Alternative Investments/ESG: Two New Sustainable Funds From Close Brothers

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Close uses a three-stage process to identify investments with sustainable characteristics and good return potential.

Close Brothers Asset Management (CBAM), which manages assets worth over £12.6 billion (US$ 16.4 billion), is part of the Close Brothers Group plc (LON: CBG), a FTSE 250 leading UK merchant banking group. Established in 1878, Close is one of the UK’s largest and longest established providers of financial advice and investment management.

CBAM is launching two new sustainable funds following demand from clients and intermediaries for funds that invest in ways that show concern and respect for the natural environment, for human dignity, and responsible corporate behavior. (WealthAdviser)

The two new funds, both actively managed, are the Close Sustainable Balanced Portfolio Fund and the Close Sustainable Bond Portfolio Fund.

Close Sustainable Balanced Portfolio Fund

This fund aims to generate capital growth with some income over the medium term (> 5 years).

It invests in shares, bonds, ETFs, third party funds, and alternatives.

Alternative investments are centered around sustainable themes, for example:

  • Property – opportunities in social housing and sustainable farming
  • Infrastructure – opportunities in solar and wind power, as well as in schools and hospitals
  • Commodities – precious metals that are certified as responsibly sourced by relevant trade bodies

Close Sustainable Bond Portfolio Fund

This fund seeks to generate income while preserving capital value over the medium term (> 5 years).

It invests in bonds (corporate and government), third party funds (investment funds managed by other firms including unit trusts), and other fixed-income securities

Both funds follow a 3-stage screening process

In Stage 1 (Ethical Screen), the managers exclude unethically exposed sectors such as tobacco, oil, weapons, gambling, pornography, alcohol, and animal testing for cosmetic purposes.

For Stage 2 (ESG Screen), the managers identify investment opportunities with positive ESG ratings and sustainability records.

In Stage 3 (Analysis and Valuation), the managers assess those opportunities that are likely to deliver the best returns. For shares, they consider risk, profitability, and earnings growth. For bonds, the factors are YTM, liquidity, and relative value.

Related Story:   European Investors Prioritizing ESG Factors In ETFs (Cerulli)                                               

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