To further support the growing momentum for the fossil fuel divestment movement Investing Ethically has carried out detailed research into the changing stances taken by ethical fund managers regarding fossil fuels.
Two years ago there were only 2 (Jupiter Ecology and Henderson Global Care Growth) out of the 100+ mainstream ethical funds which screened out ALL fossil fuels. The rest of the ethically screened funds adopted a ‘standard approach’ which excluded oil and coal, but allowed gas on a ‘best of sector’ basis or as a bridging fuel to a carbon free economy. Screening out fossil fuels is not always black and white. For example, SSE* (formally Scottish & Southern Energy) generates the most energy from renewables in the UK (2,975 MW – Sept 2016) and this is 22% of its total generation. If there is a desire to promote renewables and dis-invest from fossil fuels there can be conflict. This is one of the reasons given by many ethical fund managers as a reason for continuing to invest in gas.
So most investors agree that this ‘standard’ ethical approach is a big step in the right direction compared to non-screened funds, but, with increasing awareness and concern about climate change and fracking, is becoming less acceptable. Various stakeholder groups (i.e people like you and us) are putting more pressure on fund management houses and this has resulted in two of the key ethical fund management houses – F&C/BMO and Liontrust (ex Aviva) strengthening their screening criteria in relation to this issue . F&C/BMO have said that their Responsible Global Equity fund will exclude gas 100% and the rest of their ethical fund range (another four funds) will have dis-invested from all fossil fuels (gas, as well as oil and coal) by 2020.
Liontrust (ex Aviva ethical fund management team) have gone a step further and have stated they have already changed their stance to exclude all fossil fuels on their whole range of ethically screened funds (nine funds).
In addition to the Jupiter, Henderson, Liontrust and F&C mainstream ethical funds, there are a range of specialist renewable energy and themed funds which won’t invest in fossil fuels by definition.
This is great news for individuals and organisations who want to increase the extent to which they screen out fossil fuels with their investments.
Although many ethically screened fund managers have not changed their position as yet, these two main fund houses changing their stance represents a significant change for the better and there is hope that others will follow in the future.
In addition to the carbon free aspect of the new investment solutions, F&C and Liontrusts ethical mandate includes all the usual approaches – positive and negative screening along with best of sector and engagement.
As always these investment solutions will not be right for everyone and their suitability will be determined by individual investors specific objectives. Please contact us if you would like to discuss your divestment options in more detail.
*SSE is deemed acceptable in some ethical funds for two key reasons, 1) screening uses a forward looking measure to rate the company-89% of all their capital expenditure in the period 2015-2020 will be into renewables, so they are responding to the energy transition by investing heavily into lower carbon renewables during the specified period and 2) although 21% of their generation capacity is from coal (the most carbon intensive form of fuel), this is due for shutdown mostly this year.