Recommendations on "greener" investment options (AJbell)

TheLittleSaver

Hi everyone

I have a LISA account with AJ Bell and have been investing in the HSBC FTSE All-World Index C Acc for a couple of years.
Now I am thinking that perhaps it might be a good time to start investing into a greener alternative? Unless you think there are other options that are more likely to perform better? Or should I just stick to that HSBC index for the tim ebeing?
Any recommendation that you could give me on the matter (while keeping the same approach of passive/accumulation investment) would be very much appreciated.

Thanks

Thrugelmir

Are you after performance i.e. return on your money or making a difference to society as a whole by adopting an entirely ESG approach?  

TheLittleSaver

Thrugelmir said:

Are you after performance i.e. return on your money or making a difference to society as a whole by adopting an entirely ESG approach?  

I would like to go as green as possible, as in, I don't want to put mere "performance" over the necessity of greener alternatives, but I don't want to throw my money out the window either... if that makes sense?

So, my main goal is to invest in green companies, while making sure I have at least a minimal profit margin (which I would believe/hope it will increase over time, as greener alternatives are needed more and more).
I am basically building up my pension for the future, so I can't afford to be too "philanthropic" about it.

dunstonh

Historically, ethical investing has meant lower returns in the majority of periods.  So, you are putting your morals ahead of yourself if you invest ethically.

There has been a shift away from ethical investing and a greater focus on ESG investing.    Again, the expectation is to underperform conventional investing but not by as much.    However, it really depends on how focused you want to be and what your views are.

If you take your ESG or ethical investing seriously, then it takes a lot of work to filter the funds.   If you are doing it casually, then you can consider some off the shelf solutions but they are unlikely to fully align with your views.  But if you are not taking it that seriously, it probably doesn't matter.

Voyager2002

TheLittleSaver said:

Hi everyone

I have a LISA account with AJ Bell and have been investing in the HSBC FTSE All-World Index C Acc for a couple of years.
Now I am thinking that perhaps it might be a good time to start investing into a greener alternative? Unless you think there are other options that are more likely to perform better? Or should I just stick to that HSBC index for the tim ebeing?
Any recommendation that you could give me on the matter (while keeping the same approach of passive/accumulation investment) would be very much appreciated.

Thanks

If you want to stick to a passive approach then the index tracker that you use is as good an approach as any. Perhaps you want to move to what they call a "core -- satellite" approach, where you keep the index tracker as a "core" but make active decisions to invest a small proportion of your assets in particular sectors or companies, such as those that are particularly green.

If you choose to go down this route, you have a number of possibilities. Firstly, there are a number of Investment Trusts that supply electricity from renewable sources: I hold Greencoat; The Renewable Infrastructure Group; Foresight Solar and Bluefield. These assets pay relatively high dividends while their prices show low volatility. Secondly, the whole electric vehicle sector shows considerable promise: the Tesla share price has probably made more millionaires than Bitcoin and there are others in this sector (I don't hold any of them). Thirdly, there are various ETFs that hold the companies that make equipment to generate renewable electricity as well as those that generate it, sometimes bundled with companies that treat waste water and that provide general environmental services.

where_are_we

An alternative would be Vanguard ESG  Developed World All Cap Equity Index Fund (accumulation). Charges at .20% are slightly higher than the .13% of your HSBC fund. It doesn`t include Emerging Markets like your HSBC fund. To mirror your HSBC fund you would have to have some Vanguard ESG Emerging Markets All Cap Equity Index Fund (accumulation)(.25% charge) as well. This is not a recommendation, however I hold both of these ESG Vanguard funds.

eskbanker

dunstonh said:

If you take your ESG or ethical investing seriously, then it takes a lot of work to filter the funds.   If you are doing it casually, then you can consider some off the shelf solutions but they are unlikely to fully align with your views.

And that alignment can change quite quickly, as highlighted at https://www.latimes.com/business/story/2022-03-06/esg-funds-ukraine-russia

Funds labeled ESG — an acronym that denotes a commitment to environmental, social and governance interests — own shares of Russia’s state-backed energy behemoths Gazprom and Rosneft, as well as its biggest lender, Sberbank. The funds also hold Russian government bonds, providing money that ultimately helped pad the coffers of President Vladimir Putin’s autocracy.

[...]

Industry researchers at Morningstar Inc. estimate that 14% of sustainable funds globally held Russian assets right before the war.

[...]

ESG funds can buy a wide variety of companies, including makers of conventional weapons and producers of fossil fuels. The world’s biggest ESG-focused exchange-traded fund — BlackRock Inc.’s $23.7-billion iShares ESG Aware MSCI USA — holds shares of companies such as Raytheon Technologies Corp. and Exxon Mobil Corp.