EDENTREE RESPONSIBLE AND SUSTAINABLE EQUITY: Fund to support a greener future
Edentree is an asset manager specialized in responsible and sustainable investing.
There are no gimmicks or hints of greenwashing; those mutual funds labeled green, yet labeled green, are anything but when their investments come under scrutiny.
The investment company, which started life as Ecclesiastical Investment Management, is 100 percent dedicated to its specialty and is part of the Benefact Group, a charitable organization that strives to do good for its clients across all brands and companies.
EdenTree currently manages £3.5 billion in assets. Its products are diverse – including multi-asset funds, bonds and equities – but are all underpinned by its commitment to responsible, sustainable investing.
One of the offerings is the EdenTree Responsible And Sustainable European Equity Fund.
Launched 17 years ago, the £200m fund aims to make money from investing in European companies that make a ‘positive contribution to society and the environment’, but excludes UK shares from its portfolio.
It is run by Chris Hiorns and David Osfield and its investment record is impressive. Over the past one, three, five and ten years, it has outperformed the average of its peers, with respective returns of 16, 29.3, 61.5 and 143.7 percent.
“Our goal,” says Hiorns, “is to offer investors good returns without taking too many risks.
‘We are looking for good companies that behave responsibly and lead the way towards a greener world.
‘It means avoiding companies involved in oil and gas production, alcohol production and tobacco production. But the companies we buy must also represent good value and be supported by strong cash flows that are in growth mode.”
The top positions include Italian energy giant Enel, a global leader in green energy, and Covivio, a French real estate company with a focus on developing environmentally friendly offices and retail.
Recent additions include German-listed Technotrans, which develops cooling systems for large data centers and electric vehicle charging stations.
The fund’s investment risk is managed by holding no more than 3 percent of its assets in any one stock, although the managers have room to go up to 5 percent.
Its current largest position is in French telecoms giant Orange – and the fund has stakes in 67 companies, mainly large-cap stocks.
In terms of sector positions, Hiorns says financial stocks remain an attractive “contrarian play.” Bank of Ireland, Banco Santander, Commerzbank and BBVA are among the top ten positions.
Although income is not a target of the fund, Hiorns says many of the undervalued European stocks he likes are currently paying attractive dividends. For example, Orange shares offer a dividend yield of 7.4 percent.
He says 45 percent of the stocks in the portfolio are high yielders, although the fund’s total dividend yield is a modest 2.9 percent.
The funds in which EdenTree specializes are now subject to new rules introduced by the regulator, the Financial Conduct Authority. From December they can use one of the four FCA
approved ‘sustainable’ labels, demonstrating their commitment to such an investment approach.
Funds that make sustainable claims, but do not carry such a badge, will have to provide investors with clear information about how they invest and why they do not have a label.
Hiorns says the company is actively seeking such labels for its funds. The annual costs for the European fund are 0.8 percent.
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