Investment News & Views

Growing Back Green

Part of the coronavirus recovery is a move to rebuild in a more ethical and sustainable way with increased awareness around ESG investing. In preparation for the expected increase in growth as economies reopen, vaccine rollouts gain further momentum, and with continued and increasing fiscal and monetary stimulus packages, but also aware of continued risks, we have made a few changes to our Green Path portfolios.

We increased our equity allocations for our Balanced and Cautious Green Path portfolios to bring them closer to the equity allocations within their benchmarks and in anticipation of a recovery as the lockdown restrictions are eased and equity markets pick up again. The Dynamic Planner ratings for these portfolios continue to be 5 for Strategic, 5 for Balanced, and 4 for Cautious.

Due to the increased volatility within the sustainable and clean energy sector, we reduced this allocation slightly and split it between two different funds. We feel that it is important and appropriate for our Green Path portfolios to continue to invest and support alternative energy funds and that these funds will recover.

Our equity allocation increased for our international, UK, and emerging markets funds. We also included a small allocation to a UK small company income fund to support small companies and as we expect this area to pick up as the economy recovers. The fund has a Morningstar ESG rating of 5 globes and a blended style of growth and value small cap companies.

Our highest allocations continue to be for the US, international, UK markets. These markets are recovering the quickest with successful vaccination programmes, large fiscal stimulus packages and accommodating monetary policies.

We also completed a thorough fund review based on performance, ESG ratings, and cost. We removed 3 funds due to poor performance and higher costs and included 8 new funds to help diversify the equity options across each of the markets and to reduce the allocations to some of the higher cost funds. The underlying investments within the ESG funds for each market sector differ greatly as do their benchmarks. We therefore decided to diversify by including two different funds for each market where suitable funds were available.

Although we added 8 new funds, we are also aware of that the inclusion of more ETFs will increase transaction costs. As these are one of costs and we do not modify our asset allocation very frequently, this should have minimal impact compared to the benefits of further diversification and lower OCFs. The ongoing charges for the underlying funds in the portfolios have reduced from 0.48-0.49 to 0.38-0.40.

We believe that these changes will position our Green Path portfolios well in the coming months and in the future while supporting ESG investments.

To find out more about the Green Path portfolio performance, asset allocation and further statistics, please download the quarterly report here.

Green Path Performance Review

Green Path Performance Review

This review covers the quarter until the 1 April 2021.

Green Path Performance Review

  • Wednesday, May 5, 2021

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author

Tomiko Evans

Chief Investment Officer

Tomiko is Chief Investment Officer of Crossing Point and holds the IMC qualification for Investment Management.