Another year rolls by and this is now my 7th end-of-year review since starting my blog in 2013.
It's been quite a year.. climate change has risen to the top of the political agenda, a change of Prime Minister followed by general election to resolve the Brexit deadlock, the impeachment of President Trump ...and despite all the political turmoil, the markets have continued to surge ahead.
I feel this has been a breakthrough year for the climate - everyone is more aware of the importance of the challenges we face and the need to make some significant changes to many aspects of our everyday living. I guess the coming decade will be a make or break period. We either make the changes to limit global warming or we fail and face the consequences.
The past 5 years have been the hottest on record and unless we tackle the climate emergency, the Met Office have forecast that temperatures in the UK could be 3 to 4 degrees warmer on average by 2100. ( they have risen by just 1C over the past 150 years)
I have been trying to make sense of the big picture this year and my thoughts were set out in May in what I think is probably the most important article I have posted over the past 7 years.
Of course there are many positive signs and I have been encouraged by the direct actions of Extinction Rebellion in recent months and also the school strikes for climate inspired by Greta Thunberg. Our Parliament has set a target of zero emissions by 2050 and we now await the policy decision to map out how we achieve this.
"This can no longer be news among other news, an "important topic" among other topics, a "political issue" among other political issues or a crisis among other crises. This is not party politics or opinions. This is an existential emergency. And we must start treating it as such".
I have been working on a new book on this topic for the past few months and which I hope to publish very soon. Also, I managed to get out during national Tree Week and plant a few trees with my family and hope to do more in the coming few months.
After 3.5 long years, we are almost there!! I hope I can drop this from next year's review....
In July, Boris Johnson became our new PM with a promise to deliver Brexit, deal or no deal by end October and a 'do or die' approach. Against everyone's expectations, he managed to renegotiate a deal with the EU but struggled to make progress with our remain parliament and decided to call a general election - the first in December for almost a century. The outcome was a landslide victory for the Tories gaining a majority of 80 and a crushing rejection of a hard left Labour Party which lost 59 seats and no support for the Liberal (anti)Democrats who stood on a manifesto to revoke Article 50 and a slogan "Bollocks to Brexit"!
Labour managed their worst result since 1935 as life-long Labour voters from the ex mining communities of Yorkshire and Durham trudged through the wind and rain to vote TORY for the first time in their lives. My old grandad and uncles were proud miners from a close-knit community near Doncaster, South Yorkshire and they would have had a few choice words for this current leaders of this so called Labour Party.
As long-term readers will know, I am a big follower of sport and this has been another vintage year. Cricket... we won the World Cup in a thrilling match v New Zealand which went to the wire. However, the highlight for me was the 3rd Ashes test at Headingly v Australia and the last wicket partnership between Ben Stokes and Jack Leach. I remember the 1981 test match at the same ground when Botham and Willis pulled off a remarkable victory but I think this was even more remarkable. Sadly Bob Willis passed away this year.
When Leach came to the crease they still needed another 72 runs against one of the best bowling attacks in the world. Leech was resolute in defence at one end whist Stokes set about knocking off the runs. It was tense and the pressure was getting to the Aussies who dropped a catch, got a dodgy lbw decision(no reviews left) and fumbled a run-out near the end. But somehow England got over the line...Stokes hitting 71 of the runs in a thrilling finish to level the series. It was no surprise to see Ben Stokes voted BBC Sport's Personality of the year and receive an OBE in the New Year honours.
Likewise Rugby Union...the World Cup in Japan - a thrilling game to beat the All Blacks in the semi-final but we fell short in the final against S Africa.
Although a life-long supporter of Everton, it was good to see Liverpool win the Champions League trophy after the disappointment of losing in the final the previous year. They also won the World Club Champions tournament and are on course to win the Premiership title.
In athletics, Dina Asher-Smith took gold in the 200m sprint and silver in the 100m whilst Katarina Johnson-Thompson put in a stunning performance taking gold in the heptathlon. In world gymnastics, Max Whitlock became a three-time world champion taking gold on pommel whilst Joe Frazer made history by taking GBs first-ever gold on parallel bars. Roll-on the Tokyo Olympics next year!
Following my decision to create a more climate-friendly green portfolio last year, I realised at some point that to be true to my values, I needed to completely ditch fossil fuel companies from my portfolio. The process which started last October was completed a year later in September.
Over the past year I have sold my investment trust which hold oil shares - so, City of London and Aberforth Smaller were disposed of in February. Later in the year I sold my global index funds - Vanguard Lifestrategy 40 & 60, Vanguard SRI Global and HSBC Global Strategy and also my Baillie Gifford Managed fund. I also sold Edinburgh Worldwide trust and Scottish Mortgage which both recently acquired Elon Musk's SpaceX and related companies involved in rocket development and space exploration.
I have just put in the final figures for the spreadsheet of my investment portfolios - sipp flexi drawdown and ISAs - for the full year to 31st December.
The FTSE 100 has seen a late surge to finish the year at 7,542 and a total return of 17% for the full year. The FTSE All Share index is up 19.0% for the year.
As a matter of interest, the FTSE 100 finished at 6,749 when I did my first annual review to the end of 2013.
The Vanguard Lifestrategy 60 fund is a diverse mix of global equities and bonds and although I have disposed of my holding, it provides a good benchmark for a balanced global portfolio. The fund is up 14.5% over the past year.
Over the 12 month period, I sold several trusts and replaced them with more climate-friendly investments such as my renewable infrastructure holdings.
The better returns for the year came from TR Property 40%, Mid Wynd 31%, Polar Capital 35%, Edinburgh Worldwide 30%, Scottish Mortgage 17%, Finsbury Gr. & Income 23% and Tritax Big Box 21%.
I have held on to just the two trusts going into 2020 - Mid Wynd which has been building a low carbon theme to its global portfolio and TR Property IT.
The total return for my basket of trusts over the year was 24.5%.
Over the past year I have sold all multi-asset index funds as I decided to divest my portfolio of all fossil fuel stocks as well as the big banks which finance their global operations. So far, it has not been possible to find a multi-asset global replacement to satisfy my requirements but I am hoping the industry can offer some alternatives in the coming year which are more climate-friendly and do not contain fossil fuel companies. However I would not return to Vanguard until they stop shielding the big oil companies from climate scrutiny.
The contribution from my index collectives have seen good gains over the past year (until sale) with a total return of 16.0%.
Over the year I have been gradually building my climate-friendly section which now represents over 75% of the total with a further 10% in cash. Most of the investments have not had a full year so I am pleased that the total return for this sector compares well with the market generally and also with other sectors of my portfolio.
The better returns have been provided by offshore wind specialist Orsted which was acquired in April +32%, green hydrogen smaller companies ITM Power +90% and AFC Energy +220%. And with the collectives...Impax Environmental 26% (now sold), TRIG 22% and Bluefield Solar 15%.
The total return including dividends from my green portfolio has been 23.5% which I guess is reassuring and shows that it's possible to invest ethically, align my investments with my values and still make a decent return. Maybe it's just beginners luck!
The Complete Basket
As a whole, the portfolio has delivered a total return of 21.9% over the past year which takes account of all dealing costs - the best annual return by quite a margin for a decade. Here's my portfolio returns covering the past 10 years.
A sum of £1,000 at the start of 2010 has more than doubled to £2,220 and an average annualised return over the past 10 years of 8.3%. This has enabled me to take my 4% income each year since moving to early retirement in 2008 and leaving some held back to build reserves.
Most Popular Posts
The most popular this year have been:
1. My Index Funds Under The Spotlight (link)
2. Vanguard LS 60 - Year 4 Update
3. Brexit Revisited
4. Orsted - Portfolio Addition
5. Getting Up to Speed on Climate Emergency (link)
6. Divesting My Portfolio of Fossil Fuels (link)
7. We Are Leaving the EU...At Last!
My thanks to The Investor from Monevator for the ongoing links throughout the past year (despite our opposite views on Brexit!)
In these times of low interest rates and corresponding low returns from cash deposits, for a little more risk, an average annualised return of over 8% over the past decade is for me very acceptable. Return on my investments have been positive in 9 of the past 11 years.
Obviously as a grandfather to five, I am concerned about the climate emergency and how badly it will impact the world over the coming years. The devastating images we have seen from Australia in recent weeks should be a warning of what's coming down the line for the planet if we carry on with business as usual. Hopefully in the coming year we will get some real leadership and start to reverse the warming otherwise the consequences are dire. Either way I am in no doubt that the global economy will be affected including equities which is why I have moved my portfolio to climate-friendly alternatives.
I think it's fairly obvious that we just cannot continue with our current economic model pursuing GDP growth and unlimited consumption above everything. What exactly is the point if we end up with an uninhabitable planet in 50 years time? And as an investor, I am a part owner of everything I choose to hold in my portfolio so I have a responsibility for what those companies do or don't do. I have come to the conclusion that it's totally unacceptable to be a part owner - however small - of the big oil companies that continue to be the big drivers of climate change.
For me at this stage, investing is no longer about finding the best strategy to maximise returns. It's more about directing my resources towards those areas that are trying to promote a sustainable planet and avoiding the fossil fuel companies and associates which refuse to change and that have little or no regard for our environment. If supporting those greener companies can also deliver a decent return on capital, then that will be a bonus but it's no longer my primary driver.
I don't have a crystal ball but my strong feeling would be that the game could soon be up for the big oil companies that refuse to change their business strategies and fall into line on climate change. Likewise the banks that continue to fund their operations. 2020 could be a make or break year as we head towards COP26 in Glasgow....as they say, it's going to be very interesting!
Finally, thanks to all for dropping by during the past year and wishing everyone all good things in 2020 - especially good health.
As always, if you keep track of portfolio returns, feel free to leave a comment and share with others how your investments have fared over the past year.
Congratulations on a fantastic return for 2019! Our portfolio also had a good 2019 and returned 22.0% (all invested in equity based OEICs/Unit Trusts).ReplyDelete
On the topic of climate change - I have no issue with sustainability and preserving resources, but the problem I see is that no government/country is able to tackle population growth. The ultimate reason for climate change is the number of people consuming resources. The fact that first world countries consumes more per capita than third world countries aside - 7.7 billion people still consume a lot of stuff. However, the subject is too contentious to solve. Population control is totally counter to our innate requirement to ensure our continuation and too problematic (see China's one child policy). When I started going to school the world population was about 4.4 billion and it is now 7.7 billion. If we become net carbon neutral then what becomes the new pressure point when the world population eventually hits 10 or 15 billion? Granted world population growth is projected to slow, but it hasn't stopped and neither is it going down. I have no answers, but in my view more people is as big a problem as climate change.
I also don’t believe changes in fossil fuel consumption will come fast enough either – most of the oil majors hold too much power (Phillips, Chevron, ExxonMobil – political lobbying in the US; Lukoil, Rosneft (Russia); Sinopec, CNPC (Chinese, state owned); Saudi Aramco – all three countries where the will of the people is somewhat down the list of state priorities). The lag in system change will be too long. As a single country, we couldn’t resolve Brexit within these past years and yet we need to make significant changes (worldwide) in the next year to slowdown climate change. We have slightly more control over use of natural resources, but I think, just like with population growth, it’s too complicated a beast to stop quickly. Like steering a supertanker versus a racing car – to change direction takes a long time. This is, however, not a reason not to try and we have to start somewhere.
Apologies if these opinions are too contentious!
Thanks Kittster and likewise, well done with your portfolio returns for the past year.Delete
Certainly population needs to be addressed as the continual rise goes almost the same as the rise in carbon emissions if you were to lay a chart over the Keeling Curve. When I was born in the 1950s the world population was 2.5 bn and has expanded more than 3x over the past 60 years. I am not sure what number would be ecologically sustainable if we transition to clean energy and agreed a mainly plant-based diet but clearly it is an issue that should be a part of the IPCC negotiations (which they have passed over so far).
I agree that the big oil and coal companies and their backers in power hold far too much sway and have blocked progress however I don't think the young people will be vacating the protests anytime soon so I am hopeful that faster progress can be made. A part of the transition will be played by us investors as the fossil fuel industry needs our finances to maintain any credibility. Hopefully the small investors along with pension funds and other institutions will continue to withdraw support and increase pressure to change. We have 10 years to make the changes so no time to lose.
Lets all make 2020 the year we take responsibility for our future security!
Congratulations and well done on getting such great returns, with a portfolio which conforms to your values and beliefs. You've shown that investing ethically can literally reap dividends.ReplyDelete
I feel that change will come but slowly - at work and among my friends, there are both supporters and detractors for Extinction Rebellion and Greta (the detractors do not believe in the climate 'emergency' and deem it fake news, unsupported by science). I think everyone gets the message but not everyone is convinced, particularly big global corps.
Not sure if you'll be able to read this (firewall) but Mark Carney seems to have taken a leaf out of your book and talked about green pensions: https://www.telegraph.co.uk/pensions-retirement/financial-planning/save-planet-pension-damaged-beyond-repair/
Thanks weenie and Happy New Year!Delete
I find it hard to believe there are seemingly intelligent people who think this is 'fake news'! You just have to see the images of the fires in Australia and the utter devastation unfolding - what more evidence do people require?
Unfortunately the link you gave doesn't give access to the full story but it will be the same as reported by the BBC
Basically the governor is warning that many pension savers could come unstuck if the big insurers and asset managers as well as pension fund managers fail to reduce their portfolio exposure to the big fossil fuel companies such as Shell and BP which dominate the FTSE 100. Now if the Bank of England governor is saying this on the record, we should all take notice as it's very likely he knows what he's talking about.
We cannot afford for a gradual change - we have a climate emergency so things have to change very rapidly. I have done a lot of research for my book in recent months and I am in no doubt about the need for urgent action to avert an existential crisis.
I'm just in the process of publishing my new book so maybe you can get a copy and pass it on to the climate sceptics...it may just change their views. I will post an article in the coming week.
Congratulations on your strong returns, which beat mine this year. :) The good thing about getting Brexit out of the way from my perspective would be I can remove it from my active investing decisions, as trying to factor in UK economic and political developments when the outcomes have been so binary -- not to mention the swings in the exchange rate -- have I'm sure done damage to my process. Unfortunately I think it'll still be in the news for years to come, but now it's happening I'd certainly welcome an excellent deal and it disappearing from the news papers sooner rather than later.ReplyDelete
You're welcome re: the links, and it's heartening to see your ethics has not impacted your returns in the first year of setting out! The pictures from Australia are indeed horrific.
Thanks TI and also a Happy New Year to you.Delete
I would be very happy not to hear much more on Brexit this year. I feel it has dominated the news agenda for the past three years more than any other issue I can remember and left little energy for anything else. Having said that, I don't think it has had much impact on my investing decisions. I may have held back on some of my infrastructure purchases if I had thought Corbyn had any chance of being elected but he didn't so I went ahead!
As for the situation in Australia, it really should be a wake-up siren to the world leaders to take climate very seriously and to put pressure on the likes of Trump, Bolsonaro and Morrison to think again. I'm hoping Trump will be gone this year as I really fear him hanging around until 2025...nightmare scenario!
If you haven't found a replacement for the multi-asset index funds, but have sold up, does that mean you are sitting on a cash mountain? Or have you come up with a different deployment strategy?ReplyDelete
Thanks Rhino, a bit of both is the answer. Some of the proceeds have gradually been reinvested into my green portfolio but there remains around 10% still in cash awaiting opportunities and developments.Delete
I am hoping the industry will respond to the growing demand from investors for more truely climate-friendly options which avoid the fossil fuel companies as an absolute minimum but the big players seem to be reluctant to offer this and I suspect a great deal of influence is being exerted by the powerful fossil fuel lobby and others so it may be some time...
For the time being I will build my own portfolio which aligns with my values!
Well thats brilliant that you have the confidence and ability to do that! If you've deployed all but 10% then I'd say thats very good going. Its not necessarily particularly easy shifting a cash mountain.Delete
Thanks. I think when I came to the conclusion that it was no longer morally acceptable to continue being a part owner of the big oil companies, the process was straight forward as for me it was the right thing to do. Obviously with all the investments held in either SIPP or ISA there are no tax considerations. When I see the devastating images from Australia resulting from climate change, it reinforces the decision to avoid the fossil fuel companies.Delete
Then it's a process of building my green portfolio, some of which had been reasearched the previous year. It has helped that most of the new additions have got off to a good start and some of the smaller green hydrogen-focused smaller companies have far exceeded expectations in such a short period.