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.