fund is also well diversified across many different sectors. Some of its top holdings include Alphabet (NASDAQ:GOOGL) (the parent company of Google), Autodesk (NASDAQ:ADSK), which makes architecture and construction software, and Ecolab (NYSE:ECL), which offers water, hygiene and energy technologies.
Overall, I think this fund could be a good portfolio addition for those looking to invest sustainably. Fees are 0.93% per year through Hargreaves Lansdown (LON:HRGV).
BMO Sustainable Opportunities Global Equity The BMO Sustainable Opportunities Global Equity fund is another globally-focused fund that has performed well in recent years. It’s based on positive, sustainable investment themes, including ESG opportunities. However, it’s not limited to such themes and isn’t subject to negative screening or portfolio exclusions, so it may not be as focused on sustainability as some other funds in the sector. Its goal is to achieve medium- to long-term capital growth, with some income.
Over a one-year investment horizon, the BMO Sustainable Opportunities Global Equity fund has returned 12.5%, while over three and five years, it’s returned 55.1% and 82.8%, respectively. Again, it’s outperformed the FTSE 100 by a wide margin due to its global focus and exposure to the US technology sector. There are plenty of interesting ‘green’ names in the portfolio, such as water technology group Xylem.
All in all, I see this fund as a solid pick in the sustainable sector. It’s also available on the Hargreaves Lansdown platform with an annual fee of 1.29%.
Edward Sheldon owns shares in Alphabet. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Alphabet (C shares). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019