Claudia Quiroz, manager of the Cheviot Climate Assets Fund, explained to Alex Blackburne how investing sustainably can help to tackle global challenges.
Reducing carbon emissions, improving the food supply and demand imbalance and reducing water shortages: these are arguably the three biggest challenges that the world is currently facing.
It’s easy to become overawed and feel slightly helpless.
But there is at least one way that you can make a huge difference, and that lies in investments.
Ensuring your money is tied up ethically, sustainably and responsibly will go a long way to alleviate the increasing effects of climate change, and the subsequent challenges it brings.
“We believe the macro drivers behind climate change investing are very powerful”, states Claudia Quiroz, manager of the Cheviot Climate Assets Fund.
“The world’s population is growing faster than ever before, with the majority of the growth coming from the developing world, with the associated increase of their standard of living.
“To meet growing demand, we need more food, resources, water, and energy and this increase in the use of resources presents global challenges.
“Investors should aim to invest in companies that provide the products and technologies to overcome these global challenges”.
‘Investing in a company’ might sound like an unwanted hardship. But in reality, it’s simple. The Cheviot Climate Assets Fund is just one of a number of sustainability funds available in the UK, each with different aims, but all with sustainable undertones.
Its make-up is multi-asset, meaning instead of investing solely in stocks and shares like equity funds do, its revenue comes from a range of sources – fixed interest investments, commodities and other alternative investments such as private equity funds.
“Most of the fund offerings within the sustainability or environmental space are mainly equity only strategies”, explains Quiroz.
“These kinds of funds do very well during an upturn but shockingly badly in a downturn.
“As such, many investors associate environmental or sustainability markets with high volatility and poor returns.
“That is why we at Cheviot developed a multi-asset fund to reduce volatility and smooth the return over the economic cycle”.
Launched in March 2010, the fund focuses on three so-called ‘mega-drivers’: climate change, population growth and resource scarcity. And under that, there are five themes: energy, food, health, resources and water.
Quiroz gives an example of the challenges the Earth faces, and explains how the Climate Assets Fund has been set up to try and alleviate the problem.
“Today in the developed world we consume around 150 litres of water per person per annum, compares with just 30 litres in the developing world”, she says.
“As the developing world population grows and as their living standards increase, global water consumption is expected to grow by a factor of around five by 2050.
“This poses a significant challenge given that our existing supplies of fresh water are threatened by rising sea levels and changing rainfall distribution, both of which are the results of climate change.
“As such, the fund invests in companies providing solutions to the water scarcity problem, such as those involved in water supply and distribution, water analysis, monitoring and purification, water metering and efficient methods for crop irrigation”.
One of the fund’s largest positions is with American Waters Works, the “largest and most diversified water utility company in North America, providing drinking water to 15 million people in 32 states in the US and Ontario in Canada”, according to Quiroz.
The fund is also exposed to energy efficiency technologies; for example, BorgWarner, a leading global supplier of highly engineered systems and components for automotive power train applications, whose technology increases fuel economy or reduce emissions.
Meanwhile, Dr Reddy’s Laboratories, an Indian pharmaceutical company involved in manufacturing cheaper alternatives to branded products, called “Generics”.
“Generics offer access to safe and affordable medicines particularly for HIV/AIDS and other life threatening diseases”, says Quiroz.
“Reddy’s markets its products around the world with leading positions in emerging markets.
“This company is set to benefit by population growth, wealth effects and an efficient use of healthcare budgets”.
Choosing to back companies such as this trio encourages further development and innovation within the field. Indeed, the fund’s performance has proven that the sustainable investment sector is continually expanding, despite the harsh economic climate.
Since launch to the end of last year, the fund has returned 5.97% compared the FTSE World Index’s 3.86%.
When compared to its peer group of similar funds it has performed in the top quarter over one month, six months, nine months and a year.
“Growth is the key reason for general investor interest in the sustainability and environmental themes”, says Quiroz.
“Most end-markets in the sustainability space are expected to grow annually at double-digit rates over the next three to five years compared to low single digit in most developed economies.
“Energy efficiency is the fastest and cheapest way to achieve energy consumption reductions and contribute to a low carbon economy”.
The Cheviot Climate Assets Fund is proof that sustainable investing is brimming with prosperity – something that is only expected to rise in the future as the world moves towards a necessarily sustainable society.
With more and more businesses including sustainability into their agenda, and an increasing amount of innovation in the sector, it’s inevitable that people who invest in this way now will see huge rewards in the future.
Not just financial rewards, but environmental ones, too. The planet will be content, all thanks to you.
For more information about the Cheviot Climate Assets Fund, click here.
Alternatively, if you’d like to find out more about investing sustainably, fill in our online form or ask your own financial adviser.