It’s the environment, stupid

As G7 leaders gather to build back better, cleaner and greener, DIY investors are already focusing on the ‘E’ in ESG.

• Seven out of the top 10 most-bought funds/ investment trusts from interactive investor’s ethical investing long list over the year to date have an environmental focus

Between 11–13 June, world leaders will gather in Cornwall, with the UK hosting, ‘to help the world fight, and then build back better from coronavirus and create a greener, more prosperous future’.

The social and environmental challenge may feel overwhelming – and is a long haul. From an environmental perspective, the UK talks about a ‘green revolution’ but has at least backed this up by pledging to be carbon neutral by 2050. The US says it would like to achieve this goal too, and US President Joe Biden has pledged $2 trillion to stimulate renewable energy. China is aiming to be carbon neutral by 2060.

Data from interactive investor, the UK’s second-largest DIY investment platform, suggests that of investors investing within an ethical framework via its ethical investing long list (a list of all the fund and investment trusts in this universe available on the platform), it is environmentally focused investments that are attracting the top buys.

Some seven out of the 10 most-bought ethical investments over the year to date are environmentally focused. And all these are closed-ended investment companies, with Greencoat UK Wind (LSE:UKW) leading the pack, followed by Gore Street Energy (LSE:GSF), the Renewables Infrastructure Group (LSE:TRIG) and NextEnergy Solar Fund (LSE:NESF).

Keith Bowman, Investment Analyst, interactive investor, says: “Our data could suggest that people investing within an ethical framework are taking an ‘it’s the environment, stupid’, approach to ethical investing.

“But there’s more to it than that. If you look at the yields on some of the renewable energy-focused investment companies, these selections could be every bit as much about income. Greencoat UK Wind, for example, is currently yielding about 5%, Gore Street Energy around 6%, and Next Energy Solar a heady 7% - and perhaps not surprisingly companies in this sector are currently tending to trade on premiums. If you want income in the investment company sector, you tend to have to pay a bit more for it.

“But no investor should invest based on yield alone – it’s a dangerous game. Clearly the renewable energy theme is one that investors hope has legs. And for those of us impatient or cynical about the speed of government change, these environmental plays could also be seen as a way to take some direct action.”

Most-bought investments from the interactive investor ethical investment long list over the year to date to 2 June 2021

Interactive investor publishes an ethical investing long list, an ethical rated list, ACE 40, and a ready-made Ethical Growth Portfolio.