23 days ago • 2 mins
Pinched by higher costs and protective of every penny, everyday investors seem especially discerning about where they put their money. And so far, responsible funds look like the ones to cut. Focused on high-growth stocks and steering clear of “dirtier” stocks like energy and travel companies, the funds were once a very popular pick. Yet in September alone, investors dumped a record £544 million ($678 million) in responsible funds (light blue bar), according to data from the Investment Association, meaning over £1 billion ($1.2 billion) has been stripped from the funds this year.
Drama in the ESG (environmental, social, and corporate governance) industry is partly to blame. Europe is clamping down on “greenwashing”, an effort to make sure firms and funds that say they’re responsible are matching words with action. And a handful of US politicians are chastising the sector, believing that focusing on the greater good is a distraction from financial duties. Interest rates are the other culprit. Bonds and money market funds now look a lot more attractive, giving investors a decent bang for their buck without the risk to match, so they’re pulling attention – and money – away from other investments.
That doesn’t mean responsible investing is done for. Infrastructure investment trusts, for one, invest in assets like wind and solar farms, which are otherwise tough to trade as an investor. The trusts haven’t made their name from sustainability alone, which shields them from accusations of greenwashing. What’s more, investors could access the well-managed assets with solid potential returns for decent value: the trusts are trading at roughly 25% cheaper than their historical average. Some examples include the Hannon Armstrong Sustainable Infrastructure Capital Inc., the iShares Environmental Infrastructure and Industrials ETF (ticker: EFRA; expense ratio: 0.47%), and the SPDR S&P Global Infrastructure ETF (GII; 0.4%).
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.
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