When it comes to environmental investing, some market participants might believe that there are not that many profitable opportunities in the sector. Despite this perception, some sustainable funds performed quite decently during the last couple of years and delivered meaningful returns to investors. In this article we will discuss 3 of those:
- TIAA-CREF Core Impact Bond Fund
- Fidelity Sustainable Water and Waste Fund
- Stewart Investors Worldwide Sustainability Fund
This is by no means a comprehensive list of environmental funds, according to Bloomberg, there are many of ESG funds with decent performance.
Now let us go through each of the above-mentioned funds in detail.
TIAA-CREF Core Impact Bond Fund
The fund essentially represents a high-quality bond portfolio. According to the official factsheet, the fund invests in fixed-income securities that ‘demonstrate environmental, social, and governance leadership’. The document further states that fund managers strategically allocate investments with bonds that have a measurable impact on renewable energy and natural resources.
As of April 30, 2020, the fund’s net assets have reached $5.2 billion. If we take a closer look at its financials in more detail, the fund certainly has some advantages compared to some of its peers.
Firstly, both gross and net expense ratio stands at 0.44%, which is quite low and therefore reasonable. This means that 99.56% of the raised capital goes straight into the investments and the managers do not spend a significant portion of the amounts on salaries, rents, and other expenses. This, in turn, can help the fund to deliver higher rates of returns to shareholders.
The current Net Asset Value of the fund stands at $10.85. This essentially represents a fund’s per share market value. So the current price is very affordable even for those investors who have a small amount of capital.
The fund currently holds 1046 positions, with an average maturity of just over 9 years. This suggests that fund managers do give preference to longer-term securities. As of June 17, 2020, the distributed yield at Net Asset Value stands at 2.17%. The main principle behind this is very similar to the dividend yield. So essentially, if investors invest in this fund $1,058, by purchasing 100 shares, they will receive $22.96 in a year, which equals 2.17% of the invested capital. The fund distributes payments to its shareholders on a monthly basis.
The Fund has allocated 76% of its capital in the US fixed income securities, while also investing 22% goes to International fixed-income assets, with the rest 2% distributed in equities and some short term investments.
The Fund started operating on December 4, 2015. Since its inception, the fund delivered a 3.77% average annual total return. This is significantly higher than the US Consumer Price Index during the same period. Therefore, this fund might be well-suited for environmentally conscious investors, looking for a stable monthly income.
Fidelity Sustainable Water and Waste Fund
This fund was launched quite recently, back in November 2018. According to the official website, Fidelity Sustainable Water and Waste Fund invests in global firms, which are involved in the design, manufacture, and distribution of products or services in water and waste management industries. The factsheet of the fund also states that the managers are more focused on long term fundamentals of companies, when making investment decisions.
The current size of this equity fund stands at $1,643 million. Currently, the fund has allocated more than 62% of its capital in US equities, with the rest of its funds going towards European and some Asian stocks.
Since its launch, the fund delivered a cumulative return of 5.7%. This means that the annualized growth rate equals 3.6%, which can be considered as quite a decent return for investors, especially in times of near-zero interest rates.
Portfolio managers had a very successful year in 2019 when the fund gained 29.9%. However, most of those gains were wiped out during the stock market crash in March 2020. In fact, the fund lost more than 23% of its value during the first quarter of this year. Despite this major setback, the fund did start to recover during the subsequent months, regaining 6.2% during the last 30 days of trading. The current share price of the fund stands at $10.83.
Fidelity Sustainable Water and Waste Fund might represent a good investment vehicle for those investors looking to invest in the water and waste management sector and earn some decent returns in the process.
Stewart Investors Worldwide Sustainability Fund
According to the official factsheet, the Stewart Investors Worldwide Sustainability Fund invests in companies that can ‘benefit from and contribute to the sustainable development of countries in which they operate’. The document further states that during the decision-making process, companies with positive environmental impact are given a priority.
The fund was first launched back in November 2012. The current size of the fund stands near £416 million. Interested investors have two options to invest in the fund. They can either make an investment of a lump sum of £1,000 or, alternatively commit to a regular payment of £50 per month. So the fund offers very affordable entry options even to those people who have a limited amount of capital under their disposal.
Since its inception, the total fund return is 48.7%. Therefore, the average annual return is close to 5.4%, this also includes the yield of 0.6%, due to dividend payments from some of the companies in which the fund managers invested their capital.
As for the investment style, as experts at insidetrade mentioned, Stewart Investors Worldwide Sustainability Fund portfolio is very well diversified both in terms of geography and sectors. Fund managers invest not only in the US and Europe but also in Japan, the Middle East, and emerging markets.
So in conclusion, Stewart Investors Worldwide Sustainability Fund might be a good investment for environmentally conscious investors, interested in earning higher than average returns on their capital.