How your investment decisions could support the fight against climate change
Our ISA and Lifetime ISA both come with the option to invest in a fund that chooses which shares to buy based partly on how much damage companies are doing to the environment.
For some time, investors have been voting with their money and choosing to invest in funds that have a focus on the climate.
In fact, according to the Saltus Wealth Index, an incredible 80% of young investors (those aged 18 – 24) have chosen to put at least some of their money in ESG stocks.
ESG stands for Environmental, Social and Governance. These are funds that invest in companies with a lower carbon footprint compared to the rest of their industry, and who are less active in damaging activities, such as fracking or building weapons.
For simplicity, we call this “climate-focused investing” at OneFamily.
The more money that is invested in ESG, or climate-focused, funds, the more companies need to do to win investment. It’s becoming more and more important for companies to attract investors who care about the environment.
Our Stocks and Shares ISA and Lifetime ISA both come with the option to invest with a focus on the environment: through our Global Equity fund.
How does OneFamily’s climate-focused fund (Global Equity) make a difference?
Our Global Equity fund buys shares after taking into account companies' climate scores. This is measured by assessing things like how much companies are doing to reduce their environmental impact.
Those with the most positive climate scores compared to others in their industry are more likely to win our investment.
That gives companies more reason to consider the environment in their business decisions. The more investors that choose this sort of fund, the more pressure is put on companies to improve their practices in order to win investment.
If your money is in our Global Mixed fund, up to 35% of it will also be invested in company shares via the Global Equity fund. At least 65% is invested in lower-risk, fixed-interest assets and the climate criteria isn't applied to this part of the fund.
Both Global Equity and Global Mixed are managed by State Street Global Advisers.
On average from January to March 2024 (Q1), the work carried out by the companies that OneFamily’s Global Equity fund invests in produced 60% less carbon dioxide equivalent (CO2e) than those in the whole of the MSCI World Index.
Those companies know that their efforts to reduce CO2e emissions are resulting in more people buying their shares. Those who aren’t in our portfolio know they’re missing out because of their higher carbon emissions.
Companies that the MSCI World Index invests in had 127.28 tonnes of fossil fuel reserves in Q1 2024, in total.
Those that OneFamily’s Global Equity fund selected had only 12.32 tonnes of fossil fuel reserves between them.
That’s 90% less!
In Q1 2024, companies in OneFamily’s Global Equity fund portfolio undertook an incredible 300% more “green” business activities than those in the MSCI World Index’s portfolio. That’s things that benefit the environment while making the company money, such as waste and pollution control.
Those companies also undertook 90% less “brown” business activities between them. Brown revenues are ways of making money that harm the environment, like extracting fossil fuels.
Companies want funds like ours to invest in them, but they have to meet our strict rules or we won’t touch them. We’re seeing more and more companies working towards meeting our standards.
By choosing a OneFamily ISA or Lifetime ISA, you’re helping us to hold companies accountable for damage they’re doing to the environment. If they start to produce more CO2e then they’re at risk of us removing them from our portfolio.
At the same time, we’re keeping an eye on those that are cleaning up their acts and add companies to our portfolio when their climate score improves.
So, you’re helping to persuade them to rely more on green revenues, such as low carbon technology and “clean” energy production, and less on fossil fuel reserves and brown revenues, like drilling and mining.
How to invest in our climate-focused fund
If you don’t already, you can use your ISA allowance to support companies that are less environmentally damaging. Take a look at our Stocks and Shares ISA or, if you’re saving for your first home or for retirement, you might consider opening a Lifetime ISA.
Both of these ISAs come with the option to invest in our Global Equity fund. Up to 100% of the Global Equity fund portfolio is made up of company shares, with the companies chosen based on our climate scoring system.
Alternatively, you could choose to put your money in our Global Mixed fund. Up to 35% of Global Mixed is invested in company shares via the Global Equity fund, taking into account the climate criteria. At least 65% is invested in lower-risk, fixed interest rate assets and bonds, which makes it a less risky option as this part of the fund is less volatile, but it doesn't use the climate criteria to select investments.
By choosing to invest with a focus on the environment, you’re adding your voice to the growing group of people using the power of their investments to incentivise companies to keep fighting climate change.
Our ISA and Lifetime ISA both invest in stocks and shares. While this type of investment has good potential to grow, please be aware that the value of your investments could also go down.
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What are climate-focused funds?
Our Stocks and Shares ISA and Lifetime ISA both come with the option of investing in a fund with a climate focus, that means the climate credentials of companies are considered before the fund buys shares.