My ethical investment strategy
This may not be good, but it is what I did. Back at the start of 2018, in terms of savings and pensions, I had:
- A Nationwide cash ISA, paying 1%;
- A Nationwide regular savings account, paying 5% on a limited addition each month;
- A Nationwide joint saver account;
- A final-salary civil service pension based on c. 2.5 years of employment;
- A stakeholder pension with Aviva, invested jointly in three ethical funds (all from Liontrust), set up in 2009 using Ethical Investors;
- A Nest pension with my current work at mySociety, invested in their Ethical Fund.
I read Checksies (probably issue 2? Or 6?), on Vanguard Lifestratey, and asked Rod if he knew anything about their SRI (Socially Responsible Investment) fund (they have two, European and Global). I spent far too long reading about them.
Generally, I thought there were two main ways I could approach ethical investment – positive (only ethical, by whatever criteria that might be), or negative (don’t invest in e.g. guns or oil, otherwise whatever). I put myself in the “I only want to invest in ethical things, on principle” camp, as why bother having a few quid more when you retire if there’s no world left, eh. My Aviva pension had been decided by Ethical Investors asking me questions about my personal ethics and outlook and then picking funds from that.
The two main UK ‘comparison’ things I found were: http://www.yourethicalmoney.org/investments/ and 3dinvesting.com (their site appears to have been hacked). The latter’s site also didn’t work well, so I made a copy of the page at my own website: 3dinvesting table copy and made it work (though it will now be nearly two years out of date, of course). You can hover over things and filter using numbers using || for OR (e.g. "3 || 4 || 5" for 3-5 stars in a star-based column). Suitability is ranked 1-3.
This was certainly an overwhelming amount of information and I spent far too long reading about random funds, what they invest in, falling down rabbit holes. Fundamentally, in terms of fees alone, it boiled down to:
- Vanguard LifeStrategy was 0.2%;
- The only tracker I could see that was a little bit ethical (a negative screen of the FTSE350), the L&G Ethical, was 0.31% (the SRI/Sustainable MSCI trackers didn’t float my boat – Total, P&G, McDs, etc.), so that’s not too bad and its screening does seem good to me (I liked all the top 10, I mean);
- Other than that, they were all up around the 1% margin (e.g. my pension ones, Standard Life 0.9, WHEB 1.03, Old Mutual 0.9, etc.). Which I guess, unlike some other funds, you might actually be paying for something you consider more useful if they’re actually investigating sustainability, talking to companies, etc (which the second comparison above does even try to tell you with the capability score...)
- Oh yes, bonds – green/ethical ones seem to range from 0.45–0.8%. A Vanguard govt bond was 0.15%.
So on, I dunno, £100 a month for 20 years, that could be the difference between £37k and £40k at the end (assuming same 5% growth, might not be true, who knows). And I didn’t know how to answer the question as to whether that was worth it, so felt like I had wasted a lot of time!
But I carried on reading a lot of ethical policy statements, removed a few I just didn’t the name/look/website of, and narrowed funds down to six:
- BMO F&C Responsible Global Equity
- (Janus) Henderson Global Sustainable Equity
- Jupiter Ecology
- Old Mutual Ethical
- Stewart Investors Worldwide Sustainability
- (FP) WHEB Sustainability
And bonds down to four:
- Columbia Threadneedle UK Social Bond (Big Issue Invest)
- Kames Capital Ethical Corporate Bond (a veggie/vegan fund)
- Liontrust SF Corporate Bond
- Rathbone Ethical Corporate Bond
At this point of well approaching had-enough-of-this I was tempted to divide my ISA equally amongst the ten of them (both initially and any monthly investment), rather than make any more decisions.
But it turned out I had forgotten about my work pension (Nest if you’ve forgotten), which I had switched to their “ethical” fund at some point, and that is 60%... F&C Responsible Global Equity Fund (one of the ones I’d picked!), 20% F&C Responsible Sterling Bond Fund, and 15% L&G Managed Property. So I’d already been investing in that one without realising.
I picked Kames and Threadneedle as the nicest bonds (though Threadneedle does have 3% in Manchester Airport, hmm...), and dropped Jupiter, leaving me with a totally non-passive six choices (fee in brackets):
- (Janus) Henderson Global Sustainable Equity (0.84%)
- Old Mutual Ethical (0.90%)
- Stewart Investors Worldwide Sustainability (0.95%)
- (FP) WHEB Sustainability (1.01%)
- Columbia Threadneedle UK Social Bond (Big Issue Invest) (0.45%)
- Kames Capital Ethical Corporate Bond (0.55%)
This goes totally against the general passive advice which I also still do agree with :) I split my Nationwide ISA 50/50 bewteen funds and bonds (as my existing pensions are much more equity weighted now I’d looked at them) and each split equally inside them. I set up an account with Interactive Investor and set up a regular payment through them as well. I then don’t really look at them, apart from if Rod asks for an update :)