Sustainable Investing

Sustainable investing has become more popular and has significantly developed in recent years. At GWM Asset Management, we believe this to be a positive advancement which will only increase in the future and we are at the forefront of that change.

In recent times, the emphasis of ethical investing has switched away from the use of the term “Ethical” to what are considered “Sustainable” funds. Therefore, you will see that most “Ethical” funds are now labelled as “Sustainable” or “Socially Responsible” funds.

Sustainable investment is where fund managers actively and intentionally seek to do good, avoid doing harm and promote change. They achieve this by investing in companies which are helping to meet the world’s most pressing social and environmental challenges, whilst at the same time actively seeking to avoid those that perpetuate those issues.

In the past, largely due to a lack of suitable options available, investing Sustainably often discounted certain asset types, which hampered investment returns or reduced diversity within a portfolio. Fast forward to the present day, there is now a much wider choice of investments available that meet their sustainable objectives, whilst providing competitive returns. This is largely due to both the funds and the underlying companies in which they invest now operating in a sustainable manner.

We believe this pace of change will continue and that there are significant opportunities for companies and investors to reap the rewards of development, innovation and better management practices.

Forms of Sustainable Investing

We see sustainable investing as an umbrella term which covers a number of differing investment approaches. We have listed some of these approaches below:

  • Ethical Exclusion. Seeks to avoid company practices and industries that are thought to cause harm to people or the planet.

  • Socially Responsible Operations.  Considers how the companies in which they invest operate and supports ‘best practice’, as well as encouraging improvement in their environmental and social performance.

  • Sustainable Outcomes.  Seeks to invest in companies that believe there is potential long-term financial benefits to providing solutions to social and environmental challenges.

  • Impact Investing.  The intention is to invest to make a positive environmental or social impact that can be evidenced, whilst meeting their financial needs.

The GWMAM Sustainable Portfolio Range

The GWMAM Sustainable Portfolio Range has been designed to provide clients with long-term growth by having exposure to Ethical Exclusion, Socially Responsible Operations, Sustainable Outcomes and Impact Investing. Indeed, we believe that investment in this area should provide better long-term returns through more sustainable practices.

They are therefore targeted at clients who wish to achieve both their financial and socio-environmental goals.

Sustainable Cautious

Investment Objective: To provide capital accumulation over the long term from a mixture of income and capital growth by investing in a mix of equities and fixed income/other defensive assets.

Risk Level: Primarily defined by the equity exposure, which will range between 25% and 40% at time of investment.

Volatility Range: Between 5.9% and 7.5% over rolling 10-year time periods.

Sustainable Moderately Cautious

Investment Objective: To provide capital accumulation over the long term from a mixture of income and capital growth by investing in a mix of equities and fixed income/other defensive assets.

Risk Level: Primarily defined by the equity exposure, which will range between 40% and 55% at time of investment.

Volatility Range: Between 7.5% and 9.1% over rolling 10-year time periods.

Sustainable Balanced

Investment Objective: To provide capital accumulation over the long term from a mixture of income and capital growth by investing in a mix of equities and fixed income/other defensive assets.

Risk Level: Primarily defined by the equity exposure, which will range between 53% and 68% at time of investment.

Volatility Range: Between 9.1% and 10.7% over rolling 10-year time periods.

Sustainable Moderately Adventurous

Investment Objective: To provide capital accumulation over the long term from a mixture of income and capital growth by investing in a mix of equities and fixed income/other defensive assets.

Risk Level: Primarily defined by the equity exposure, which will range between 65% and 80% at time of investment.

Volatility Range: Between 10.7% and 12.3% over rolling 10-year time periods.

Sustainable Adventurous

Investment Objective: To provide capital accumulation over the long term from a mixture of income and capital growth by investing in a mix of equities and fixed income/other defensive assets.

Risk Level: Primarily defined by the equity exposure, which will range between 78% and 93% at time of investment.

Volatility Range: Between 12.3% and 13.9% over rolling 10-year time periods.

Please note that on all portfolios this is not guaranteed, and actual volatility may fluctuate outside of these boundaries.

Responsible Ratings

All funds within our portfolios will have a Square Mile Rating and it is expected that all, bar government securities, will have a Responsible rating. There is a variety of standard measures and ratings available. We use Square Mile’s ratings as we believe they are one of the market leaders in this particular field.

Responsible ratings run along the same scale as Square Mile’s standard ratings.  Funds are graded based on Square Mile’s confidence in a fund managers ability to meet their objectives. The only difference between the two scales is that responsibly rated funds will have a socio-environmental target incorporated into their mandate and their grading will be based on Square Mile’s confidence in them meeting both aspects of their objectives.

Should a fund lose its rating, GWMAM would look to remove it from the portfolio as soon as practically possible.  Government securities may be held for diversification and risk mitigation purposes, where there is no suitable alternative available. This should provide investors with confidence that the funds within the portfolios continue to meet both the financial and socio-environmental objectives set out in their investment mandates.

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