Helping a family use its investments to make an impact on the environment and society

Background

Our client is a family trust. We have successfully managed the trust assets for over a decade. Over the last few years, the younger members of the family – the trust’s principal beneficiaries - have started to take more of an interest in the stewardship of the family’s assets. Now in their mid-20s, the beneficiaries are already involved with the family’s philanthropic activities, with a particular focus on environmental and social causes. They would like to see their values reflected in the trust’s investments and have asked the trustees to investigate how this could be achieved.

Challenges

The trustees had little experience of sustainable investment and were interested to hear more about how “impact” objectives could be incorporated into a portfolio – and how such a portfolio might be constructed. They also wanted to understand the potential implications for financial returns. Lastly, the trustees and beneficiaries wanted information on how we could quantify the environmental and social impact of a portfolio.     

Our solution

We met with the trustees on a number of occasions to discuss suitable options. We demonstrated that embedding impact and sustainability objectives into a portfolio would not involve sacrificing financial return and that our research suggests that companies that are sustainably managed are more likely to outperform in the long-term. This was demonstrated during the coronavirus crisis of 2020, when companies that ranked more highly in terms of their sustainability practices saw lower downward revisions to their earnings forecasts.

Following our meetings, we proposed transitioning the trust assets to a portfolio with a 25% allocation to impact and thematic funds. These funds invest solely in companies that demonstrate how they are improving outcomes in a particular area (e.g. environmental or social causes). The remainder of the portfolio’s investments will be made in sustainable funds. The managers of these funds look for companies that run their businesses in a sustainable way.  

We are able to use a number of proprietary analytical tools to help us quantify the impact of portfolios. Our carbon footprint analysis showed that a £1m investment in our proposed portfolio would generate 50 tonnes less carbon than a similarly sized investment in a global equity index. This is equivalent to the annual energy use of six homes.

The trustees and beneficiaries receive regular reporting on the impact and sustainability characteristics of their investments. They are pleased to have achieved strong financial performance in a portfolio that better reflects the beneficiaries’ values.

 

Find out how we can help you plan for the future.

Get in touch

 

This strategy was based on our understanding of prevailing tax legislation at the time and should be reviewed on a regular basis in light of changes in legislation and personal circumstances.

This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. 

Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.

This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.

All data contained within this document is sourced from Cazenove Capital unless otherwise stated.