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Earth Day: five wealth managers' top ethical funds

To mark Earth Day, we asked five readers to reveal their top ethical fund picks.

Phoebe Stone, head of sustainable model portfolio service, LGT Vestra,  London

Allianz Green Bond

The theme of this year's Earth Day is protecting our species. With this in mind, one of the sustainable funds we are currently using in portfolios is the Allianz Green Bond fund.

Green bonds channel capital to environmental projects, many of which in turn look to reduce the level of CO2 emissions produced.

'Minimising future increases in global temperatures is vital in ensuring that we attempt to control the potential impacts of climate change. These include flooding, water scarcity, crop degradation, extreme drought and damage to biodiversity.

A study from the University of Connecticut has predicted that if climate change continues on its current trajectory, one in six species could face extinction.

Many criticise the Paris Agreement for not going far enough, it does however move us in the right direction. As with the Montreal Pledge, these international agreements can be developed and progressed.

The Allianz Green Bond looks to fund projects linked to positive environmental outcomes.

Moody's has estimated that the green bond market will be worth $200 billion in 2019, which has grown from almost nothing a few years ago. This is as a result of investor demand driven by increasing awareness of the environmental challenges we face as a global community.

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Phoebe Stone, head of sustainable model portfolio service, LGT Vestra,  London

Allianz Green Bond

The theme of this year's Earth Day is protecting our species. With this in mind, one of the sustainable funds we are currently using in portfolios is the Allianz Green Bond fund.

Green bonds channel capital to environmental projects, many of which in turn look to reduce the level of CO2 emissions produced.

'Minimising future increases in global temperatures is vital in ensuring that we attempt to control the potential impacts of climate change. These include flooding, water scarcity, crop degradation, extreme drought and damage to biodiversity.

A study from the University of Connecticut has predicted that if climate change continues on its current trajectory, one in six species could face extinction.

Many criticise the Paris Agreement for not going far enough, it does however move us in the right direction. As with the Montreal Pledge, these international agreements can be developed and progressed.

The Allianz Green Bond looks to fund projects linked to positive environmental outcomes.

Moody's has estimated that the green bond market will be worth $200 billion in 2019, which has grown from almost nothing a few years ago. This is as a result of investor demand driven by increasing awareness of the environmental challenges we face as a global community.

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Tim Cockerill, investment director, Rowan Dartington, Bristol

Hermes Impact Opportunities

Environmental, social, governance (ESG) is embedded within Hermes, and the enthusiasm of the team is clear. They have a very comprehensive and robust process, which goes into considerable depth, far more than most. It is an end to end process, yet it is more than just the depth of the process.

It is the resulting focus on sectors and businesses that are at the early stage of major change, driven by the way economies are managed, and the way investors and consumer think. 

As investors we seek positive long term returns in order to increase our wealth, and yet wealth can be defined in other ways too. It can include our health, education, the state of our society and the world. 

Impact investing is the idea that we can invest not only to generate a positive return, but to use our capital to tackle the many challenges the world faces.

'The fund is concentrated, unconstrained, long term and benchmark agnostic. Long term I expect this fund to perform strongly but tracking error will potentially be high and at times it will lag markets driven by momentum, value or specific sectors.

However, the transformation the global economy needs to make is huge, and so to the investment opportunity. This fund should be a beneficiary and conduit for that change.'

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Alex Twiss, CFA, investment manager, Connor Broadley Wealth Management, London

Foresight UK Infrastructure Income

Finding investments with lower correlations to equities and bonds can be difficult in a socially responsible portfolio, which is why my favourite fund is Foresight UK Infrastructure Income.

The combination of infrastructure equity, infrastructure debt and renewable investment trusts results in the performance that Absolute Return funds have been unable to generate of late.

Most of the cash flows are government linked. The duration risk of the longer maturity infrastructure assets is partially offset by the power price sensitivity for above subsidy production in the renewable assets.

Foresight have extensive expertise in the latter allowing them a deeper insight into the underlying assets than peers. The combination of careful selection and strong execution has resulted in excellent risk adjusted returns.

It has become an important building block in our socially responsible portfolios as well an important way of supplying capital to the increasingly profitable renewable energy industry.

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StJohn Gardner, chief investment officer, Sandaire,  London

NN (L) Green Bond Short Duration

Sustainable and impactful investment issuance has been gathering apace.

A 'green' bond, one of the available sustainable solutions, is a bond specifically earmarked for climate and environmental projects at no additional costs compared to “brown” bonds.

The green bonds market has grown quickly over the last couple years, standing at €350 billion (£320 billion) by year end 2018 and is expected to reach €500 billion by the end of 2019.

Sandaire clients have been vocal in their keenness to support investment solutions delivering on climate change. One fund in the market is the NN (L) Green Bond Short Duration fund.

The fund allocates its capital to issuers with strong ESG policies and improving ESG-ratings financing projects reducing carbon footprint.

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Matthew Wiles, investment manager in the multi-manager strategy team, Aberdeen Standard Investments,  London

Pictet Global Environmental Opportunities 

The Pictet Global Environmental Opportunities fund follows a specialist thematic strategy based on the hypothesis that environmental challenges will continue to increase and present opportunities for solution providers.

We like the philosophy which focuses on long term environmental trends and is applied through eight underlying themes: energy efficiency, dematerialised economy, water supply & technologies, waste management and recycling, pollution control, environmental services, sustainable agriculture & forestry, renewable energy.

The dedicated team of over 30 specialist thematic investors is led by experienced manager, Luciano Diana (pictured) and together they manage a concentrated, yet well-diversified, multi-cap portfolio.

'Given the fund’s thematic nature, it is focused on a smaller range of underlying sectors than a core fund, so investors should be aware that it may experience volatility when market sentiment is negative although the robust process aims to avoid cyclicality through gaining exposure to themes with significant secular growth potential. In our opinion, this Fund represents an excellent way of accessing an exciting and innovative segment of the market.'

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