Social investment expert calls for new view on green funds

The common belief that green funds are too volatile to form the basis of an investment portfolio is a misconception that must be challenged, according to UK Social Investment Forum board director Julia Dreblow.

Dreblow (pictured), former socially responsible investment marketing manager at Friends Provident, said the reputation for higher risk was a hangover from the days of negatively screened funds, which often banned holdings in some of the highest performing sectors, such as tobacco and mining.

Increasingly, institutional investors were overcoming the perceived higher risk from screened funds by buying engagement-only funds, which gained their ethical credentials by influencing corporate behaviour in a positive way, Dreblow said.

‘But they’re not very well promoted in the retail market – it’s complicated to get the message across and I think a lot of advisers are used to selling screened funds,’ she said.

Options readily available included funds from CIS, Norwich Union, Jupiter, Friends Provident and F&C to name a handful of examples, Dreblow said.

Some funds that exclude negative screening are the Jupiter Global Green Investment Trust, Aberdeen Ethical Engagement UK, F&C Global Climate Opportunities and CIS Sustainable Leaders.

The CIS fund screens out military applications, animal testing and human rights-abusing countries but it is still different to the usual exclusion-by-sector approach.

Dreblow said engaging with companies on responsibility was not an empty gesture even as a minority shareholder. ‘We have seen lots of dialogue between fund managers and companies – there is gradual progress being made.’

For example, although a shareholder resolution to improve chicken welfare at the recent Tesco AGM was defeated, Dreblow said the engagement between the company and investors such as F&C would yield improvements over time.

‘Shareholder activism is phenomenally important – it can’t be exaggerated,’ she said. ‘You can’t hide things from investors.’

Dreblow also highlighted the distinction between volatility and risk, noting that the long-term risk of ignoring environmental and social factors outweighed the short-term risk of paying them too much heed.