The Jupiter Ecology Fund wears its environmental colours on its sleeve.
As its manager Charlie Thomas explains, its name is evocative of the era in which it was conceived.
“The Ecology fund is 30 years old”, he says. “Ecology was very much the word in vogue at the time in relation to environmental issues. You hear it less these days but we’ve kept it.”
These days, the Ecology Fund rubs shoulders with many more-recently launched funds that call themselves ‘ethical’, or otherwise adhere to an ESG - environmental, social, governance - agenda. The space has become more crowded and has led to potential confusion among investors about how different funds apply their principles, according to Thomas.
He says: “I see three broad camps of funds. At one end you’ve got ethical funds which simply exclude certain sectors on ethical grounds. In the middle are ESG funds which will look at companies’ environmental, social and governance standards, and select based on those. At the far end are the funds which only pick companies that deliver a solution - a product or a service - to environmental or social problems. Jupiter Ecology sits in this last camp.”
This approach makes the Jupiter Ecology one of the ‘darkest green’ ethical funds - meaning its ESG principles affect the stock-picking process in a significant way.
“We are a global fund but our universe of stocks is only about 1,200 companies”, Thomas says. ”The companies we invest in have to offer solutions to problems and this has tended to lead us to mid-cap companies, which is where a lot of the innovation comes from.
“Traditionally, a lot of our opportunities have come from Europe but that is changing. North America and in particular Asia are now vibrant areas for us.”
Thomas and his team split companies into three main groups and look for opportunities in each. First are companies exposed to population growth, particularly growth in the middle class population. This is most acute in Asia and Africa. Second are those companies operating in areas affected by environmental rules which may need solutions in response - a rare example of an investor welcoming more regulation. Finally, those companies providing solutions in the area of renewable and efficient energy.
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Thomas argues that funds like his should be seen almost as a separate asset classes versus go-anywhere equity funds, because of the ethical principles being applied when picking stocks.
That said, he believes a strict approach to ESG concerns does not have to mean turning down returns. There is widening acknowledgement that all companies will have to improve their ESG standing not only because it’s the correct thing to do, but in order to avoid damaging reputational damage or punishing regulations.
As the effects of climate change, as well as trends like population ageing and growth, become more visible and acute, the demand for the companies identified by the Jupiter Ecology Fund will only increase.
More on the Jupiter Ecology Fund
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