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James Williams, Hedgeweek

Wealth managers embracing sustainable investments as opportunities continue to grow

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By James Williams – Values-based investing that targets sustainable investment opportunities is becoming easier than ever for socially responsible investors.

Steering clear of companies that have poor labour records, or which have a negative impact on the environment, is becoming de riguer and something that wealth managers are keen to address as investor demands evolve. Take Guinness Asset Management, for example. Last month, they opened Guinness EIS 5, a tax-efficient Enterprise Investment Scheme that invests in UK sustainable energy companies. 

The aim of EIS 5 is clear: to generate attractive risk-weighted returns by investing in a range of companies spanning solar photovoltaic, hydroelectric, wind and biomass and which have predictable revenues, low technology risk and low correlation with other asset classes. “We continue to see a wealth of investment opportunities in the small-scale renewables space,” commented Shane Gallwey, co-manager of Guinness EIS 5. 

This was recently demonstrated by boutique wealth management firm Signia Wealth, who played a key role in sourcing and advising co-investors in the acquisition of Western Bio-Energy Limited, a 14.7MWe capacity wood and grade A waste wood-fuelled biomass power plant in Port Talbot, South Wales; the first commercial-scale power station of its kind in Wales. 

Greensphere Capital, the specialist investment firm headed up by chairman Jon Moulton, made the investment, which wouldn’t have been possible without the help of wealth manager Signia. They were able to identify and bring together a number of clients with an interest in sustainable energy and infrastructure to provide 49 per cent of the capital needed for the Western Bio-Energy acquisition.   
    
Such is the growing importance of sustainable investing that Swiss private bank Sarasin have appointed their very own head of sustainable investment research, Pierin Menzli. Menzli was previously the head of research at SAM Sustainable Asset Management and in 2011 became a founding partner of Contrast Capital. Menzli’s appointment has been greeted with wide acclaim, providing further evidence that the ethics of investing are taking on more of a socially responsible hue.  

In an article written this year entitled: “The Value in Values-Based Investing”, Merrill Lynch Wealth Management commented that investors and companies increasingly realise that ‘doing good and doing well financially often go hand in hand’. They point out that a 2012 study by investor group, the Forum for Sustainable and Responsible Investment, found that values-based investing is now worth USD3.74trillion: equivalent to one in every eight or nine dollars under professional management. That’s a significant figure and anyone who harbours a belief that SRI-driven investment mandates are a fad should probably think again. 

As the wider investment management community gets on board, with investors of hedge fund managed accounts increasingly dictating that certain stocks be excluded and private equity houses upholding environmental, social and governance (ESG) beliefs, the choices for wealth management clients are growing. This is welcome news but as Anna Snider, Global Head of Equity Manager Due Diligence at Merrill Lynch commented, such investments require heightened scrutiny: "We're looking for investment managers who take a deep dive, company by company, and who analyze these companies based on their ESG-based policies and practices to unlock additional value relative to others in their sector," Snider said. 

The green shoots of values-based investing seem to have been firmly planted. 

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