This blog is designed to record the investment journey of a UK based small investor. I hope to make a modest contribution to the collective wealth of investing knowledge made freely available to ordinary people. I am the author of five books [see sidebar and books tab]
The aim of this trust is firstly to preserve capital and then
to achieve capital growth in absolute terms rather than relative to a
particular stock market index, principally through a wide variety of
investments including variable weightings of investment trusts, cash,
bonds, index-linked securities and commodities when it is considered
It is just over two years since the trust was added to my
portfolio as a 'safe house' for some of the proceeds from various sales. After
several years of above-average returns from equities, it seemed like a good
plan to shelter the profits and de-risk the portfolio.
There are a few trusts which offer to preserve capital such
as Ruffer, Personal Assets and RIT Capital Partners. They all work on the
principle that accepting a more solid but lower return from a diverse asset mix
is a price worth paying for the peace of mind from not suffering potential
losses from riskier or more concentrated assets.
The trust has recently announced results for the full year to
5th April 2019 (link via Investegate). Total return per share has increased by
a respectable 7.9% with net assets increasing to £40.82.
The focus of this holding is capital preservation rather than
income. Last year the dividend was 27p however this year revenues have again
increased to 51p and the board have proposed an increased payout of 30% to 35p
which includes a special dividend of 12p. The yield however is still less than
The portfolio is currently very defensive with 35% in cash or
short-dated gilts and a further 25% in US inflation linked government bonds.
Then there is 18% allocated to preference shares and corporate debt. A further
15% is allocated to property and then a similar percentage to equities.
I was particularly pleased to note that new positions have
been opened in renewable energy infrastructure with the additions of John Laing
Env. Assets Trust, TRIG, Greencoat UK Wind, Foresight Solar and Greencoat
Renewables. The combined returns from these additions was 20% so I hope this
will encourage the management to increase their weighting over the coming year.
Commenting on the year, manager Peter Spiller said
"With real rates set to remain at
historically low levels, it is not easy to identify a short-term catalyst that
will bring an end to the current business cycle and the associated powerful
equity bull market. The fragile macro-economic backdrop, combined with elevated
equity and bond valuations, suggest that portfolio returns will be modest over
the medium term and could be negative if there is a period of recession.
with the past year, capital preservation remains the key objective of portfolio
allocation, until valuations return to more attractive levels. An objective of
merely preserving capital sounds modest. But, if it can be delivered over a
period of normalising asset prices it will represent a significant achievement
and lay the foundation for potentially more exciting returns in the future".
3 Yrs Comparison v FTSE All Share
(click to enlarge)
I am reasonably content with my first couple of years. Certainly I
would be happier if the trust did not have 2.2% holding in a FTSE 100 ETF and
maybe that positition will be reduced in due course. The current share price is £42.50
which is 10% up on my purchase price. In addition there is a further 2% in
dividends so an average of 6% p.a. is not too bad for a very defensive
portfolio. I am also encouraged to see the ongoing charges have reduced from
0.77% to 0.70%...every little helps.
The trust provides a good counter-balance to some of my racier
holdings such as Scottish Mortgage and Mid Wynd and the proof of the pudding
will be the combined return on the whole basket at the end of 5 years.
So, back to the bottom drawer with this one and review again at
the same time next year.
As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation -always DYOR!
Well, here we are, almost 3 years on since we
voted to leave the EU and not only have we not left, we have actually taken
part in electing even more MEPs to Brussels! How on earth has it come to this?
In my article on the Brexit fudge last July, I
covered the situation following the Chequers gathering and suggested the PM would
struggle to get the agreement through parliament and would end up resigning. It
took a little longer than I thought - three failed attempts to get the bill
through the Commons, but inevitably Mrs May conceded defeat and will step aside
on 7th June.
We have seen a number of indicative votes on a
range of options discussed by MPs - customs union, no deal, revoke Article 50,
second referendum - but nothing has a clear majority. The reality is that we
have a remain parliament which does not really want us to leave the EU in any
meaningful way and which has therefore been at odds with the country which
voted 'leave'. There are many millions of people who are naturally frustrated
and angry that the referendum result has not been delivered. There are also
many on the remain side who continue to call for Brexit to be cancelled or at
least for the chance to have a second referendum.
It is therefore no surprise that, with parliament
in deadlock and unable or unwilling to deliver Brexit on 29th March coupled with the
requirement for us to take part in more EU elections, we have the re-emergence
of Nigel Farage and his new Brexit Party.
The EU Elections
So, we had another vote last Thursday and it's
fairly clear that people are rejecting the half-in/half-out compromise of the past
couple of years dished up by the main two parties. The ruling Tories slumped to
5th place behind the Greens and lost 15 of their 19 MEPs and managed just 9% of the
national vote - their worst ever election result in almost 200 years. Labour
did slightly better losing 10 of their 20 MEPs mainly to a resurgent Lib Dems
who gained 15 MEPs.
2014 EU Elections
The new Brexit Party were the outright winners
however both 'remain' parties, Lib Dems and Greens also did well and therefore I
suggest the battle lines are now clearer leading to the new deadline:
a) 'leave' come what may by 31st October, or
b) go back to the people to reverse the referendum
The results were:
1. Brexit Party32%
2. Lib Dems20%(16 MEPs +15)
3. Labour14%(10 MEPs-10)
4. Greens12%(7 MEPs+4)
5. Tories9%(4 MEPs-15)
6. SNP4%(3 MEPs+1)
For someone who voted to leave back in 2016, my
decision has not changed. The politicians gave us the referendum. It was billed
as a 'once in a generation decision'. The question on the ballot was 'leave' or
'remain' and parliament promised to implement the outcome. We chose to leave
with a majority of 1.3 million people. The problem has not been with the people
who voted but with the remain politicians and civil servants entrusted with
delivery of the decision.
If the result had gone the other way, I would not
be jumping up and down demanding we withdraw a bit more from the EU to satisfy
the 48% who voted to leave. No, I would have accepted the decision to remain -
that's how democracy works...the losers have to accept the decision and move
on. In the final analysis, democracy isn't really democracy if our politicians
decide to just ignore the results they don't agree with.
We voted to leave and the wishes of the majority
must be respected and those who voted remain should now accept the decision. Regardless
of how the new PM and cabinet proceed, the simple fact endures that we cannot
move forward as a country until the 2016 vote has been respected and we have
left the EU. Therefore, the referendum outcome must now be delivered - deal or
Call me old fashioned but for me, it's all about
integrity and democracy. I honestly do not believe a second referendum would
resolve this issue. People would quite rightly ask "What did you not
understand about the instruction we gave last time?" It would prolong the
agony and would create more uncertainty and divisions.
We now need decisive action from the politicians
to respect the result of the 2016 referendum...I'm not holding my breath.
Feel free to have a say on Brexit in the comments below. What do you make of the past three years? Has your position changed or does it remain the same? How do you see it being resolved?
It is now four years
on since my initial purchase of this all-in-one fund in May 2015 so time for another
I believe the
average investor could do well from adopting a very simple, no-frills low cost
diy strategy which makes sense, which can be tailored to fit in with a variety
of attitudes to risk/market volatility and has every chance of providing a
decent outcome. However, I am also becoming more aware of the risks posed by our
climate emergency and in February I had a closer inspection of the funds
exposure to fossil fuels which I am trying to avoid as I am wanting to more closely
align my portfolio with my values and lifestyle. Here's a link to the article.
consideration of the options, I have decided to stay with the Lifestrategy for
the time being but I have taken a step down from the VLS 60 to the VLS 40 to
reduce my exposure to equities generally and to fossil fuels in particular. The
problem for me is the 25% weighting of the equities element in the Lifestrategy range to the FTSE All
Share Index which is overweight in oil & gas stocks - mainly Shell and BP. In
addition, I have urged Vanguard UK to review their range of funds in relation
to climate change. I was pleased to have an opportunity to speak with one of
their senior management team earlier this month and I am hopeful of seeing the
launch of a climate-friendly fund later in the year.
I have also diverted
some of the proceeds from my VLS 60 into their SRI Global fund as a compromise.
In addition, I have re-allocated some of the funds into HSBC Global Strategy
which has a much lower weighting to the UK - less than 5% and therefore much
lower exposure to the oil & gas sector.
A One-Stop Solution
LifeStrategy funds offer a balanced portfolio of globally diversified equities
combined with some gilts and corporate bonds. You are invested in 11 industrial sectors and
12 different types of investment, 17 specialist funds, spread across 25
countries and some 18,000 individual shares and bonds.
They were introduced
in June 2011 and provide investors with a neat solution to match their asset
allocation between equities and bonds - from 20 to 100. The number
represents the level of equities held in each fund, therefore the LS40 will
have 40% equities and 60% bonds; the LS80 will have 80% equities and 20% bonds.
The single funds
LS20, 40, 60 & 80 will hold a blend of around 17 or so of the Vanguard
stand-alone equity and bond funds. Each of these will hold many hundreds of
individual stocks or bonds - for example, just 1 of the 17 constituents is the
FTSE Developed World (ex UK) fund which alone holds ~2,000 stocks & shares.
holding just a single LifeStrategy fund, your portfolio is widely diverse with
over 18,000 stocks/bonds from all around the world. The bond element (assuming
you do not want the 100% equity) will comprise a combination of UK gilts,
global bonds, corporate bonds and inflation-linked gilts. The equities element
includes their UK all share tracker, global funds and some exposure to emerging
The big advantage
for me is the auto rebalance to ensure the fund always remains at the risk
level selected at the start. The funds are frequently rebalanced - possibly daily.
I had a look at annualised
returns for each fund from inception to end April 2019 (just short of 8 yrs):
LS100 10.67% p.a.
LifeStrategy 40 Mix
I have therefore moved some of the proceeds from the 60 sale to top up my VLS40 which is the second
most popular with UK investors and has £3bn of assets. Just looking under the
bonnet of the fund -
40% equity comprised of Developed World (ex
UK) 19.6%, FTSE UK All Share 10.0%, US Equity 5.1%, Emerging Markets 3.3%,
Europe (ex UK) 1.3%, Japan 0.7% and Pacific (ex Japan) 0.4%
60% bonds comprised of Global 19.3%, UK
Gilts 8.8%, UK Corp. Bonds 5.4%, UK Inflation-linked Gilts 5.8%, US Credit
Index 5.3%, US Gilts 5.1%, Others 10%
The ongoing charges
are 0.22% (worth noting its US equivalent charges 0.13%)
Performance of VLS
So, just to complete the figures following the sale - I made my initial purchase in my ISA with Halifax Share Dealing in
May 2015. My average purchase price was £136.50.
The price four years
on, to the point of sale was £186.67 so a gain of 36.7%. This is an average
annualised 8.1% p.a.
By comparison, the
total return for the FTSE All Share over the same period is around 24% so the
combination of 40% bonds and a wider exposure to global equities in the VLS
fund has worked very well.
Of course, the bonds
provide a much less volatile ride compared to a fund with just equities which
makes it easier to remain invested. As I am not the type of person who can handle too much volatility, the step down to the VLS 40 should help me to stay
invested and this is why they represent a large percentage of my portfolio.
Here are the total
return for the VLS60 for each of the last 7 full years :
The appeal of the
VLS strategy is its simplicity and auto rebalance combined with good performance compared to other
strategies. However, with climate change rising to the top of the agenda all
around the world, many investors and fund managers will be assessing the impact
of fossil fuel companies and evaluating the risk of continuing to hold such
companies in their portfolio.
Personally, I do not
wish to profit from investing my money in companies that continue to add to
global warming and so holding multi-asset global index funds presents me with a
challenge as I attempt to climate-proof my portfolio for the future.
The solution, which
I have discussed with Vanguard UK, would be for them to offer investors a
choice of fossil-free climate-friendly equity funds and balanced with a mix of
gilts and green bonds. I will retain my VLS 40 until the end of this year in
the hope they can deliver but time is of the essence - we have declared a
As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation -always DYOR!
Mortgage is an actively managed, low cost investment trust, investing in a high
conviction, global portfolio of companies. The managers aim to achieve a
greater return than the FTSE All World Index (in sterling terms) over a five
year rolling period.
This investment trust was added to my SIPP portfolio at the
start of 2017 at the initial purchase of 338p. A year later, following a little
turbulence in the share price, I added SMT to my ISA portfolio at 415p. The share
price has advanced to currently 530p however the price can be volatile as witnessed towards the end of 2018.
The trust has today issued results for the full year to end
March 2019 (link via Investegate). Share price total return for the past year is
up 16.5% compared to 10.7% for the
benchmark FTSE All-World index.
Scottish Mortgage has increased total net assets to more than
£7bn making it one of the UK's largest investment trusts. In 2017 it became the only investment trust to be listed in the FTSE 100.
The managers, James Anderson and Tom Slater run
a conviction portfolio of around 70 to 80 shares. The result is a portfolio
dominated by big holdings in some of the companies involved in the world of
social media, the internet, healthcare, eco-friendly energy and gene therapy.
The top ten holdings account for 51% of the portfolio and
include Amazon 9.6%, Illumina 7.6%, Tencent 6.6%, Alibaba 6.6%, Tesla Motors 5.3% and Netflix 3.1%.The managers have authority to hold up to 25% of the trusts assets in unquoted companies such as early stage start-ups. Currently, some 17% of the portfolio is invested in 40 unquoted
companies - Dropbox, peer-to-peer lender Funding Circle and airbnb to name
three I am familiar with.
Some 22% of
the trust's portfolio are allocated to China. In the past year, the trust made
their largest single investment in Ant Financial as a result of a long standing
relationship with its parent company Alibaba.
China's economy is growing at a
rapid pace as it becomes increasingly consumer-led. It is now the second
largest economy in the world behind USA and has been the largest contributor to
global growth since the meltdown of 2008. Annual growth is averaging 7% each
year and over just the past 10 years, real terms household income has increased
by 120% and more and more of the huge population of 1.3bn continue spending
(and also saving).
the Chinese internet giant behind the WeChat messaging app (over 1bn users),
has surpassed Facebook in value after it became the first company in China to
be worth more than $500bn.
Scottish Mortgage offers a clear, consistent and simple
proposition: a portfolio of long term investments in what the managers believe
to be the best growth businesses, operating in any industry and anywhere around
Many of the companies held in the trust's portfolio are
disrupting the traditional ways of doing business. They create new markets or
impact significant changes on old markets in a wide range of industries such as
auto, health, advertising, retail and manufacturing which are transformed by
advances in the technological revolution.
SMT (blue line) V Vanguard Lifestrategy 100 past 5 yrs (click image to enlarge)
I was however, a little disappointed
to see they have acquired a holding in Space Exploration Technologies which is
an unlisted enterprise involved in the design, manufacture and launch of
rockets and spacecraft. And on a linked theme, nothing to indicate concern
about the threats posed by our climate emergency. I hope this will be an issue
that is taken up at the AGM on 27th June.
Over the past ten years, the trust has delivered
a return of 737%. Although this is essentially a global growth trust, it is
worth noting it has increased its dividend every year for the past 35 years.
The increase this year will be 2% making a total of 3.13p and the current yield
The ongoing charges remain at 0.37% which makes it one of the
most competitive trusts on offer.
Obviously I am pleased with progress since my purchases but I hope the managers will switch on to climate at some point
and until they do, I probably will not be adding to my position. For now the
current holdings can return to the bottom drawer.
As ever, this article is merely a record of my
personal investment decisions and should not be regarded as an endorsement or
recommendation -always DYOR!
With the direct action of Extinction Rebellion in
London over the Easter period (over 1,000 arrests), the BBC's hard-hitting
"Climate Change - The Facts" and the rise of the school strikes for
climate started by Greta Thunberg, there is no doubt that our climate crisis is
quickly climbing to the top of the political agenda. The focus of the challenge
is directed towards governments which have not been taking climate seriously.
As a result, last week our parliament declared a climate emergency - the first
country in the world to do so! It's not so clear what action this declaration
will bring about but there can be little doubt that there will be some big
changes to come.
Over the past six months or so, I have tried to get
my head around this important subject - the science, what the consequences may
be if we carry on with business as usual, what that may mean for our economy
and my investments, what needs to be done to avert the worst-case scenarios. So, in
this article, I wanted to clarify my thoughts on the subject.
Of course, climate change is nothing new - our
climate is continually changing. The last ice age ended some 12,000 years back
when vast areas of the Northern hemisphere including the UK and much of Europe and N America was covered by a vast ice sheet. The Earth has moved in and out of these
naturally occurring interglacial periods for at least two million years.
The current man-made climate change however is interrupting this
natural cycle and the warming we see today is well outside of the pattern of
the past 800,000 years. The problem we are facing at present is the speed at
which our planet is warming and our ability to adapt to the relatively rapid increase in temperature.
Over the past 150 years or so, the average global
temperature has increased by around 1C. This is due the industrial revolution
and increasing reliance on coal, oil and gas. These are fossil fuels which
release greenhouse gas emissions (GHG) such as carbon dioxide and methane into
the atmosphere when burnt to create energy for our homes, transport and
factories. The scale of these emissions has gradually increased due to an ever accelerating
global population and growing affluence of developed nations which means more houses, cars, lorries, shipping and airplanes.
GHG Concentrations over past 1000 years
(courtesy of wxshift.com)
These GHGs are trapped in the upper atmosphere and
hang around for many years after they are released. Some of the gases are naturally
absorbed by the seas (25%) and by our trees but we have been producing much
more than nature can deal with. Over time, these gases build up and form an
ever thicker layer in the upper atmosphere which traps some of the sunlight and
causes gradual warming.
The levels of CO2 in the atmosphere is measure and
currently stands at 415 parts per million (ppm) which is the highest
concentration for the past 3 million years. The average over the past 500,000
years has been 260ppm. When I was born in the 1950s it was 310ppm and the
global population was 2.5 billion.
The last time we had CO2 levels this high, the
global temperature was 3C to 4C warmer than today and there were trees growing at the
Despite the agreement reached in 2015 in Paris by
200 world leaders, CO2 emissions continue to rise. In 2018, global emissions
rose by a further 1.7% to a record high of 33.1 Gt of CO2 and the highest
increase since 2013. Coal for power accounted for a third of this, mainly in
Asia. China, India and the US were responsible for 85% of this increase whilst
emissions reduced in Japan, Germany, France and the UK.
The global population is growing - currently 7.5
billion - and as the economy grows to meet demand for more goods and services,
the demand for energy increases.
This rapid rise in GHGs which has caused the 1C
rise in global temperature is starting to impact our global weather patterns. The
past 5 years have been the warmest on record all over the planet and this trend
is due to continue due to the GHGs already locked into the atmosphere. This is
leading to more powerful cyclones/hurricanes, severe flooding, more intense
wildfires, droughts and changes to natural habitat which is already leading to
the extinction of animals and plants as well as coral reefs.
These severe weather events have already caused
loss of human life - 3,000 people died in hurricane Maria in 2017 when it hit
Dominica and Puerto Rica. In Kerala, India last year an estimated 500 people
died during storms and flooding. In March 2019, cyclone Idai stuck Mozambique
with devastating effect - hundreds killed and up to 2 million people displaced and
made homeless by flooding. These are just three examples of the hundreds of
extreme weather events of recent years.
In addition to the impact on every days lives,
there is a massive economic cost from climate change. Insurance group Swiss Re
have reported that climate-related losses have averaged $180 bn each year over
the past 10 years. In January 2019 the World Economic Forum's Global Risks
Report at Davos ranked extreme weather and failure to adapt to climate change
as the top two global risks
The polar ice caps are warming at a faster rate
than the global average. The latest estimates are for at least 3C by 2100 which
would lead to the thawing of large areas of permafrost and the release vast
amounts of carbon dioxide and also methane gas which is 20x more potent than
CO2. This would cause additional warming and result in a tipping point which
could lead to a runaway warming which far exceeds current forecasts.
The world's largest ice shelf in Antarctica - the
Ross Ice Shelf - is the size of France and several hundred metres thick. It is
melting ten times faster than originally thought. This could lead to rapidly
rising sea levels around the globe.
We have reached a crossroads - if we carry on
without making any serious changes to the way we live our lives, we face
unimaginable consequences. If we continue to do what we've always done, we will
get what we've always got - an ever warming world. So it follows, we need to
change what we've always done in order to get a different outcome.
We have collectively generated more GHGs than the
planet can reabsorb. We understand the problem and we know what needs to be
done - and, importantly, we have all the tools and technology already to address
the problem. We now just need to get on and DO IT.
We need to get to net zero emissions quickly. Some
people suggest 2030 and others a more realistic transition of 2050. The term 'net zero' includes reductions in all GHGs such as methane and nitrous oxides - carbon
neutral only refers to carbon dioxide. Perhaps a clearer term would be 'climate
Plant more trees - trees absorb CO2 and if we quickly
plant millions more trees and stop clearing rainforests for cattle grazing, it
will provide a breathing space for other initiatives to kick in. Support more tree planting via The Woodland Trust.
Energy - transition from coal,oil & gas to
renewables such as solar and wind. These renewable sources of power are now
actually cheaper than fossil fuels so just on economics alone, it makes sense
to speed up the process.
Transport - a top consumer of fossil fuel such as petrol,
diesel and kerosene (aviation). It is responsible for around 25% of
energy-related emissions. Electric vehicles are part of the solution...provided
the electricity comes from renewables.
International shipping is a major polluter and
accounts for around 3% of global emissions and around 20% of emissions from
transport. Maersk, the worlds largest container company has recently announced
a policy to be carbon neutral by 2050. It would be technically feasible to
decarbonise shipping using biofuels and renewable energy by 2035 according to
Aviation is one of the fastest growing sources of
GHG emissions. If it was a country it would be in the top 10 emitters. One
round trip from London to New York is the equivalent of heating a house for the
whole year. Aircraft are becoming more efficient all the time but we are flying
more. Until electric planes are introduced on a commercial basis (trials underway), the only solution is for individuals to choose to fly less.
4. Food - Our global system is responsible for a whopping 40% of global emissions. Transport accounts for around 17%,
packaging a further 10%, refridgeration 4%, distribution to retailers 4%, our
journeys to the shops and when we get it home, a further third is thrown away
which adds further to emissions. We need to become more self-sufficient as a
country, to stop wasting food and also think about food miles.
Meat and dairy is a huge factor in global warming.
Emissions are on track to become the worlds biggest contributor to climate
change and already surpass the likes of Shell and Exxon Mobil. As well as the
increasing levels of GHGs such as methane from livestock, there is
deforestation to create more pasture and pressure on water supplies. Much of
the forest is cleared by 'slash and burn' which adds to the problem.
The solution is relatively simple - people can consume less meat and dairy and move to a plant based diet. Check out your diets carbon footprint.
The UKs Performance
Here in the UK, our record on cutting back on CO2
emissions is good compared to many other developed countries. We have reduced
emissions by 39% compared to 1990 levels. This figure however excludes emissions from
air travel and shipping.
Our emissions levels are now back to where they
were in the 1890s when Queen Victoria was on the throne.
Much of the reductions in recent years are due to
moving away from coal as a power source - down 16% in 2018 and 80% over just
the past 6 years.
According to the latest analysis of government
projections, around 50% of our electricity will come from renewables by 2025.
This is mainly due to the rapidly falling cost of solar and wind generation
rather than any change in government policy.
However the Committee on Climate Change are
concerned that we are not making sufficient progress in many areas of our
economy. Whilst we are doing well on power generation which accounts for around
25% of emissions, we are not doing enough in other sectors to reduce CO2
emissions, particularly transport/aviation and housing.
Our current target is 80% reduction by 2050 but
this lacks ambition and we are off-track to meet our 4th and 5th carbon budget targets. To meet our obligations under the Paris agreement, we need
to achieve net zero emissions by 2050 and this is the recommendation of the
recent report from the independent Committee on Climate. This would involve a
reduction of around 8% each year. Hopefully, as our parliament has now declared a
climate emergency, there should be no problem in adopting the new targets.
It's one thing to adopt a recommendation, and
quite another to implement the policies to make it happen.There could well be much
resistance to the transition from the familiar to the new. For example, around
90% of our homes have gas central heating. Most systems will have been fitted
in the past decade and will be very expensive to replace. People are used to
the technology and it works - heating and hot water at a reasonable price at
the flick of a switch. Millions of home owners will need to be persuaded to
switch to electric heating - the costs of the switch will need to be affordable
and the technology reliable. I suspect the transition to a carbon neutral UK
will be a monumental effort and certainly take much longer than the 2025
demanded by the protestors.
Here's an excellent in-depth analysis from Carbon
Most savvy investors understand that in order to
secure our long term financial goals, we first have to learn to live within our
means and then save for the future. This principle can be applied to global
warming - we must learn to live collectively within the sustainable limits of
our planet. There will be few attractive investment opportunities for a world
So, what are us small investors supposed to do? I
guess we are all different with our individual perspectives and goals so there
is no 'one-size-fits-all'.
Personally, I have decided to reduce my overall
exposure to equities. I have moved from Lifestrategy 60 to LS 40 (but this is
still a problem), I have reduced my exposure to big oil via the sale of City of
London, I have recycled some of the proceeds into Vanguard SRI Global, I have
built up my 'green' portfolio which now accounts for just over 1/3rd of my
total investments. I have contacted Blackrock requesting they
offer climate-friendly index funds. Last week I had a long conversation with Vanguard's senior management in the UK to urge them to introduce a climate-friendly option for my investments (following many email requests!). I am assured they are actively looking to introduce ESG or fossil-free funds but no time-frame. The more pressure from concerned investors, the more they are likely to act so if you are one of the investors who would like to see more ESG options from Vanguard, please email : email@example.com
I have lowered my expectations for future returns. The 9%
or 10% nominal average from my portfolio over the past decade is unlikely to be
repeated. I suspect the average could well be nearer to 5% or 6% and I am expecting more
negative years as volatility increases.
Fund managers probably don't pay much attention to
the likes of Extinction Rebellion, however when the Governor of the Bank of
England, Mark Carney warns on the dangers of climate and says "take global
warming seriously or you will lose money", it is language they understand.
In a recent address to the City, he told them that companies that don't adjust
to the realities of climate change will simply cease to exist.
The B of E is part of a global Network for
Greening the Financial System who are collaborating on plans for the
reallocation of capital on a massive scale to ensure we can meet the Paris
Around $1 out of every $4 of professionally
managed investment in the US - a total of $12 trillion in assets -is now invested in ESG or SRI funds according
to CNBC and this has grown by 40% over the past 3 years.
According to a survey by UK Sustainable Investment
& Finance, less than 1 in 5 fund managers believe oil companies will remain
a good investment in 5 years time if still focussed on fossil fuels. Survey
participants manage over £10 trillion and included HSBC, Schroders and UBS.
In 2018, Aviva assigned £1.8 bn of new investment
into wind, solar, biomass and energy efficiency which takes the total invested
in low carbon to £3 bn. In addition they hold a further £1.3 bn in green bonds
to support the transition to a sustainable economy. They are committed to
delivering on their responsibilities under the Paris Agreement and say :
is no greater collective risk we face today than tackling climate change. If we
do not take urgent action to limit global temperature increases to within 2°C,
the impacts upon the economy, society and our business will be nothing short of
devastating. Aviva is determined to make its own contribution to tackling
climate change. This is not at odds with business or investment. In fact, it is
a business imperative".
The way we use money has a knock-on affects to the
wider community. We can use it to support companies that are drilling in the
Arctic for more oil reserves, or we can invest in companies which are
installing wind turbines and solar panels. Governments can spend tax receipts
on subsidies for home insulation or for airport expansion. Every decision,
large or small, will impact on the environment and climate change.
Norway's sovereign wealth fund with assets of £1
bn recently decided to divest away from 134 oil/gas companies in its portfolio
as they now regard them as risky assets. For the time being, they will retain
holdings in Shell and BP but this could signal the thin end of a very large
wedge. Large companies which fail to comply with the Paris Agreement face
increasing risk of divestment from the growing impact and ESG funds. In
addition, these companies will face big litigation cases for damage resulting
from their activities.
I think it's becoming clear to many that companies
which damage the environment will be increasingly marginalised as the financial
community responds to concerns about climate. Sustainable and ethically sound
investing which respects the environment will become the norm - possibly more
quickly than many people imagine. Investors will still want a return on their
investments but equally, they want a planet that is clean and healthy which
they can enjoy in their retirement and will remain so for their children down the line.
Of all the 450 articles I've posted over the past 6 years, I feel this is by far the most important. However I am merely scratching the surface of this subject and it
will be interesting to see how the story unfolds. I am obviously concerned for
our future as I have children and five young grandchildren under the age of 10. However, I see the tide is turning and that people in positions of power seem to get the message and
that's encouraging. I remain optimistic that we can rise to the challenges
ahead. I am sure that as the catastrophic consequences of 'business as usual'
become clearer to more and more people, they will change their lifestyles and
demand action from politicians, policy makers and businesses...and maybe fund managers!
We are now entering uncharted territory - global
temperatures are rising rapidly, atmospheric CO2 levels are off the chart and
life as we know it is under threat as never before - and yet many are addicted
to their modern lifestyles and refuse to heed the warnings. It seems we have a
few years to make some fundamental changes - maybe 10 or 15 - but certainly no
time to waste like the last three years bickering about Brexit.
In a recent documentary 'Climate Change : The
Facts', Sir David Attenborough said
While Earth has survived radical climactic changes and regenerated following
mass extinctions, it's not the destruction of Earth that we are facing, it's
the destruction of our familiar, natural world and our uniquely rich human
This is a climate emergency. The UK, Scottish and
Welsh governments as well as many local authorities throughout the UK have
recently declared such an emergency. Rising GHG emissions do not respect the
boundaries of individual countries - it's a global problem. We need a system
change and a green new deal on a global scale to tackle the threats confronting
The world will not end in 2030, but if we don't
make some serious inroads to reducing global emissions over the coming decade, the job will be a
legacy for future generations and the problems facing them will be far more
intense and difficult to manage. To my way of thinking, it just makes sense to stop putting off the
difficult decisions and just get on with what we know needs to be done.
Plant more trees and stop destroying rainforests; move
to a largely plant based diet; leave fossil fuels in the ground and build more
renewable capacity; appoint a minister for Climate Change and also put this
subject on the national school curriculum. These and other measures are not
exactly rocket science.
We have caused the problem and we now need to get
it sorted as a matter of urgency...more and more rational people understand it's
simply the right thing to do.
Do you have any thoughts on this subject? Are we
already doing enough or should we be moving things along with more urgency? How
will your finances be affected? Have you taken any steps to climate-proof your
portfolio? Maybe you think it's all a big fuss about nothing. Leave a comment
below, share your views with others.