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Engines of growth: Investment trusts for responsible investing

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Engines of growth: Investment trusts for responsible investing

By Mary McDougall, Investors Chronicle, 12 November 2020

Appetite for investment products with strong environmental, social and governance (ESG) credentials has boomed this year as the pandemic has put the need for a sustainable world under the spotlight. Enthusiasm has been helped by sustainable funds broadly outperforming their conventional peers this year, partly because they tend to have less exposure to the oil price, and more to technology and healthcare stocks, which have largely performed well.

Investment trusts are often overlooked as a way to get exposure to sustainable investments, in part because there are many more open-ended funds that specifically market themselves as sustainable… interactive investor says that “the investment trust sector has been a bit slow off the mark to cater to a budding demand for ESG solutions”, but that ESG is a work in progress…

Many trusts address how they approach ESG considerations in their annual reports, so these are a good place to get a feel for how robust their approach is…

If you have specific preferences, you can refer to the Association of Investment Companies website to search for funds in specialist categories…

You can also look at ESG scores from data providers such as Refinitiv and Morningstar for their assessment of investment trusts, although they do not cover all of these.

Specialist trusts

Impax Environmental Markets is the largest specialist environmental trust, with assets worth £946m at the end of October…

Some real estate investment trusts (Reits) focus on social causes.

Broad equity trusts with an ESG focus

Some equity trusts include ESG considerations in their investment process. Montanaro UK Smaller Companies Investment Trust(MTU) and Montanaro European Smaller Companies Trust (MTE) have well established ESG processes…

James Carthew, head of investment company research at QuotedData, says that Pacific Assets Trust (PAC) also has a well established ESG process.

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