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Impact investing

How your investments can help make the world a better place

Important - The value of investments can fall as well as rise, so you could get back less than you invest, especially over the short term. The information shown is not personal advice. You should seek advice if you’re not sure an investment is right for you.

Climate change is one of the biggest challenges we face.

It’s causing sea levels to rise and weather patterns to intensify, and plant and animal systems are suffering. We’re destroying ecosystems that took millions of years to perfect, and that we depend on for food, medicine and raw materials.

Plastic pollution is another significant environmental concern. It’s estimated that less than 10% of the plastic used globally is recycled, and around 8 million pieces of plastic reach the oceans daily. If current trends continue, there’ll be more plastic in the ocean than fish by 2050.

The problem goes beyond single-use plastics too. Microplastics are everywhere, from remote areas like the Arctic and Antarctic, to the depths of the Mariana Trench. They’ve even been found in lots of the foods we eat, from salt and sugar to alcohol and honey – there’s probably some plastic inside you right now.

We also face serious social challenges. As people become wealthier and live longer, chronic conditions caused by unhealthy lifestyles, like diabetes and high blood pressure, are on the rise. Age-related diseases like cancer and dementia are also climbing rapidly. There’s also massive health inequality across the globe. For example, there’s a 30-year gap in life expectancy between Chad and Hong Kong.

How your money can help change the world

Investing in impact funds can be a great way to help solve some of these environmental issues and support social developments. They aim to have a positive effect on the world around them, alongside delivering a financial return. They also measure and report back on the positive impact they set out to make.

We're not saying you should invest your whole portfolio in impact funds. We think the most successful portfolios are ones that invest in a range of different themes, types of investments, countries and industries. But if you feel passionately about social and environmental issues, you could think about investing a small amount of your portfolio in them.

We take a look at two impact funds in more detail below.

This article isn’t a recommendation to invest. If you’re not sure if an investment is right for you, ask for financial advice. All funds will fall and rise in value so you could get back less than you invest. Both funds have the flexibility to invest in emerging markets, which increases risk.

Investing in funds isn't right for everyone. Investors should only invest if the fund's objectives are aligned with their own, and there's a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.

Baillie Gifford Positive Change

The Baillie Gifford Positive Change fund invests globally in companies that create positive change in one of four areas: social inclusion and education, environment and resource needs, healthcare and quality of life and addressing the needs of the world’s poorest.

The fund currently invests in water, hygiene and energy solutions company Ecolab. In 2020, the company helped customers save:

  • More than 936bn litres of water
  • 12.6m MWh of energy
  • 3.5m tons of carbon dioxide emissions
  • 35,000 tons of waste by using recycled plastics and reusing packaging

The fund also invests in several companies that are helping to improve our quality of life.

Dexcom, for instance, makes systems that help hundreds of thousands of diabetics across the globe monitor their glucose levels. Illumina makes gene sequencing machines which help improve our understanding of diseases, enable more accurate diagnosis and facilitate research into new therapeutics.

The fund invests in quite a niche area of the market, so we expect it to perform differently to other funds in the IA Global sector at times. It also invests in a relatively small number of companies, which adds risk.



FP WHEB Sustainability

The team behind the FP WHEB Sustainability fund invest based on nine sustainable investment themes. These range from resource efficiency and sustainable transport to education and wellbeing.

Every investment into the fund makes a positive difference. £10,000 invested into the fund in 2020 helped:

  • Generate 2 MWh of renewable energy
  • Avoid 3 tons of carbon dioxide emissions
  • Treat 27,000 litres of waste water for reuse
  • Recycle or recover 1 ton of waste material
  • Provide three days of tertiary education
  • Five people receive healthcare treatment, and saved £270 of costs through more efficient healthcare systems

This is the only fund managed by the WHEB team, meaning they're totally dedicated to it and focused on its success. The portfolio looks very different to the wider global stock market, so we expect it to perform differently too. The fund's focus towards small and medium-sized companies adds risk.