Ethical fund

letsbetfair

I've got under £10k in Vanguard Lifestrategy 80. I'd like to move this to similar, but in an ethical* investment. I'm a bit lost on where to start, though - Vanguard's ESG funds seem to be indexes. Am I looking for something that doesn't exist?

*I know that what people mean by this varies. I'd like an investment that considers environmental criteria and avoids investing in arms and tobacco companies.

aroominyork

No, quite the opposite: you seem to have found just what you want. Vanguard's ESG funds - the Developed World All Cap Index and the Emerging Markets All Cap Equity Index - are index funds just like the VLS range except for four differences:

- they are not overweight to the UK

- they separate developed and emerging markets into separate funds

- they have an ESG screen

- they contain no bonds.

So if you want to replicate VLS80 ethically with £10k, buy £1k of Emerging Markets All Cap Equity Index, £7k of Developed World All Cap Index, £2k of something like Vanguard Global Bond Index (hedged), and accept not being overweight UK.

thegentleway

They do does exist: e.g. I've got Royal London Sustainable World C Acc which is ~15% bonds (not exactly 20% prob close enough?). I used Morningstar to search for funds; it rates and ranks funds on ESG criteria, which is really useful. If you don't like the RL sustainable world then you coud look in 'GDP moderately adventurous' category and find other funds which are around the 80/20 split.

letsbetfair

Thanks for the replies! Looks like the Vanguard ESG funds could work well then. Do they also have the benefit of being comparatively good value in terms of fees (though I appreciate fees will be a bit higher than non-ESG funds)?

aroominyork

The Royal London fund mentioned by thegentleway is a good one-fund solution if you want an actively managed fund. Its makeup is North American Equity 36.9%; UK Equity 25.5%; European Equity 20.5%; UK Fixed Interest 15.8%; Cash 1.3%, so you get your UK overweight (like VLS) but no Japan or emerging markets.

Re fees on the Vanguard combination, you currently pay 0.22% on VLS80. You would pay 0.20% on the developed markets fund, 0.25% on the EM fund and 0.15% on bonds, so it works out cheaper than VLS80. Depending on your platform you might lose a bit on trading fees since you would hold three funds instead of one.

A_T

The Vanguard Global Bond Index contains bonds from Philip Morris (tobacco)

Wildsound

As well as the Royal London Sustainable funds, I personally like the Liontrust Sustainable Future funds, which have varying multi-asset funds across the risk spectrum.

aroominyork

A_T said:

The Vanguard Global Bond Index contains bonds from Philip Morris (tobacco)

The ubiquitous Philip Morris - the very reason I sold Fundsmith and bought Fundsmith Sustainable.
ESG bonds is trickier than ESG equities. Search the limited market and see if anything appeals to you.

Albermarle

I'd like an investment that considers environmental criteria and avoids investing in arms and tobacco companies.

There are lots of these 'light green' investments but if you want something more ideologically 'dark green' that exclude all kinds of companies and activities then there is less choice and they are generally more expensive,

letsbetfair

Vanguard offers an 'ESG Developed World All Cap Equity Index Fund (UK)' and 'ESG Developed World All Cap Equity Index Fund'. Struggling to work out the difference between them. Anyone know?

IanManc

letsbetfair said:

Vanguard offers an 'ESG Developed World All Cap Equity Index Fund (UK)' and 'ESG Developed World All Cap Equity Index Fund'. Struggling to work out the difference between them. Anyone know?

One is domiciled in the UK and the other is domiciled in Ireland.  🙂