2 investment trusts that don’t cost the earth

Public awareness of sustainability issues has risen significantly in recent years. It’s hard to watch the news or read a newspaper without a reminder of the impact we’re having on the planet around us.

Climate change is one of the most pressing sustainability issues we face. The concentration of carbon dioxide in the atmosphere has risen around 50% since pre-industrial times, with human activity thought to be largely responsible. This traps more heat in the lower atmosphere and causes the planet to warm up.

More severe storms, wildfires, droughts, rising sea levels, and mass migration are just some of the issues society will need to contend with if we continue our current trajectory.

How investing can make a difference

You probably already know you can do your bit by recycling, eating less meat and taking public transport instead of driving where possible. But you can also help tackle climate change and a range of other environmental and social issues through your investments.

You could avoid companies that do the most damage, or invest in companies that take their commitments towards society and the environment seriously.

For some investors though, that doesn’t go far enough. Some want to invest in companies that have a positive impact on the world, like those creating green energy, or cleaning and reusing water.

But just because a company has a positive impact on the world, doesn’t necessarily make it a good investment. And finding sustainable companies with great prospects isn't easy. That's why we think it could be worth enlisting an investment manager to do the hard work for you.

Below, we take a closer look at two investment trusts that invest in companies making a positive difference to the planet. We think they have the potential to deliver reasonable returns over the long run, although there are no guarantees.

Both trusts can invest in derivatives, emerging markets and smaller companies, and use borrowing to invest (sometimes known as gearing). These factors increase risk.

Investing in the investment trusts mentioned in this article isn’t right for everyone. Investors should only invest if the investment’s objectives are aligned with their own and they understand the specific risks. Investors should make sure any new investment forms part of a diversified portfolio.

You can find out more about a trust’s risks and charges in the key investor information and annual reports. Investors in closed-ended funds should be aware the trust can trade at a discount or premium to Net Asset Value (NAV). 

Keystone Positive Change Investment Trust

The Baillie Gifford Positive Change team took control of this trust in February 2021. But they’ve been implementing their successful positive change investment process since the launch of their open-ended Baillie Gifford Positive Change fund in January 2017.

They invest in companies that help solve social or environmental problems and have the potential to disrupt their entire industry. Each investment helps create positive change in one of four areas – social inclusion and education, environment and resource needs, healthcare and quality of life, or addressing the needs of the world’s poorest.

Current investments include agricultural machinery maker Deere & Co. The company invests significantly in research and development to help make agriculture more sustainable using technology. For instance, its ‘see and spray’ system uses cameras and machine learning to differentiate crops and weeds. The sprayer then only applies pesticide to weeds, and fertiliser to crops, significantly reducing waste, and increasing crop yield.

The managers tend to invest in relatively few companies. This means each one has the potential to make a big difference to the portfolio, either positive or negative, which adds risk.

The managers also invest in unquoted companies (ones not listed on the stock market). Investing in unquoted companies increases risk and they can be much harder to sell than those traded on established stock exchanges. Around 2% of the trust currently invests in unquoted companies, although the managers expect this to increase over time.

More information on Keystone Positive Change Investment Trust, including charges

Keystone Positive Change Investment Trust Key Investor Information

Impax Environmental Markets

This trust has been managed by Jon Forster and Bruce Jenkyn-Jones since launch in February 2002. They aim to invest in profitable, well-established companies with proven business models and experienced management teams.

The managers believe global population growth and rising living standards are putting huge strain on basic resources and infrastructure. In their view, this combined with rising public concern over environmental issues could drive the performance of companies that help improve sustainability and solve environmental problems.

The trust is mainly focused on companies providing cleaner, more efficient products and services across the energy, water, waste, food, and agriculture industries. Current investments include DS Smith, a company that makes 100% recyclable packaging. It’s also Europe’s largest cardboard and paper recycler, managing around six million tonnes of waste material every year. This is more than the company requires for its own products, so the excess is passed on to other companies. 

More information on Impax Environmental Markets, including charges

Impax Environmental Markets Key Investor Information

These two trusts are more specialist than lots of other global equity trusts. There are large areas of the market they won’t invest in, so there will be times when their performance is very different to their peers and the broader global stock market. We think any investment in these trusts should form a small part of a well-diversified portfolio.

This article isn’t advice or a personal recommendation to invest. All investments can fall as well as rise in value, so you could get back less than you invest. If you’re unsure, please seek advice. 

Want to learn more?

If you want to learn more about investing responsibly, explore the new Responsible Investment section of our website.