Online investment house Nutmeg has launched a range of environmental, social and governance (ESG) portfolios and announced it will provide ESG scores for its entire product range, despite previously stating ethical investing has “no set definition”.
The wealth manager said the ESG scores will be calculated using independent data from index provider MSCI. It said these scores will give investors a clear picture of how each portfolio ranks for ESG principles such as corporate tax being paid, measures to guard against corruption and limits on carbon production.
Nutmeg has also joined existing robo-advisers Wealthsimple and Wealthify by launching 10 globally-diversified, socially responsible portfolios.
The Nutmeg management fee for managed portfolios is 0.75% for up to £100,000 ($128,000, €113,000) invested and 0.35% beyond that. The average investment fund cost is 0.33% and the average market spread cost is 0.08%.
Change of heart
In September this year James McManus, head of ETF research at Nutmeg, told our sister publication Portfolio Adviser that it didn’t offer ESG portfolios because “what constitutes an ‘ethical’ strategy has no set definition”.
He said then: “What’s more, at the moment there’s no easy way for an investor to compare when they’re faced with a myriad of opinions. So their portfolio might not align as closely to their values as they thought.”
Clive Waller, consultant at CWC Research, said there is a difference between ethical and sustainable, stating the former is an “emotive and subjective term”.
“For example, many so-called ethical investors exclude pharma from portfolios. On most measures this is ludicrous and, of course, pharma is hugely sustainable. Ethicals include gilts in portfolios. Gilts, of course, are used to fund wars and buy arms.
“For me it makes investment sense to buy sustainable stock for financial and ecological reasons. Most investors are boomers or older and will be expecting children and grand children to benefit.
“Surely, if you are looking to the future, sustainability is both desirable and financial sensible.”
Transparency and stewardship
Waller added that transparency of underlying holdings is another issue, driven by the regulator. “There is a move to more transparency albeit many asset managers and DFMs are resisting with all their might,” he said.
He also noted a move towards greater stewardship by shareholders.
“However, the resistance that current major players display whether it is transparency of charges or responsible investing will not disappear any time soon.”
But, Shaun Port (pictured), chief investment officer at Nutmeg, explained that although Nutmeg is committed to increasing transparency, “no investment portfolio can be designed to dodge every controversy”.
He said: “Whether it’s ethical, green, sustainable, ESG, or socially responsible, it isn’t always clear what these labels mean for investments, or investors.
“For too long many investments have hidden behind these terms without defining the purpose they are serving. There’s very little information for people who want to know if their investments are in line with their values; be they reducing carbon emissions, gender equality on boards or a business’ management of their data. We’re changing that.”
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