Established in 2012, these portfolios are for clients that:
They can be used as a stand-alone investment solution for those who view social and environmental considerations as paramount to their investment objectives, or as separate specialist portfolios.
Each investor has their own portfolio which is invested in a well-diversified mix of 20-25 funds and actively managed by EQ. They can be held both in ISA (tax-free savings) or SIPP (personal pension) accounts. There are seven levels of risk available, with the maximum equity exposure ranging from 35% to 85%. Stockmarkets are volatile and so in all cases we advocate a minimum time horizon of five years (although portfolios can usually be liquidated on seven days notice).
Click the buttons below to view factsheets and portfolio holdings:
We have worked with EQ Investors and their research team for a number of years and have been regularly impressed by their fund review process, and the depth of their research.
An investment approach that aims to make a positive contribution to society or the environment, alongside an attractive financial return.
Socially responsible investing is not a recent phenomenon, it can actually be traced back several centuries. Early initiatives were all based on the exclusion of controversial sectors such as tobacco or armaments rather than on investing in businesses which have the power to do good. That’s what Impact Investing is seeking to achieve and it has begun to take off.
Seeking out companies making a positive impact…
The EQ Positive Impact Portfolios are not just about selecting investments that do good, they are also about selecting good investments.
Negative screening techniques inevitably result in nil, or minimal, exposure to some sectors such as tobacco which have often been highly profitable investments for a century or more. Therefore, it is not surprising that some studies have demonstrated that a ‘sin portfolio’ outperforms an ethical one.
However, the positive impact approach leads to selecting companies that are actually trying to do good and run their business in a sustainable manner. Such companies avoid fines and other penalties; they have stronger relationships with their customers, suppliers and staff. Furthermore, they tend to operate in sectors with high growth potential. Research by fund manager Wheb has illustrated that growth is higher in their universe of 1,000 investable companies than in the stockmarket generally, as shown below.
Research carried out by Cambridge Associates in conjunction with its launch of an impact investing benchmark suggests positive impact funds may actually outperform conventional funds.
Our own analysis of past performance suggests that there is little or no correlation between impact and financial return – the adverse impact of negative screening seems to be compensated by the benefits of the positive impact investments. On that basis there is no reason to expect a positive impact approach to have an adverse impact on performance.
No sacrifice in financial return is required.
The research below is from WHEB, a specialist investor into companies making a Positive Impact. It shows that both historical and forecast sales growth figures are higher for companies in their ‘investment universe’ – i.e. which they have screened for social and environmental impact – when compared to average figures from the MSCI World Index (whose constituent companies are not screened).
The Positive Impact Portfolios focus investment on solutions to the most pressing social and environmental issues of our time.
The evidence is unequivocal: climate change is a reality and the Earth has already warmed significantly as a result. Scientists are observing knock-on impacts on natural and human systems across the globe. Continued emissions of greenhouse gases will cause further warming and changes in all components of the climate system. Limiting climate change will require substantial and sustained reductions of greenhouse gas emissions.
We invest in industries that are creating the post-fossil fuel economy, and have fully divested from those responsible for fossil fuel production and ozone depletion.
We invest in…
Thanks to the concerted efforts of governments, researchers, and health organisations around the world, global human life expectancy has increased by 5 years since the turn of the millennium and the gap between African and European life expectancy has narrowed by almost the same. Ensuring good health and well-being for all is at the heart of improving life prospects for millions of people worldwide.
Our investments target a range of healthcare innovations and avoid industries that pose a risk to human health.
We invest in…
Humanity’s ‘ecological footprint’ continues to grow. We currently use the equivalent of 1.6 planet Earth’s to provide the resources we use and absorb our waste. In other words, it takes the Earth one year and six months to regenerate what we use every year.Moderate UN scenarios suggest that if current population and consumption trends continue, by the 2030s, we will need the equivalent of two Earths to support us. And of course, we only have one.
We invest in sectors that are developing efficient ways of using and conserving our limited natural resources.
We invest in…
The world’s population continues to grow by 2050 it is estimated there will nearly 10 billion humans, more than 2.6 billion of them younger than 18. Many children born today will enjoy vast opportunities unavailable 25 years ago. But not all will have an equal chance to grow up healthy, educated and able to fulfil their potential or become fully participating citizens. Ending poverty, protecting the planet and ensuring prosperity for all underpin the UN’s Sustainable Development Goals for 2030.
We focus on sectors that are helping to reduce social inequality while avoiding those with poor reputations in this area.
We invest in…
First we focus on the big picture. Academic research indicates that 90% of investment returns depend on achieving the right balance between equities, bonds and other types of asset. Our aim is to identify which markets offer the best value right now, as these are the areas where the biggest gains are to be made.
There are more than 20,000 funds available to investors in the UK, but the vast majority of these make no attempt to screen their investments in respect of impact. We restrict the number of funds available to those that do screen their investments. Then we assess:
a) how much impact they achieve, and
b) their potential to deliver good financial returns.
Building a portfolio can be compared with creating a recipe: each ingredient needs to be of the highest quality but it is also vital that they combine well. We take advantage of sophisticated analytical techniques to ensure each portfolio is properly balanced, blending ethical funds with much more tightly-focused thematic funds (such as those specialising in water or biotech).
Portfolios are monitored on a daily basis and regularly rebalanced. Rebalancing is essential to maintain growth: effectively selling assets that have become expensive and reinvesting in those that are cheap. The EQ asset allocation and fund selection committees meet quarterly to review all portfolios, or more frequently if there is a material change in markets or circumstances.
We conduct rigorous due diligence on each manager to ensure the portfolios perform both financially and ethically.
We have developed a rigorous and systematic approach for impact assessment which takes into account the fact that different fund managers screen their investments in different ways.
We focus our investment selection towards those funds delivering solutions rather than simply avoiding problems, using a proprietary scorecard system that rewards fund managers more highly for positive than for negative screening.
Furthermore, to make sure our investment process works in practice we will double-check the underlying stocks to make sure fund managers are really doing what they say they are.
Each fund must aim to deliver an attractive return for its sector of the market. We put each fund through a rigorous quantitative assessment which looks at the consistency of historic risk adjusted returns.
The fund is then plotted on a grid that measures its impact and performance assessment. Those with the best combinations are selected for an intensive review that includes an in-depth interview with the fund manager.
Each recommended fund becomes the subject of a detailed report that is then reviewed by our fund selection committee.
Our philosophy is about investing for the long term. We build long term relationships with our fund managers and engage proactively with them on the issues we care about.
Ethical investing is rarely black and white. Should we invest in a fund that has holdings in the oil and gas sector, but which includes innovations to reduce carbon emissions? In our view there is no simple answer to this.
Using a scorecard approach enables us to identify the managers that, on balance, are making the most impact addressing climate change, conserving natural resources, improving health and reducing inequality.
If we decide to invest then this is just the start of an ongoing conversation. If we see a holding that doesn’t meet our expectations then we question it. And as a result of our dialogue we have seen managers divest in companies that we’d rather avoid.
EQ is an award-winning boutique wealth manager acting for private clients, small companies and charities all around the UK.
At EQ we think financial planning is all about: